California Adopts Strict Quotas For Public Company Boards

Allen Matkins
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Allen Matkins

Yesterday, Governor Gavin Newsom signed AB 979 into law.  The new law will apply to publicly held corporations having their principal executive offices in California to have specified numbers of directors from "underrepresented communities".   The law requires that these corporations have at least have a  one director from an underrepresented community by the end of next year.  By the end of 2022, subject corporations more than 4 but fewer than 9 directors must have a minimum of 2 directors from underrepresented communities and corporations with 9 or more directors must have a minimum of 3 directors from underrepresented communities.

The law is subject to constitutional challenge on several different grounds, including the equal protection clauses of the U.S. and California constitutions, the First Amendment of U.S. Constitution, and the Commerce Clause of the U.S. Constitution.  In addition, corporations who implement the law may be deemed to be "state actors" and hence liable for civil rights violations under 42 U.S.C. Section 1983.  See Will AB 979 Expose Corporations To Section 1983 Liability?

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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