Bill Would Impose Minimum Number Of "Directors From An Underrepresented Community"

Allen Matkins
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Allen Matkins

In 2018, the California legislature enacted SB 826 (Jackson) which imposed gender quotas on corporate boards of directors of "publicly held corporations".  See California Enacts Novel Female Board Quota Legislation.  The constitutionality of that legislation is now before the courts.  See Secretary Of State Must Answer Legal Challenge To Female Director Quota Law.

On Monday, Assembly Member Chris Holden gutted and amended AB 979 to impose a similar quota requirement on domestic and foreign publicly held corporations having their principal executive offices in California.  Similar to SB 826, corporations will be required to have a minimum of one director from an underrepresented community no later than the close of the 2021 calendar year.  By the close of the 2022 calendar year, the minimum numbers would be as follows:

  • Three, if the corporation's number of directors is nine or more;
  • Two, if the corporation's number of directors is more than four but fewer than nine; and
  • One, if the corporation's number of directors is four or fewer. 

The bill would also impose similar reporting requirements on the Secretary of State and subject violators to significant fines.

The bill defines a "director from an underrepresented community" to mean an individual who is African-American, Hispanic, or Native American. 

The legislature goes into summer recess today and will reconvene on July 13.  J.R. 51(b)(2).  AB 979 has been assigned to the Senate Committee on Rules. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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