LOS ANGELES (Legal Newsline) – A California state court judge has struck down a law that requires companies based in the state to put minorities and women on their boards of directors.
Los Angeles Superior Court Judge Terry Green on April 1 granted a motion for summary judgment for three plaintiffs who brought suit against Secretary of State Shirley Weber. The ruling comes as other challenges are pending, including one brought by the National Center for Public Policy Research.
The laws at issue are 2018’s SB 826 and 2020’s AB 979. Five lawsuits over the laws have been filed.
“There is nothing outlandish or incredible about the idea that people generally tend to socialize with, and select, other people like themselves,” Judge Green wrote.
“The natural result of this tendency is the exclusion of people who look and act differently. And the natural result of that exclusion is the loss of the acumen that those different people would bring to a conversation, business, or any other group.”
But that doesn’t give the state Legislature the right to tell companies who should be on their boards.
“The difficulty is that the Legislature is thinking in group terms. But the California Constitution protects the rights of individuals to equal treatment. Before the Legislature may require that members of one group be given certain board seats, it must first try to create neutral conditions under which qualified individuals from any group may succeed,” Green wrote.
“That attempt was not made in this case.”
Figures amassed before the laws took place showed 13% of the boards of publicly traded companies headquartered in California had a Latino board member, 16% had an African American member and 42% had an Asian American member. Of the 662 companies, 233 had all-white boards.
California also says one-quarter of the companies had no females on their boards, despite the fact that companies that did outperformed them.
Addressing these figures was a compelling state interest, state Attorney General Rob Bonta has argued in court. The laws started by requiring, by 2021, one female member and one minority or LGBT member on boards, with the secretary of state able to impose penalties on companies that do not – if deemed appropriate.
Those quotas went up for the end of 2022, depending on the size of the board.
Those quotas, Green found, violate the Equal Protection Clause of the California Constitution. The Legislature rejected other simpler measures to address diversity on boards, he wrote.
“(W)hile remediation of discrimination can be a compelling interest, the state must define a specific arena in which the discrimination has occurred, such as a school district or a specific industry within a particular local jurisdiction,” he wrote.
“Corporate boards are not such an arena - they cover all industries and all parts of the country. The Legislature did not even attempt to limit its investigation or its findings to California corporations, though jurisdictional restrictions ensured that only California corporations would be covered by the law.
“And even supposing that corporate boards were a sufficiently specific arena, neither the Legislature nor the Secretary has produced the combination of (a) valid statistical comparisons and (b) anecdotal testimony which could serve as ‘convincing evidence’ of discrimination in that arena.”