The state of California will require companies to include diversity among boards. Last week, governor Gavin Newsom signed a new diversity law. The new bill orders publicly traded companies in the state to have people from underrepresented groups to hold at least one seat on the board.
Diversity Among Corporate Board Members
On September 30, the governor of California signed a new bill that would require companies to diversify their boards. It will begin next year. It also echoed similar legislation several years ago. The similar law restricts the board of public companies in the state to remain all-male by requiring women to hold seats.
CA doesn’t succeed in spite of our diversity – our state succeeds because of it.
— Office of the Governor of California (@CAgovernor) October 1, 2020
Basically, companies with headquarters in California should include at least one member of the board from an underrepresented community by the end of 2021. But with bigger board size like those with four to nine members, at least two or three by 2022. Meanwhile, those companies that would not diversify could be fined.
Underrepresented groups mentioned in the new law include people who identify as Black, Latino, Native American, Asian, American, Pacific Islander, Native Hawaiian, or Native Alaskan. Additionally, the law also includes those who self-identify as gay, lesbian, bisexual, or transgender.
Answering Social Inequality
In a press conference, Gov. Newsom stated: “When we talk about racial justice, we talk about power and needing to have seats at the table.”
Meanwhile, Chris Holden said that “the new law represents a big step forward for racial equity” in a statement. Holden serves as one of the authors of the AB 979 bill and an assemblyman. Another assemblymember and co-author of the bill, Christina Garcia, said that “we can no longer wait for corporations to figure it out on their own.”
Response to the Bill
USA Today noted that the bill did not receive any major objection. However, corporate lawyer Keith Bishop opposes the new bill, citing that it violates the “Equal Protection Clauses of the US and California Constitutions and the Commerce Clause of the US Constitution.”
Meanwhile, the chief executive of the Center for American Liberty also questions the bill. Harmeet Dihllon said: “For a civil rights perspective, we ought to be encouraging corporations to have the best and brightest directors,” which she said the role of the shareholders.
“I don’t know what the governor and his woke agenda have to do with shareholders’ interests. In fact, those are diametrically opposed in California.”
The new bill comes several months after the police killing of George Floyd. The incident intensified protests against social inequality, putting pressure on companies to acknowledge the issue.