Social Acts
In this part, we introduce American laws that restrict business behavior on employee and shareholder equality.
Civil Rights Act (1964)
Enacted in 1964, the Civil Rights Act (CRA) was recognized as one of the most significant legislative achievements in American history. The act states that discrimination based on sex, color, religion, nation or race is considered illegal. Further, it prohibits racial segregation in public accommodations, such as swimming pools, libraries, and public schools.
It greatly reduced the racial segregation phenomenon in the United States, but did not completely eliminate the racial and sexual bias. Nonetheless, the law plays an important role in promoting social equality in the United States. Besides, it provides the basis for the enactment of the Equal Employment Opportunity Act (EEOA) and the Americans with Disability Act (ADA).
Equal Employment Opportunity Act (1972)
Enacted in 1972, the Equal Employment Opportunity Act (EEOA) amends the Title VII of the Civil Rights Act (CRA). Its main function is to specify the actions and implementations of CRA and make the CRA applicable for more situations and corporations.
In the EEOA, The Equal Employment Opportunity Commission (EEOC) is authorized to take enforcement action against individuals, employers, and labor unions which violated the CRA. It also promotes religious freedom by stating that employees should adjust their behaviour to accommodate the religious beliefs of colleagues. Moreover, it expands the number of applicable firms – the CRA in 1964 applied to firms with 25 employees or more, but the 1972 Amendment made it applicable to firms with 15 employees or more.
Americans with Disabilities Act (1990)
The Americans with Disabilities Act (ADA), namely, concerns the rights of disabled Americans. It was enacted in 1990 as an amendment for the Civil Rights Act (CRA). Similar to the Equal Employment Opportunity Act (EEOA), which enforces employees to provide accommodations to colleagues with religious beliefs, the ADA enforces employees to provide accommodations to disabled colleagues and outlaws discrimination of the disabled. This law was proposed and drafted by the National Council on Disability.
The law also specifies what could be categorized as “disability”. First, people with certain syndromes, including blindness, deafness, ADHD, autism, and bipolar, are classified as disabled (for the complete list, see Wikipedia). For other mental or physical illnesses, the result depends on the specific condition.
The ADA has 5 titles, which concerns employment, public transportation, public accommodation, telecommunication, and miscellaneous provisions.
Governance Acts
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Securities Act (1933)
You may also have known the other names of the act: the Truth in Securities Act, the Federal Securities Act, the 1933 Act…… In fact, they all refer to one specific law: the Securities Act enacted in 1933. This law was drafted after the 1929 stock market crash during the Great Depression and the first major federal legislation to regulate the offer and sale of securities.
It mainly requires every offered sale of primary securities to use interstate commerce (i.e. every sale must be kept on record) to promote security sale transparency and avoid the 1929 tragedy from happening again. The law was originally enforced by the Federal Trade Commission (FTC) in 1933 and then by the Securities Exchange Commission (SEC) since 1934.
Securities Exchange Act (1934)
Enacted in 1934, the Securities Exchange Act mainly regulates the financial market. The difference between the Securities Act of 1933 and the Securities Exchange Act in 1934 is that while the Securities Act of 1933 regulates the primary market of financial securities (common individual investors excluded), the Securities Exchange Act in 1934 regulates the secondary market of securities (common individual investors included). In this way, the two laws regulate almost every stakeholder in the market, ensuring the transparency of every deal.
The Securities Exchange Commission (SEC) enforces the law, and it also replaces the Federal Trade Commission (FTC) in 1934 to enforce the Securities Act of 1933.
Foreign Corrupt Practice Act (1977)
The Foreign Corrupt Practice Act (FCPA) was enacted in 1977 and amended in 1988 and 1998. It mainly prohibits American citizens from bribing foreign government officials for their own benefits. The 1998 Amendment makes it also applicable to people who try to make corrupt payments in the United States territory.
The uniqueness of this law is that it concerns not only American citizens and institutions but also foreign stakeholders. However, it is this uniqueness that raises some worldwide debates about this law. Opponents argue that the law is vague in terms of what to report about their cash flow. Some people also criticize the law for discouraging companies in the United States from making foreign investments.
If you want to further explore the U.S. social & governance laws that contains ESG, check out:
Social Laws:
Occupational Safety and Health Act (OSHA) – 1970
Dodd-Frank Wall Street Reform and Consumer Protection Act – 2010
Governance Laws:
Sarbanes-Oxley Act (SOX) – 2002
California Transparency in Supply Chains Act – 2010