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California Makes Space For Women On The Board

Published by and on November 26, 2018

California makes space for women to have a seat at the table in first state law requiring all publicly traded companies in the state to have at least one female on their board of directors by the end of 2019.

On September 30, 2018, California Governor Jerry Brown signed into law California Senate Bill 826, which requires publicly traded corporations headquartered in California to have at least one woman on their board of directors by the end of 2019. Companies with six or more members on their board of directors will be required to have at least three women on the board by 2021. In order to prove compliance, companies are required to report gender ratios on each board of directors to the California Secretary of State.

California companies who fail to be in compliance with the law face substantial penalties. Companies will be fined $100,000 in the first year they fail to meet requirements under the new law. For every year of non-compliance thereafter, California employers will face penalties of $300,000 for each additional year. Companies who fail to report gender ratios to the California Secretary of State face an additional $100,000 penalty.

Reception to the new law has been challenging at best. Some critics foresee that the effect of forcing women on boards will have the unintended result of making it more difficult for companies to achieve broader diversity goals. Further still, many critics are challenging the constitutionality of the law based on its clear gender preference of women.

Welter Insight

Upon signing the Bill, Governor Brown acknowledged the potentially flawed legislation, but noted that the law’s purpose of gender equality was not being heard in Congress. For companies effected by the new legislation, continued monitoring of the situation is advisable. The law is likely to be challenged under the Equal Protection Clause and may never be fully implemented. Companies in other states should also track the California law, as the final outcome may inspire other states to follow suit.

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