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Ad agencies are concerned they could lose big federal contracts due to Trump’s executive order banning some diversity training, even if he leaves office

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Ad agencies are scared about losing their lucrative government contracts in the wake of President Trump’s executive order banning diversity training — even if he leaves office.

Trump’s September 22 “executive order on combating race and gender stereotyping” targeted any business working with the federal government that runs diversity programs with themes like “white privilege” and “unconscious bias,” which it calls “divisive” and “racist.”

Within a month, a Department of Labor hotline received 140 calls to report companies for allegedly violating the order.

Alison Pepper, head of government relations at trade group 4A’s, said agency execs at a recent webinar expressed concern about what to do. The order doesn’t just apply to new and existing contracts but to any subcontractors working under the agencies, Pepper said.

“We are worried about it. Lots of firms are getting legal advice on how we can still go ahead with diversity training and not fall afoul of the law,” said a top agency executive. “You don’t want to jeopardize major contracts.”

All the major holding companies have federal government contracts. At least $135 million of Omnicom’s 10-year contract with US Army will go to agency fees. IPG’s McCann and Weber Shandwick handle advertising and PR for the USPS, and WPP’s Ogilvy works with Customs and Border Protection and the Centers for Disease Control and Prevention, among others.

If Joe Biden wins, Pepper predicted the new administration would begin to rescind the order. Execs at holding companies with multiple government clients said they’re still unclear about how the order would be enforced, though. Pepper said this uncertainty has created “a chilling effect” that will lead many agencies to delay diversity work until after the inauguration as they figure out how to restart their diversity efforts.

A Department of Labor spokesman said nothing in the order prevents contractors from continuing with diversity work that doesn’t include “stereotyping or scapegoating.”

Multi-million-dollar federal contracts are on the line for all kinds of companies

The concern extends to big advertisers. In October, the Information Technology Industry Council, which includes Apple, Amazon, and others, co-signed a letter arguing that the order would infringe upon these companies’ First Amendment rights. The 4A’s also signed it.

At Uber, which has a five year, $810 million contract to provide rides to government employees, the question came up during an October all-hands meeting.

Chief diversity and inclusion officer Bo Young Lee said that Uber doesn’t plan to change its diversity training but that a lot could happen before November 20, when vendors like the rideshare giant have to prove that they’re complying with the order or risk losing their contracts.

The controversy shows how brands can’t avoid politics

Viviane Scott, an associate at law firm Frankfurt Kurnit Klein & Selz, said companies like Uber need to ask how they can “thread the needle” by saying they support Black Lives Matter while complying with an order that seems designed to target the same movement — especially if they’re based in states or cities with robust anti-bias laws.

Scott also suggested that companies that have emphasized diversity, such as Verizon or Procter & Gamble, may not want to work with agencies that paused or altered their own internal diversity work to avoid violating the order, because that wouldn’t fit with the brands’ own social responsibility goals.

She said the controversy shows how the federal government can draw on political ideology to wield significant discretionary power over its budget, though she said it’s not clear whether the order has standing.

Several groups such as the National Urban League have already sued the administration over the order’s legality.

“It’s possible that you could inadvertently violate it just by talking about history, frankly,” Scott said.

SEE ALSO: Mark Penn tried to sell ad agency network Stagwell Group to rival holding companies as he looks to cut $1 billion in debt

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