Crest v. Padilla redux—conservative activist group challenges AB 979, California’s board diversity law for “underrepresented communities”
It didn’t take long. From the folks that brought you Crest v. Padilla (see this PubCo post), we now have the sequel, Crest v. Padilla II. You might recall that, shortly after SB 826, California’s board gender diversity bill, was signed into law, a conservative activist group challenged the new law, filing Crest v. Alex Padilla I in California state court on behalf of three California taxpayers seeking to prevent implementation and enforcement of SB 826. With AB 979 signed into law just last week (see this PubCo post), the same three plaintiffs represented by the same conservative group have now filed a similar lawsuit challenging this new law on essentially the same basis. AB 979 requires boards of public companies, including foreign corporations with principal executive offices located in California, to include specified numbers of directors from “underrepresented communities.” Framed as a “taxpayer suit” much like Crest v. Padilla I, the litigation seeks to enjoin Alex Padilla, the California Secretary of State, from expending taxpayer funds and taxpayer-financed resources to enforce or implement the law, alleging that the law’s mandate is an unconstitutional quota and violates the California constitution.
Social unrest currently roiling the U.S. body politic has brought systemic racial inequity and injustice into sharp focus. Why, after decades of public statements and corporate commitments to enhancing racial diversity has so little progress been made? Because, as it’s often said, change starts at the top, one avenue to begin to address these issues is to increase the number of African-Americans and ethnic and other underrepresented minorities represented on boards of directors. Yesterday afternoon, California Governor Gavin Newsom signed into law AB 979, designed to do for “underrepresented communities” on boards of directors what SB 826 did for board gender diversity. (See this PubCo post.) As reported in the Sacramento Bee, prior to signing the bill, Newsom said that “[w]hen we talk about racial justice, we talk about empowerment, we talk about power and we need to talk about seats at the table.”
Will companies accede to calls for actions to improve racial and ethnic diversity in hiring and promotion? California considers a new mandate for racial/ethnic board diversity
In this excellent NYT article from early June, the author painfully explores the view of many African-American executives that, notwithstanding the public condemnations of racism by many public companies and the “multimillion-dollar pledges to anti-discrimination efforts and programs to support black businesses,” still, many of these companies “have contributed to systemic inequality, targeted the black community with unhealthy products and services, and failed to hire, promote and fairly compensate black men and women. ‘Corporate America has failed black America,” said [the African-American president of the Ford Foundation]. ‘Even after a generation of Ivy League educations and extraordinary talented African-Americans going into corporate America, we seem to have hit a wall.’” In the article, a number of Black executives offer recommendations for actions companies should take to begin to implement the needed systemic transformation. And now, third parties—from proxy advisors to institutional investors to legislators—are taking steps to induce companies to take some of these actions. Will they make a difference?