CALIFORNIA ENACTS LAW MANDATING INCLUSION OF UNDERREPRESENTED COMMUNITIES ON PUBLIC COMPANY BOARDS


On September 30, 2020, the Governor of California, Gavin Newsom, signed California Assembly Bill No. 979 (“Bill 979”).  Bill 979 amends California’s General Corporation Law and, inter alia, requires publicly held corporations that maintain principal executive offices in California to have a minimum of one director from an underrepresented community by the end of 2021.  As stated in Bill 979, companies that fail to comply are subject to fines of up to $300,000.

According to Bill 979, domestic corporations and foreign corporations with principal executive office locations in California are required to have a minimum of one diverse director on their respective boards by the end of calendar year 2021.  Additionally, the law requires these corporations to comply with the following by the end of 2022:

•    Boards comprised of four or less directors must include at least one director from underrepresented communities;
•    Boards comprised of more than four, but less than nine directors must include at least two directors from underrepresented communities; or
•    Boards comprised of more than nine directors must include at least three directors from underrepresented communities.

Further, Bill 979 instructs the California Secretary of State to publish a report by March 1, 2022.  The report will identify corporations that have complied with the new law, have subsequently relocated their corporate headquarters within the past year, and those corporations that are subject to Bill 979, but are no longer publicly traded.

Bill 979 will likely face legal challenges on the constitutionality of the bill; however, Bill 979 follows the growing trend of mandating the representation of underrepresented communities on boards of directors of publicly traded companies.  The published version of Bill 979 can be found here.
 

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About Christopher M. Lash

Christopher M. Lash's practice is focused on shareholder derivative and securities litigation. Chris is an Associate in the firm's Pennsylvania office.

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