Republican Virginia Gov. Glenn Youngkin vetoed legislation Thursday requiring companies to disclose their internal diversity when applying for tax breaks or state incentives.

The legislation – recently passed by the Virginia state legislature by slim party-line votes – would require the state's Major Employment and Investment (MEI) Commission to consider the diversity of an applicant business' board of directors when approving MEI incentive projects. Youngkin said such a requirement would harm investment in the state and simultaneously overlook the achievements of minority groups.

"The Commission’s role is to scrutinize financing for individual incentive packages, not assessing whether a business adheres to a requirement akin to a demographic-based quota," Youngkin said in a statement shared with Fox News Digital. "Such requirements could deter companies from investing in the Commonwealth, especially privately or family-owned enterprises which may find themselves wholly precluded."

"The quota-like system overlooks the achievements of women and minorities in their own right," he continued. "Both groups have made significant strides in representation on boards and mandating specific demographic composition risks undermining their accomplishments."

Under the legislation, the MEI Commission would be required to evaluate whether a "business has and commits to maintaining a balanced board of directors based upon gender and racial diversity," such that at least 30% of its board consists of minority groups. 

It would also be required to consider whether the business regularly submits board diversity disclosures and commits to updating those disclosures on an annual basis.

"Ultimately, the proposal fails to acknowledge that the primary beneficiaries of economic development are not board members, but individuals who secure gainful employment," Youngkin added Thursday.

"A truly egalitarian approach should focus on attracting businesses to the Commonwealth and fostering opportunities for expansion and investment in individuals" he said. "Mandating board diversity is merely one aspect of unconstitutional and intrusive government intervention, offering little in the way of promoting a more diverse and inclusive Virginia. Accordingly, I veto this bill." 

The Virginia legislation is part of a broader effort by Democrats at the state level to increase private sector board diversity. 

For example, Maryland, New York, Illinois, Massachusetts, Hawaii, Connecticut, Michigan, New Jersey and Oregon have all either proposed or approved corporate diversity disclosure laws. And California has gone as far as mandating that companies based in the state must set aside a certain number of board seats for minorities, though a federal court struck that law down in May 2023.