Monday, June 13, 2022
California Corporate Gender Diversity Law Struck Down, But Other States and Countries Continue Trend of New Laws
In 2018, California broke new ground for women when Governor Jerry Brown signed the first-in-the-nation requirement that publicly traded companies in the state have at least one woman on their board of directors by the end of 2019, and two or three (depending on company size) by the end of 2021. The bill’s co-sponsor state Senator Hannah-Beth Jackson put it bluntly: “We are not going to ask any more. We are tired of being nice. We’re tired of being polite. We are going to require this because it’s going to benefit the economy. It’s going to benefit each of these companies.”
Alas, it was too good to last. Last month, the law was deemed unconstitutional in a bench trial by Los Angeles County Superior Court Judge Maureen Duffy-Lewis because it wasn’t designed to remedy a “specific, purposeful, intentional and unlawful” instance of discrimination. She added that the state’s claims that diverse boards would directly boost California’s economy could not be proven.
It’s no surprise that Judicial Watch, the conservative group that prevailed in the litigation, trotted out the dreaded “Q Word” in opposing the measure: quotas. Legal precedent holds that quotas violate the Civil Rights Act of 1964, which prohibits discrimination against people based on race, gender, religion, age and other protected identities, because they could lead companies or schools to discriminate against people outside the targeted groups.
Never mind that in this case the poor, underrepresented targeted group happened to be wealthy white men, who have dominated corporate boards since Queen Elizabeth I the granted the first corporate charter to the East India company in 1600.
The ruling is without question a legal and moral setback, but fortunately for the future of women on boards in corporate America, that particular train may have already left the station. In the short time the law was in force, the percentage of board seats held by women virtually doubled—from 15.5 percent to 31.9 percent. In raw numbers, that translates to 766 female board members when the law was passed to 2046 by the end of 2021. ***
It’s clear from the pitiful progress since California led the way that stronger action is needed. Cases in point: Washington state’s law requires boards to have at least 25 percent of their makeup be members who self-identify as women. But violators face no penalties. Three other states—Maryland, New York and Illinois—merely require boards to disclose their demographic makeup. Ohio “encourages,” but does not require, disclosure.
We should take a page from the European Union playbook, where 40 percent female board seats for publicly traded companies were required as of March of this year. Under the new rules by the Council of the E.U., listed companies must meet the mandate by 2027