Calif. Bill to Mandate Women on Corporate Boards Passes Senate

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By Laura Mahoney

California-based companies that lack women on their boards would need to add at least one woman under a bill passed in the state Senate.

S.B. 826 by state Sen. Hannah-Beth Jackson (D) passed May 31 on a 22-11 vote and now moves to the Assembly. It would apply to publicly traded companies with headquarters in the state and would make California the first state in the nation with such a requirement.

Skechers U.S.A. Inc. and TiVo Corp. are among the companies that would need to change their board makeup.

The bill would require companies to have at least one woman director by the end of 2019 and have two or three, depending on the size of the board, by the end of 2020. Companies could comply by filling an opening with a woman or by expanding the size of the board. They wouldn’t be required to kick men off their boards to create an opening for a woman.

Companies that don’t comply would have to pay a fine equal to their directors’ average cash compensation for one year.

‘Why Is It So Hard?’

Jackson and Senate President Pro Tempore Toni Atkins (D), the first woman to hold that post, said on the Senate floor they are frustrated that they must push legislation to diversify corporate boards.

“Why is it so hard for us to try and make the case that women in leadership and women on corporate boards could have a positive impact on your bottom line?” Atkins said. “I don’t know why I have to stand here and actually plead.”

The legislation’s top supporter and longtime champion is the California chapter of the National Association of Women Business Owners (NAWBO).

Employer and business groups led by the California Chamber of Commerce have come out against the bill, saying it only considers one part of diversity, and ignores others such as race or national origin, and could result in the displacement of existing board members based solely on their gender. These groups have also raised concerns about the constitutionality of such a requirement.

Jackson said the bill will pass constitutional muster because it doesn’t impose a quota or a percentage for board seats held by women.

The Assembly must pass the bill by Aug. 31 for it to reach the desk of Gov. Jerry Brown (D).

To contact the reporter on this story: Laura Mahoney in Sacramento, Calif. at lmahoney@bloomberglaw.com

To contact the editor responsible for this story: Terence Hyland at thyland@bloomberglaw.com

For More Information

More information about the bill is available at http://src.bna.com/zgo.

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