Explainer: California's board diversity law struck down - what now? - Reuters
The company and law firm names shown above are generated automatically based on the text of the article. We are improving this feature as we continue to test and develop in beta. We welcome feedback, which you can provide using the feedback tab on the right of the page.
(Reuters) - A California judge on Friday struck down a state law requiring publicly held companies headquartered in the state to include LGBT+ individuals and people of color on their boards, blocking one of the most aggressive government efforts to diversify corporate leadership in the U.S.
Here's what happened in court and what to expect.
WHAT DID THE LAW REQUIRE?
Passed in 2020, the law required companies to have from one to three board members who self-identify as a member of an "underrepresented community," which includes Asian, Black, Latino, Native American, and Pacific Islander individuals, as well as those who are gay, lesbian, bisexual or transgender. It allowed the Secretary of State to fine companies who did not comply.
California passed the law after enacting a similar one requiring companies to include women directors, amid a broader push to make boards more inclusive.
Stock exchange operator Nasdaq Inc instituted a rule last year requiring its listed companies to include diverse members on their boards or explain why not.
Companies increased the number of Black directors on their boards in 2020, after the murder of George Floyd, an unarmed Black man, by a white police officer sparked a national outcry against systemic racism.
WHO CHALLENGED THE LAW AND WHY?
Judicial Watch filed the lawsuit on behalf of Robin Crest and two other state taxpayers on Sept. 30, 2020, the same day California Governor Gavin Newsom, a Democrat, signed AB 979 into law.
The plaintiffs argued the law violated the California Constitution by making distinctions based on race and gender that did not meet a compelling government interest. The lawsuit sought to bar California Secretary of State Alex Padilla from using taxpayer funds to enforce the statute.
Los Angeles County Superior Court Judge Terry Green granted summary judgment on Apr. 1, finding the law violated the state's constitution.
In a 24-page opinion, Green found lawmakers did not have statistics about discrimination against qualified director candidates. And they had not tried identity-neutral methods, such as requiring board members to be selected publicly.
"Only in very particular cases should discrimination be remedied by more discrimination," he wrote.
Judicial Watch President Tom Fitton called the decision "one of the most important civil rights decisions in recent memory."
WHAT HAPPENS NOW?
California Assemblymember Chris Holden, one of the law's authors, said on Monday that he was disappointed but awaiting a review of next steps by the Secretary of State and California Department of Justice.
A spokesperson for the Secretary of State did not immediately reply to inquiries on Monday.
Fabrice Houdart, an advocate who testified in favor of the law, said that he hopes the agency will appeal.
His organization Out Leadership estimated this year that LGBTQ+ directors hold less than 0.4% of the seats on Fortune 500 boards. Latino and Hispanic representation in boardrooms has also lagged far behind California's population.
Houdart thinks the pace of change will remain slow absent intervention.
"Without the regulator, it is going to take an enormous amount of time," he said.
Judicial Watch is also challenging California's women on boards law. In that case, Los Angeles Superior Court Judge Maureen Duffy-Lewis denied summary judgment and held a trial. The judge has yet to rule.
Former California State Senator Hannah-Beth Jackson, who authored the women on boards law, issued a statement on Monday, saying the case involved a "very different set of facts and distinctly different legal issues."
source: https://www.reuters.com/legal/legalindustry/californias-board-diversity-law-struck-down-what-now-2022-04-05/
Your content is great. However, if any of the content contained herein violates any rights of yours, including those of copyright, please contact us immediately by e-mail at media[@]kissrpr.com.