Democratic Gov. Gavin Newsom signed a bill into law on Wednesday that will require publicly traded companies in California to have a diverse board of directors.
The law, which critics say is unconstitutional, will be enforced in waves. By the end of 2021, the 625 publicly traded companies headquartered in California will be required to have one board member from an underrepresented group. By the end of 2022, companies with boards that include up to nine members must have two members from a diverse background. Boards with more than nine members will be required to have three diverse members.
“While some corporations were already leading the way to combat implicit bias, now all of California’s corporate boards will better reflect the diversity of our state. This is a win-win, as ethnically diverse boards have shown to outperform those that lack diversity,” Democratic Assemblyman Chris Holden, one of the authors of the bill, told the Los Angeles Times.
The legislation determined that the underrepresented groups included people who are black, Hispanic, Latino, Asian, Pacific Islander, Native American, or those who self-identify as gay, lesbian, bisexual, or transgender.
Assemblywoman Cristina Garcia, a Democrat, said the legislation was necessary because it was “clear” that the state could “no longer wait for corporations to figure it out” how to diversify their boards on their own time.
California already has legislation requiring that companies that are traded on the New York Stock Exchange or the Nasdaq composite have at least one woman on its board. Anastasia Boden, a senior attorney at Pacific Legal Foundation, was one of many attorneys to criticize the legislation.
“Limiting a person’s opportunity based solely because of their skin color, sex, or sexual orientation is the thing we should be trying to avoid, yet AB 979 requires exactly that,” Boden said.
Tom Fitton, the president of Judicial Watch, said his conservative watchdog group is considering a lawsuit to determine the constitutionality of the legislation. Judicial Watch sued the state in 2018 after it passed the requirement that boards include at least one woman.
“It’s a quota, and quotas are unconstitutional,” Fitton said. “We are deeply concerned about the new legislation. It’s a violation of the equal protection clause of the U.S. Constitution. It undermines the core legal concept of equal protection.”
