New Law in California – Racial and Sexual Orientation Diversity Required in Corporate Boards

California Governor Gavin Newsom signed a law requiring publicly traded corporations headquartered in California to appoint directors from underrepresented communities to their boards, the first law in the country to dictate the racial makeup of corporate boards, USA Today reports.

Underrepresented communities are defined as people who identify as Black, Latino, Native American, Asian American, Pacific Islander, Native Hawaiian, or Alaska Natives. Companies can also appoint directors who identify as gay, lesbian, bisexual, or transgender.

The law was inspired by first-of-its-kind legislation in 2018 that requires publicly held corporations headquartered in the state to diversify their all-male boards. It has faced legal challenges from conservative groups.

– When we talk about racial justice, we talk about power and needing to have seats at the table – the governor said during a press conference on Wednesday.

The legislation did not draw significant opposition, but corporate attorney Keith Bishop testified against the bill, saying "it violates the Equal Protection Clauses of the U.S. and California Constitutions and the Commerce Clause of the U.S. Constitution," USA Today writes.

Nationwide protests over the death of George Floyd prompted pledges from corporate America to close the racial gap. Yet a recent study by USA Today found that less than 2% of top executives at the 50 largest companies are Black.

– The new law represents a big step forward for racial equity – one of the bill’s authors Assemblyman Chris Holden, a Democrat from Pasadena, said in a statement.

– While some corporations were already leading the way to combat implicit bias, now, all of California’s corporate boards will better reflect the diversity of our state – he added.

In 2022, boards with four to nine people must have at least two members from an underrepresented community and boards with nine or more people must have at least three. Companies that don’t comply could face stiff fines.

California state

Gavin Newsom

Keith Bishop

underrepresented communities in corporate boards

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racial minorities