On Sept. 30, 2018, Gov. Jerry Brown signed into law Senate Bill No. 826 (SB 826), California’s new legislation promoting gender balance on the boards of directors of publicly held corporations headquartered in California. The legislation is designed to encourage gender diversity in corporate boardrooms, boost the California economy, and improve opportunities for women in the workplace. The new law requires publicly held domestic California corporations and foreign corporations headquartered in California to have a minimum of one female board member by the end of 2019, and a representative number of female board members by the end of 2021.
California’s new law is facing pushback from California businesses and commentators on various grounds. Some argue the law violates the U.S. and California Constitutions by establishing an express gender classification and requiring companies to select board members based on gender. The law also raises concerns by requiring foreign corporations with principal executive offices in California, whose internal affairs are generally governed by the laws of their state of incorporation, to alter the structure of their boards to comply with California law. This creates a potential conflict between the laws of a foreign corporation’s state of incorporation and the laws of California. The law may also result in disparate treatment of publicly held domestic California corporations based on the location of their principal executive offices.
Click here for an overview of SB 826, compliance considerations and costs of non-compliance, and potential legal implications.