Tag: board gender diversity

California court determines board gender diversity statute violates California Constitution

You might remember that the first legal challenge to SB 826, 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 a judgment declaring the expenditure of taxpayer funds to enforce or implement SB 826 to be illegal and an injunction preventing the California Secretary of State from expending taxpayer funds and taxpayer-financed resources for those purposes, alleging that the law’s mandate is an unconstitutional gender-based quota and violates the California constitution.  A bench trial began in December in Los Angeles County Superior Court that was supposed to last six or seven days, but closing arguments didn’t conclude until March. (See this PubCo post.)  The verdict from that Court has just come down.  The Court determined that SB 826 violates the Equal Protection Provisions of the California Constitution and enjoined implementation and enforcement of the statute. This verdict follows summary judgment in favor of the same plaintiffs in their case against AB 979, California’s board diversity statute regarding “underrepresented communities,” which was patterned after the board gender diversity statute. (See this PubCo post.)  The Secretary of State has not yet indicated whether there will be an appeal.  In light of pressures from institutional investors and others for board gender diversity, together with the Nasdaq “comply or explain” board diversity rule (see the SideBar below), what impact the decision will have on board composition remains to be seen.

With the Court decision still to come, what happened in the first trial of California’s board gender diversity statute?

You might remember that the first legal challenge to SB 826, 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 a judgment declaring the expenditure of taxpayer funds to enforce or implement SB 826 to be illegal and an injunction preventing the California Secretary of State from expending taxpayer funds and taxpayer-financed resources for those purposes, alleging that the law’s mandate is an unconstitutional gender-based quota and violates the California constitution.  A bench trial began in December in Los Angeles County Superior Court that was supposed to last six or seven days, but you know, one thing and another, closing arguments were just completed and the case has now been submitted. As we await the Court’s decision—and in anticipation of International Women’s Day—it might be interesting to review some of the testimony from the trial.

In 2021, the scales tipped toward more women joining boards in California

With the passage of SB 826 in 2018, California became the first state to mandate board gender diversity (see this PubCo post). To measure the impact of that legislation, in 2020, California’s current First Lady co-founded the California Partners Project. In 2020, the CPP released a progress report on women’s representation on boards of public companies headquartered in California, tracking the changes in gender diversity on California boards since enactment of the law. (See this PubCo post.) Now, the CPP has released another report, Mapping Inclusion: Women’s Representation on California’s Public Company Boards by Region and Industry.  The new report, the CPP’s third, found “much to celebrate in the progress California has made. All-male boards are a thing of the past—from nearly a third of public company boards in 2018 to less than two percent now—and women hold a record number of California public company board seats.”  The report asserts that the “California experiment proves that where there’s a will, there’s a way. Concern that there were not enough qualified women to serve on boards is unfounded.” Most revealing perhaps, the report tells us that, in 2021 “more women have joined California’s public company boards than men, likely for the first time.” But just barely—469 of the 930 directors that started in 2021, or 50.4%, were women. Whether this new statistic is attributable to SB 826 is anyone’s guess—correlation is not necessarily causation and investors and others have also pressured companies on diversity issues—but it certainly helped to dial up the heat.

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.)

Ninth Circuit allows challenge to California board gender diversity statute to go forward

In Meland v. Padilla, a shareholder of a publicly traded company filed suit in federal district court seeking a declaratory judgment that SB 826, California’s board gender diversity statute, was unconstitutional under the equal protection provisions of the 14th Amendment.  In April 2020, a federal judge dismissed that legal challenge on the basis of lack of standing. On Monday, a three-judge panel of the 9th Circuit reversed that decision, allowing the case, now called Meland v. Weber, to go forward.  The Court held that, because the plaintiff “plausibly alleged that SB 826 requires or encourages him to discriminate on the basis of sex, he has adequately alleged that he has standing to challenge SB 826’s constitutionality.”

Tackling the underrepresentation of women of color on boards

With the passage of SB 826 in 2018, California became the first state to mandate board gender diversity (see this PubCo post). In 2020, the California Partners Project, which was founded by California’s current First Lady, released a progress report on women’s representation on boards of California public companies, tracking the changes in gender diversity on California boards since enactment of the law.  That same year,  AB 979 was signed into law in California.  That bill was designed to do for “underrepresented communities” on boards of directors what SB 826 did for board gender diversity. (See this PubCo post.) The CPP has just released a new report that not only updates its 2020 progress report on board gender diversity, but also provides data on women of color on California’s public company boards.  The takeaway is that, while there has been tremendous progress in increasing the number of women on boards, nevertheless, much work remains “to tap all of our talent and achieve racial and cultural equity. Most women on California’s corporate boards are white, while women of color—especially Latinas—remain severely underrepresented.”  In addition to new data, the report offers some strategies for overcoming these deficits in diversity.

California posts new report on board gender diversity—what does it tell us?

On March 1, the new California Secretary of State, Dr. Shirley N. Weber (who replaced Alex Padilla, newly appointed Senator) issued the Secretary’s 2021 report required by SB 826, California’s board gender diversity law, on the status of compliance with the law. The report counts 647 publicly held corporations that identified principal executive offices in California in their 2020 10-Ks, and indicates that 318 of these “impacted corporations” had filed a 2020 California Publicly Traded Corporate Disclosure Statement, which would reflect their compliance with the board gender diversity requirement (slightly fewer than the 330 filed last year). Of the 318 companies that had filed, 311 reported that they were in compliance with the board gender diversity mandate, slightly more than the 282 reported last year, but still less than half of the companies subject to the law. (See this PubCo post.) But is that data from the report really meaningful?

New report looks at board gender diversity in California

With the passage of SB 826 in 2018, California became the first state to mandate board gender diversity (see this PubCo post). The California Partners Project, which was founded by California’s current First Lady, has just released a new progress report on women’s representation on boards of California public companies, tracking the changes in gender diversity on California boards since enactment of the law. According to the report, “[r]esearch has shown us that companies with women on the board of directors outperform those without them. Women directors are more effective at managing risk, better able to balance long-term priorities, and have a keen sense of what customers, shareholders, and employees need to thrive.” The report observes that, if “all of the companies in the Russell 3000 followed California’s lead, over 3,500 women’s voices would be added to corporate governance.”

Federal District Court dismisses a challenge to California board gender diversity statute

In Meland v. Padilla, a shareholder of a publicly traded company filed suit in federal district court  seeking a declaratory judgment that SB 826, California’s board gender diversity statute, was unconstitutional under the equal protection provisions of the 14th Amendment.  A federal judge has just dismissed that legal challenge on the basis of lack of standing. (Update: This case has been appealed to the 9th Circuit.)

New report on California board gender diversity mandate

As required by SB 826, California’s board gender diversity law, the California Secretary of State has posted its March 2020 report on the status of compliance with the new law. The report combines information gathered in the July 2019 report (see this PubCo post) with data for the additional six-month period of July 1, 2019 through December 31, 2019. The report counts 625 publicly held corporations that identified principal executive offices in California in their 2019 10-Ks, but indicates that only 330 of these “impacted corporations” had filed a 2019 California Publicly Traded Corporate Disclosure Statement, which would reflect their compliance with the board gender diversity requirement. Of the 330 companies that had filed, 282 reported that they were in compliance with the board gender diversity mandate.