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New California law requires diversity on corporate boards

On Behalf of | Oct 16, 2020 | Employment Law For Employers |

Many people would argue that diversity in the workplace, and perhaps in society as a whole, has to begin at the top. In corporations, that would be the board of directors. Overall, however, corporate boards, are still predominantly white and male.

Last month, California Gov. Gavin Newsom signed a bill into law that aims to bring more diversity to corporate boardrooms. The law requires all publicly held corporates headquartered in California to have at least one director who belongs to an “underrepresented community” by year-end 2021. These underrepresented communities include, among others, people who identify as African American, Latino, Asian, Native American and LGBT.

By year-end 2022, any board with four to nine directors must include at least two people from one of these communities. Boards with over nine people must have a minimum of three.

Gov. Newsom noted that the law is intended not just to increase the diversity of corporate boards, but to address ongoing issues around racial equality. He noted, “When we talk about racial justice, we talk about empowerment…we need to talk about seats at the table.”

One of the state assembly members who authored the bill says that while many corporations took a public stand on behalf of diversity following the death of George Floyd, not enough were making concrete changes. Another agrees that “it is clear we can no longer wait for corporations to figure it out on their own.”

Two years ago, former Gov. Jerry Brown signed a law that required all publicly held California companies to begin including women on their boards effective in 2019. Conservative groups like Judicial Watch have challenged that 2018 law in court.

The president of that group contends that “quotas are unconstitutional.” He says they haven’t decided whether to challenge the new law, which he calls a “violation of the equal protection clause of the U.S. Constitution.”

At least one constitutional law scholar disagrees, saying, “I think there is a strong argument that such laws are constitutional.” As one of the bill’s authors noted, “This is a win-win, as ethnically diverse boards have shown to outperform those that lack diversity.”

California is often at the forefront of laws regarding employment diversity and discrimination. That’s why its worthwhile for businesses of all sizes to work with attorneys who can help protect them from getting in to unnecessary legal jeopardy.