California law requiring women on company boards is overturned

California will appeal a ruling requiring public companies based there to have women on their boards, the state’s secretary of state said Tuesday.

But the legislation appears to have achieved at least some of its stated goals: bringing more women into boardrooms and bringing the issue of diversity to the fore.

Last week, a Los Angeles County Superior Court Judge, Maureen Duffy-Lewis, ruled that the law, Senate Bill 826, violated the state constitution because it was not designed to remedy an instance of “specific, intentional , intentional and illegal”. She of discrimination She added that the state’s claims that the diverse boards would directly boost California’s economy could not be proven.

His decision came about a month after another judge in California struck down a similar state mandate that required public companies to have board members from underrepresented communities. Judicial Watch, a conservative nonprofit advocacy group that brought both lawsuits, applauded the latest decision for upholding “the core American value of equal protection under the law.”

Introduced in 2018, SB 826 mandated that public companies add at least one female director by the end of 2019. By the end of 2021, boards were expected to have at least two or three female directors, depending on company size, and companies that they failed. to comply with risky financial penalties.

The number of companies in California without female directors dropped to 1 percent in 2021, from 28 percent before the law passed in 2018, according to data from the California Partners Project, a gender equity nonprofit organization that was co-founded by Jennifer Siebel Newsom. , the wife of California Governor Gavin Newsom. Overall, 31% of board seats were held by women in 2021, more than double the number in 2018.

“Today, more than half of California public companies have three or more women on their board, which is an increase from 11 percent in 2018,” said Leigha Weinberg, director of programs for the California Partners Project.

“That really matters because that’s the threshold of critical mass where women can actually influence board discussions in a more substantial way” rather than being perceived as symbols, Ms Weinberg added.

According to a report by accounting firm KPMG published in 2020, the majority of women added to boards in 2019 were first-time directors, a statistic the firm says indicates the law “widened the pool of candidates” for attract candidates. from beyond the board’s usual network.

The law has also sent ripples through the corporate world, with a growing number of institutions, such as the Nasdaq stock exchange and Goldman Sachs, now requiring leadership diversity from companies seeking to go public.

“There isn’t a boardroom in America that doesn’t talk about diversity,” said Megan Wang, chief operating officer of Boardlist, which helps companies find director candidates. “The law certainly accelerated something that we had been talking about for decades. But we are in a moment where legislation is a lever and there are many other things at stake at the moment.”

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