New California Law Mandates Racial and Other Minority Representation on Corporate Boards
On September 30, 2020, two years after making headlines by enacting Senate Bill 826, legislation requiring public companies based in the state to include at least one woman on their boards by the end of 2019, California enacted Assembly Bill 979, a similar bill requiring public companies based in the state to include at least one director from an underrepresented community by the end of 2021.
By the end of 2022, AB 979 will require a minimum of two directors from underrepresented communities on boards with five to eight members and a minimum of three directors from underrepresented communities on boards with nine or more directors. AB 979 defines “director from an underrepresented community” as “an individual who self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian or Alaska Native, or who self-identifies as gay, lesbian, bisexual or transgender.” Like SB 826, companies that fail to comply with AB 979 face substantial financial penalties.
Also, like SB 826, critics argue that AB 979 is unconstitutional on equal protection grounds. Judicial Watch promptly issued a press release announcing that it had filed a lawsuit to prevent California from enforcing the new diversity mandate. The conservative group filed a similar lawsuit in response to SB 826 and won a procedural victory in July when a California court authorized the lawsuit to go forward, holding that the organization’s clients have standing to sue under state law.