California’s first-of-its-kind law mandating diversity on boards of directors was declared unconstitutional by a superior court in April.
In 2020, Governor Gavin Newsome signed Assembly Bill 979 into law, requiring publicly held corporations headquartered in California to include a minimum of one “person from an underrepresented community” on their boards by December 31, 2021. Larger boards were given an extra year to comply.
For boards with more than four but fewer than nine members, the corporation was instructed to include a minimum of two directors from underrepresented communities; boards with nine or more directors needed a minimum of three.
The law defined “person from an underrepresented community” as someone who self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian or Alaska Native, or who self-identifies as gay, lesbian, bisexual or transgender.
AB 979—which built upon Senate Bill 826, a 2018 law that requires companies to have a minimum number of women on their boards of directors—included penalties beginning at a fine of $100,000 for the first violation and increasing to $300,000 for subsequent violations.
A trio of taxpayers filed suit, seeking to have the law struck down.
Ruling on cross motions for summary judgment, Superior Court Judge Terry A. Green sided with the plaintiffs, holding that AB 979 violates the Equal Protection Clause of the California Constitution, as it “treats similarly...
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