Results for: board racial diversity
Another complaint filed against California board diversity statutes
Yesterday, yet another complaint was filed in federal district court charging that California’s board diversity statutes, SB 826 and AB 979, are unconstitutional under the equal protection provisions of the 14th Amendment. This complaint was filed by The National Center for Public Policy Research, which, you may recall, has also filed a petition challenging the Nasdaq board diversity rule (see this PubCo post and this PubCo post). The NCPPR describes itself as “a non-profit 501(c)(3) organization that supports free market solutions to social problems and opposes corporate and shareholder social activism that detracts from the goal of maximizing shareholder returns.” The case is National Center for Public Policy Research v. Weber, and the initial scheduling conference for this case isn’t set to occur until March of next year.
Hearing on board gender diversity statute—will the court issue a preliminary injunction? (Updated)
On October 19, a federal district court judge held a hearing on a motion for a preliminary injunction in Meland v. Weber, a case challenging SB 826, California’s board gender diversity statute, on the basis that it is unconstitutional under the equal protection provisions of the 14th Amendment. The judge had previously dismissed the case on the basis of lack of standing, but was reversed by the 9th Circuit. What did the hearing reveal? (This post has been updated to reflect additional information regarding the hearing. See “At the hearing” below.)
Hearing on board gender diversity statute—will the court issue a preliminary injunction?
On October 19, a federal district court judge held a hearing on a motion for a preliminary injunction in Meland v. Weber, a case challenging SB 826, California’s board gender diversity statute, on the basis that it is unconstitutional under the equal protection provisions of the 14th Amendment. The judge had previously dismissed the case on the basis of lack of standing, but was reversed by the 9th Circuit. What did the hearing reveal?
The Conference Board reports on board diversity
The Conference Board has just released a new report, Corporate Board Practices in the Russell 3000, S&P 500, and S&P MidCap 400: 2021 Edition, a primary focus of which is board diversity. According to the press release, the study is the “most current and comprehensive review of board composition, director demographics, and governance practices at US public companies.” Key to the study is that more companies are now actually disclosing the racial and ethnic composition of their boards (based on self-reporting by directors): companies providing data are up from 24% of the S&P 500 in 2020 to 59% in 2021, and from 7.7% of the Russell 3000 in 2020 to 26.9% in 2021. With regard to progress in board diversity, the data shows that women have made significant advances—on the Russell 3000 this year, women represented about 38% of this year’s newly elected class of directors, bringing total representation of women on Russell 3000 boards to 24.4%, up from 21.9% in 2020. However, boards have significant catching up to do when it comes to racial and ethnic diversity. Based on self-reported data, “boards remain overwhelmingly white,” and, for 2021, the class of new directors was 78.3% white, with only 11.5% African-American, 6.5% Latinx/Hispanic and 3.1% Asian, Hawaiian or Pacific Islander.
First legal challenge to California’s board gender diversity statute heads to trial
You might remember that the first legal challenge to California’s board gender diversity statute, Crest v. Alex Padilla, was a complaint filed in 2019 in California state court by three California taxpayers seeking to prevent implementation and enforcement of the law. Framed as a “taxpayer suit,” the litigation sought to enjoin Alex Padilla, the then-California Secretary of State (now U.S. Senator), from expending taxpayer funds and taxpayer-financed resources to enforce or implement the law, SB 826, alleging that the law’s mandate is an unconstitutional gender-based quota and violates the California constitution. The court in that case has just denied each side’s motion for summary judgment after concluding that there were triable issues of material fact. The case will now be going to trial, which was initially set for October 25. However, on the court’s own motion, the trial was “trailed” to December 1. Stay tuned.
Petition filed for review of SEC approval of Nasdaq board diversity rule
It should hardly come as a surprise to anyone that the new Nasdaq board diversity rule (see this PubCo post) would be challenged in the courts. The rule was approved by the SEC on Friday, August 6. On Monday, August 9, the Alliance for Fair Board Recruitment filed a slim petition under Section 25(a) of the Exchange Act in the Fifth Circuit Court of Appeals—the Alliance has its principal place of business in Texas—for review of the SEC’s final order approving the Nasdaq rule. The petition itself is not particularly revealing, but it’s notable that the petitioner is also the most recent plaintiff challenging California’s two board diversity laws.
A little more on the Nasdaq Board Diversity Rule
On Friday, the SEC approved Nasdaq’s proposal for new listing rules regarding board diversity and disclosure, along with a proposal to provide free access to a board recruiting service. The new listing rules adopt a “comply or explain” mandate for board diversity for most listed companies and require companies listed on Nasdaq’s U.S. exchange to publicly disclose “consistent, transparent diversity statistics” regarding the composition of their boards in a matrix format. (See this PubCo post.) Nasdaq has now posted a three-page summary of its new board diversity rule, What Nasdaq-listed Companies Should Know.
SEC approves Nasdaq “comply-or-explain” proposal for board diversity
You probably remember that, late last year, Nasdaq filed with the SEC a proposal for new listing rules regarding board diversity and disclosure, accompanied by a proposal to provide free access to a board recruiting service. The new listing rules would adopt a “comply or explain” mandate for board diversity for most listed companies and require companies listed on Nasdaq’s U.S. exchange to publicly disclose “consistent, transparent diversity statistics” regarding the composition of their boards. In March, after Nasdaq amended its proposal, and in June, the Division of Trading and Markets, pursuant to delegated authority, took actions that had the effect of postponing a decision on the proposal—until now. On Friday afternoon, the SEC approved the two proposals.
New challenge to California board diversity laws
There’s a new case challenging both of California’s board diversity laws. The case, , Alliance for Fair Board Recruitment v. Weber, which was filed in a California federal district court against the California Secretary of State, Dr. Shirley Weber, seeks declaratory relief that California’s board diversity statutes (SB 826 and AB 979) violate the Equal Protection Clause of the 14th Amendment and the internal affairs doctrine, and seeks to enjoin Weber from enforcing those statutes. The plaintiff, the Alliance for Fair Board Recruitment, is described as “a Texas non-profit membership association,” with members that include “persons who are seeking employment as corporate directors as well as shareholders of publicly traded companies headquartered in California and therefore subject to SB 826 and AB 979.” Will this case be the one to jettison these two statutes?
Commissioner Lee discusses board’s role in ESG oversight
On Monday, in a keynote address before the Society for Corporate Governance 2021 National Conference, SEC Commissioner Allison Herren Lee discussed the challenges boards face in oversight of ESG matters, including “climate change, racial injustice, economic inequality, and numerous other issues that are fundamental to the success and sustainability of companies, financial markets, and our economy.” Shareholders, employees, customers and other stakeholders are now all looking to corporations to adopt policies that “support growth and address the environmental and social impacts these companies have.” Why is that? Because actions or inactions by our largest corporations can have a tremendous impact. According to Lee, a 2018 study showed that, of the top 100 revenue generators across the globe, only 29 were countries—the rest were corporations, that is, corporations “often operate on a level or higher economic footing than some of the largest governments in the world.”
You must be logged in to post a comment.