A California Law That Required Minority Representation on Corporate Boards Was Overturned

white-male-board-of-directors
Image: Laurence Mouton/Getty Images.

On Friday, a Los Angeles judge ruled that a California law that mandated corporations to diversify their boards with members from certain racial, ethnic or LGBTQ+ groups is unconstitutional, the Associated Press reports.

The case was brought by Judicial Watch, a conservative legal group that sought a permanent injunction against the measure that was signed into law last year. The ruling does not give an explanation of the judge’s decision.

Before the judge’s ruling, corporate boards of publicly-traded companies with an executive office in California were required to have a member from an underrepresented community, which included “LGBTQ+, Black, Latino, Asian, Native American or Pacific Islander.

Judge Terry Green wrote in his decision that the state Legislature failed to consider other options to foster diversity on boards before establishing a mandate.

“If demographically homogeneous boards are a problem, then heterogenous boards are the immediate and obvious solution,” he wrote. “But that doesn’t mean the Legislature can skip directly to mandating heterogenous boards.”

According to the lawsuit, the mandate violated the state’s constitutional equal protection clause.

Tom Fitton, Judicial Watch President, said in a statement that the decision “declared unconstitutional one of the most blatant and significant attacks in the modern era on constitutional prohibitions against discrimination.”

In response, the state argued that the measure didn’t “discriminate against, or grant preferential treatment to, any individual or group on the basis of race, sex, color, ethnicity, or national origin in the operation of public employment, public education, or public contracting.”

Since the law was enacted, no companies were fined and no tax dollars were used to enforce the measure. The state law, which was enacted in 2020, required corporations to make the quota by the end of last year by adding a seat or filling a vacant one.

In March, a “Diversity on Boards” report that was issued by the secretary of state found that about 300 out of some 700 corporations had complied. Half of the corporations decline to file the required disclosure statement.

The law was expected to be challenged by conservatives who viewed it as a discriminatory quota, just as they did a 2018 law that required a woman director on corporate boards.

California Governor Gavin Newsom, who signed the bill into law, noted that it was critical for minorities to have representation on influential corporations in the state.

“When we talk about racial justice, we talk about empowerment, we talk about power, and we need to talk about seats at the table,” Newsom said.

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