New California law, the first of its kind, requires racial diversity on corporate boards of directors
California Gov. 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.
It 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.
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.
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“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.”
Holden says research shows that public support for social justice often does not lead to lasting reforms needed to boost hiring and retention.
The legislation he co-authored would require people from “underrepresented communities” to have at least one seat on corporate boards in California by the end of 2021.
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.