Forty years after the Kerner Commission report, US philanthropy is struggling with its own, self-acknowledged problems with racial diversity.

The commission, created by President Lyndon Johnson after the race riots in Newark and Detroit in 1967, famously described the US as “moving toward two societies, one black, one white, separate and unequal”. Today this disparity is evident in many foundations, where boards and executive directors are overwhelmingly white.

Proposed legislation in California would take a step towards bridging the racial and ethnic gap between largely non-minority-led foundations and an increasingly “majority/minority” US population. A bill by the Assembly, which awaits a State Senate vote, would require foundations with more than $250m in assets (of which there are about two dozen) to disclose publicly – on their websites and in annual reports – the racial/ethnic, gender and sexual orientation of their staff, trustees and grantees.

The legislation was introduced by Assemblyman Joe Coto, chair of the legislature’s Latino caucus, and drew on a study by the Greenlining Institute, a San Francisco Bay area non-profit organisation known for issuing “report cards” on the racial/ethnic composition of banks and law firms. The 2006 report generated startling findings about the racial context of foundation grantmaking.

According to Greenlining, in 2004 only 14.7 per cent of grant dollars from 24 large “national independent” foundations went to non-profits led by racial or ethnic minorities. The figure falls to 3.6 per cent if a $535m grant from the Bill and Melinda Gates Foundation to the United Negro College Fund is excluded. Only 4 per cent of the grants of 10 large California foundations went to minority-led non-profits.

Foundations have contested the accuracy of Greenlining’s analysis and, led by their national trade association, the Council on Foundations, oppose the bill. They argue AB624 is an intrusive, burdensome reporting requirement and a violation of the privacy of foundations and grantees. They fear that if the bill gets traction in California, other states may follow. Greenlining has talked to the staff of Charles Rangel, chair of the US House of Representatives ways and means committee, suggesting he call for a congressional investigation of foundations’ racial/ethnic grantmaking and diversity.

According to survey data on members of the Council on Foundations, foundation boards are “whiter” than the boards of Fortune 500 corporations, with only 6.7 per cent comprised of African-Americans compared with almost 10 per cent for Fortune 500 corporate boards. The non-profit sector is not much more diverse. A survey by the Urban Institute found the average non-profit board was 86 per cent white and half the boards were entirely non-Latino white.

The foundation sector’s opposition to mandatory reporting appears to contradict the stance of most of California’s philanthropic sector towards racial/ethnic reporting. Many of those opposing AB624 were equally strong opponents of Prop 54, a ballot initiative that would have prevented the state from collecting and reporting on most data by race or ethnicity. According to a study on Prop 54 by CompassPoint, a Bay area consultancy, most California foundations make extensive use of information about the racial and ethnic make-up of the clients of grantee organisations.

Many foundations, including some opposing AB624, routinely require grant applicants to report on the demographics of the populations they serve and the racial/ethnic composition of their boards and staff, with no apparent qualms about privacy. During the past three decades, “identity-based” African-American, Latino, Asian/Pacific-Islander and Native American foundation “affinity groups” have advocated increased grantmaking to minority-led non-profits and inclusion of more minorities among foundations’ trustees and senior staff.

A new report from Asian Americans/Pacific Islanders in Philanthropy found that “foundation investments to AAPI-led organisations, especially during times of national crisis, do not appear to have kept pace with community needs”. Hispanics in Philanthropy has created a fund to support Latino-led non-profits with the goal of “allow[ing] the Latino community to find its own solutions to its problems” as a path to community empowerment.

While conservatives in the foundation movement decry the notion of any reporting on racial/ethnic issues, politically moderate and liberal foundation leaders appear to be fighting the California legislation not simply on specifics, but because it could signal increased government interference in foundations.

The California legislation is likely to succumb to the pressure of lobbyists, but the debate over what foundations should measure and how will continue. Without reliable metrics on race and ethnicity, foundations will be hard-pressed to work out what they need to do about the prophecy of two separate, unequal, racially divided Americas.

The writer is national correspondent for Nonprofit Quarterly and former executive director of the National Committee for Responsive Philanthropy, a foundation watchdog