California governor signs first-ever law requiring diversity on corporate boards

California takes a big first step toward corporate equality

Oct 1, 2020

In a move that is being lauded as the first of its kind, California Gov. Gavin Newsom has signed a law requiring all publicly traded corporations headquartered in the state to make diversity a priority by appointing directors from underrepresented communities to their boards.

According to USA Today, this is the first law in the nation that’s mandated the racial make-up of corporate boards. It was reportedly inspired by a gender-focused piece of legislation from 2018 that required publicly-held corporations headquartered in California to diversify their all-male boards.

“When we talk about racial justice, we talk about power and needing to have seats at the table,” Newsom said Wednesday during a press conference.

Not surprisingly, in 2018, when the state mandated that company boards could no longer be a ‘boy’s club’ that systemically kept women at bay, the law was faced with opposition and legal challenges from conservative groups. But in the wake of nationwide protests sparked by the murder of George Floyd, the buy-in for this newest mandate along the lines of race appears to be widely understood as a sign of the times.

California Gov. Gavin Newsom signed legislation that will require the boards of publicly traded companies based in the state to have at least one racially, ethnically or otherwise diverse director by 2021 https://t.co/WrustaKG0l
— The Wall Street Journal (@WSJ) October 1, 2020

Granted, corporate attorney Keith Bishop testified against the bill, saying “it violates the Equal Protection Clauses of the U.S. and California Constitutions and the Commerce Clause of the U.S. Constitution,” but this time, no major groups or organizations made a concerted effort to undermine the law’s passage.

A new study by USA Today found that less than 2% of top executives at the 50 largest companies are Black. But moving forward, at least one person from an “underrepresented community” has to have a seat on corporate boards in California by the end of 2021.

“The new law represents a big step forward for racial equity,” one of the bill’s authors, Assemblyman Chris Holden, a Democrat from Pasadena, said in a statement. “While some corporations were already leading the way to combat implicit bias, now, all of California’s corporate boards will better reflect the diversity of our state.”