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Minority ownership rule change draws anger

Leading black and Hispanic entrepreneurs were outraged Wednesday that a key corporate advisory group recast a rule that firms be 51 percent minority-owned to qualify for certain corporate contracts.

The 51 percent rule still applies, but the National Minority Supplier Development Council created a new class of firm that can be 30 percent minority-owned as long as 51 percent of the voting stock is held by minorities and that they control the board of directors.

Minority leaders contend that this will lead to the end of affirmative action, while creating fronts for white-owned firms to scoop up billions of dollars in equity capital.

"If you don't think that our community is not receiving venture and equity capital now, what makes you think this will change?" said George Herrera, president and chief executive of the Hispanic Chamber of Commerce.

But Harriet Michel, the president of the NMSDC, countered that her group had created a solution to a pressing problem: Many of the companies that currently qualify are too small to attract large investments and instead have to rely on loans.

The NMSDC says that under the new rules, companies would be more attractive to venture capitalists and other investors because they could potentially be larger. Of the 15,000 firms the NMSDC certifies, at least three-fourths have instead had to rely on debt financing.

In 1998, NMSDC-certified firms won more than $40-billion in contracts from NMSDC members, a group of 3,500 companies that includes more than half of the Fortune 500.