Tag: board gender diversity

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.

Will other states follow California in adopting board gender diversity mandates?

Remember California’s SB 826, the board gender diversity mandate? That law requires  each public company with principal executive offices located in California, no matter where they are incorporated, to have a minimum of one woman on its board of directors by the close of 2019. That minimum increases to two by December 31, 2021, if the corporation has five directors, and to three women directors if the corporation has six or more directors. (See this PubCo post.)  Has it made a difference? According to reporting from the WSJ, the answer is a big yes.  Given the success of the new law in making progress toward its goals, the question then is—are other states now following California’s playbook?  Well, kinda, sorta….

Another challenge to California’s board gender diversity law

There’s now another legal challenge to SB 826, California’s board gender diversity statute, filed today in the federal district court in the Eastern District of California. In Creighton Meland v. Alex Padilla, Secretary of State of California, a shareholder of a publicly traded company that is incorporated in Delaware and headquartered in California filed a complaint seeking a declaratory judgment that the statute is unconstitutional under the equal protection provisions of the 14th Amendment and a permanent injunction preventing implementation and enforcement of the statute.  A representative of a legal organization contended that the statute “puts equal numbers above equal treatment….This law is built on the condescending belief that women aren’t capable of getting into the boardroom unless the government opens the door for them. Women are capable of earning a spot on corporate boards without the government coercing businesses to hire them.”  This case appears to be the second complaint filed to challenge the new law, the first being, Crest v. Alex Padilla.  (And here is the amended complaint.) As you may recall, Crest, filed in California State Court, was framed as a “taxpayer suit” that sought to enjoin Padilla from expending taxpayer funds and taxpayer-financed resources to enforce or implement the statute, claiming violations of the equal protection provisions of the California constitution.  (See this PubCo post.) 

ISS releases 2019 Global Policy Survey

ISS recently released the results of its 2019 Global Policy Survey. In this year’s integrated survey, the topics included board gender diversity, overboarding, sunsetting of multi-class capital structures, combined chair and CEO roles and climate change risk. The respondents included 128 investors (including 88 asset managers, 24 asset owners, four advisors and 12 other investors), and 268 non-investors (including 227 corporate issuers,  19 advisors, six corporate directors and 16 other non-investors). Highlights of the survey are summarized below.