At the state level, corporate laws have not traditionally mandated board composition, but some state legislatures are taking action in this area. California enacted a law in 2018 requiring that public companies headquartered in the state have at least two female directors by the end of 2021 (three if there are six or more directors). In 2020, California enacted another law that requires public companies headquartered in the state to have at least one director (more depending on the size of the board) on their board who is from an underrepresented community, which is defined as “an individual who self‑identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native, or who self‑identifies as gay, lesbian, bisexual, or transgender.” Fines for noncompliance are authorized in the amounts of $100,000 for the first violation and $300,000 for each subsequent violation. Washington state also has a gender diversity law for public companies, and a number of other states are considering such legislation. North Carolina has not enacted any such laws to date.
Last but not least, private parties are also exerting their influence on issues of diversity, equity, and inclusion. Institutional investors with large ownership positions in companies are pushing for more transparency on these issues and may vote their shares against management’s proposals at annual shareholder meetings if they are not satisfied with a company’s response. Service providers are also adopting diversity policies applicable to their clients and customers. Most notably, Goldman Sachs has a policy that it will only underwrite initial public offerings in the United States and Europe of companies that have at least two diverse board members.