A Warning to Certified Minority-Owned Businesses: Play by the Rules
In recent news, the Piston Group, America’s largest Black-owned automotive supplier, had its minority business enterprises (MBE) status revoked. This move could cost the group hundreds of millions of dollars in future contracts, and issues a stark warning to all certified minority-owned businesses; play by the rules.
Based out of Southfield, Piston Group’s automotive subsidiaries manufacture modules, assemblies, seating components, climate control systems and parts sequencing for automakers. Fun fact, Piston Group is 100%-owned by former Detroit Pistons guard Vinnie Johnson.
The reason for their decertification was not made public by Vinnie Johnson or the Michigan Minority Supplier Development Council (MMSDC). What we know is the MMSDC’s requirements for certification are: a company must be majority-owned by a person of color; actively managed in the day-to-day operations by a person of color; and operate independently.
What the council did indicate is the day-to-day leader for their certified firms must be a qualified ethnic minority. So, what are they trying to say?
While Vinnie Johnson does serve as the founder, chairman and CEO, heads of the subsidiary’s largest business units are white men. With some of these subsidiaries accounting for nearly $2.2 billion of the Piston Group’s $2.9 billion in revenue.
However, it’s unclear why the role of chairman and CEO is not considered the manager of day-to-day operations. But the MMSDC would go on to say their decision to decertify Piston Group was reviewed by third-party organizations, stating:
“… the MMSDC is in the business of certifying minority-owned businesses, not decertifying them without sufficient cause… In fact, in the very rare occasion when decertification is required, we take the extra step of engaging external certification experts to review the file.”
One point to know about these certification companies is their transparency, or the lack thereof. Council’s say it is deliberate, so businesses begin the certification process in the spirit of what they want to accomplish, rather than adhering to the letter of their rules for the benefits.
As attorneys and advisors to certified companies (minority, women, or veteran-owned) we always tell our clients “play by the rules” as the certifying entity is the referee for the certification game, and you cannot beat the referee.
Do you think the MMSDC will reverse their decision, or will Piston Group try to fight it?