California Law Requiring Board Diversity Is Struck Down

A California law requiring diversity on corporate boards of directors has been struck down in a blow to the state’s efforts to address racial and gender disparities in the workplace.

In response to a lawsuit brought by Judicial Watch, a nonprofit conservative advocacy group, Judge Terry Green of Los Angeles County Superior Court on Friday found that the law violated the state constitution.

The law, Assembly Bill 979, went into effect in 2020. It requires publicly traded companies based in California to have board members from underrepresented communities including people of several races and ethnic groups and people who identify as gay, lesbian, bisexual or transgender. Gov. Gavin Newsom, in signing the bill into law, proclaimed it a victory for racial justice and empowerment.

Judicial Watch’s lawsuit, filed a month after the law was signed, argued that it was unconstitutional because it mandated quotas.

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In a statement after the ruling, Tom Fitton, president of Judicial Watch, decried the law as part of “one of the most blatant and significant attacks in the modern era on constitutional prohibitions against discrimination.”

California has led the country in pushing companies to diversify their top ranks, starting with a 2018 law that required corporate boards have at least one woman. Companies that do not comply face fines.

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The Securities and Exchange Commission has approved a rule by Nasdaq, set to go in effect this year, that will require companies listed on its exchange to disclose the ethnic and gender makeup of their boards and have at least two “diverse” members or explain why they do not. Other states, including Maryland and New York, have required companies to disclose board diversity statistics, but none have enacted mandatory quotas.

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