Dive Brief:
- A new lawsuit alleges that the law mandating California boards include women is illegal, "deeply patronizing to women," and "plainly unconstitutional" (Meland v. Padilla, No. 19-cv-02288 (E.D. Calif. Nov. 13, 2019)).
- The law requires all public corporations, domestic or foreign, with "principal executive offices" in California to have at least one female director on their boards by the end of the current calendar year. By the end of 2021, the required number of female directors goes up to two (for corporations with five directors) or three (for corporations with six or more directors).
- The complaint was filed by a male shareholder of a publicly traded Delaware company with headquarters in California and a seven-member board. He alleges that "[t]he Woman Quota imposes a sex-based quota directly on shareholders, and seeks to force shareholders to perpetuate sex-based discrimination...The Woman Quota injures Plaintiff's right to vote for the candidate of his choice, free from the threat that the corporation will be fined if he votes without regard to sex."
Dive Insight:
More than 25% of public companies in California need to add a woman to their boards to comply with the new law, according to researchers at Clemson University and the University of Arizona. The research also found that stocks registered negative average returns (-1.2%) following the news that S.B. 826 had passed, which the study authors believed was due to the "more onerous requirements" that kick in for 2021.
State and local legislators are increasingly passing laws to benefit the employment prospects, career opportunities and pay of groups traditionally underrepresented in the workplace, including women and people of color. In crafting S.B. 826, California lawmakers explicitly said they were trying to "improve opportunities for women in the workplace" and help achieve gender parity.
Roll Call reports that Illinois, New York and New Jersey are now considering similar legislation, along with federal lawmakers. But efforts to boost other underrepresented groups, including African-American and Latino individuals, "are encountering opposition from business groups and skeptics who say the measures either aren't needed or aren't inclusive enough."
But even absent legislation like S.B. 826, women are gaining traction in the boardroom. At least 20% of the board members for companies in the Russell 3000 index are women, according to Equilar's Gender Diversity Index.
