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Can California legally require women to be on the corporate board of directors? | Work

Los Angeles (AP) —At the time, California Governor Jerry Brown suggested that when he signed the country’s first law requiring women to the board of directors of a listed company, he might not be able to tolerate legal issues.

Three years later, the judge will begin hearing evidence at the Los Angeles High Court on Wednesday. This could revoke the law allowed by increasing the number of female seats in conference rooms traditionally dominated by men. California law urged other states to adopt or consider similar legislation.

Judicial Watch, a conservative legal group, argues that it is illegal to use taxpayer funds to enforce laws that violate the Equal Protection Clause of the California Constitution by requiring gender-based allocations. And filed a lawsuit.

“They are creating a classification that either prioritizes one class or prioritizes another,” said lawyer Robert Patrick Sticht. He said the state does not have a compelling government interest in creating mandates.

Another conservative legal group filed another proceeding in federal court alleging that the law violated the Equal Protection Clause of the US Constitution.

Former Senator Hannah-Beth Jackson, who drafted the bill, said the bill does not impose quotas because the board does not require a certain percentage of women. Companies can meet the requirements by adding females without compromising the rights of male directors.

She said plaintiffs should be ashamed to claim that the law is discriminatory.

“I think it’s incredibly ironic and hypocritical,” Jackson said.

The law requires listed companies headquartered in California to have one member on the board of directors to be identified as a female by the end of 2019. By January, a board of directors with five directors will need two women and a board of directors with six or more members will need three. woman.

The fine amounts to a $ 100,000 fine for companies that fail to report the composition of the board to the Secretary of State of California. Companies that do not include the required number of female directors may be fined $ 100,000 for the first breach and $ 300,000 for subsequent breach.

Last year, less than half of the approximately 650 applicable companies in the state reported compliance. According to the latest report, more than half did not submit the required disclosure statement.

The Secretary of State will be fined, but no company will be fined, spokeswoman Jenna Dresdner said.

The state claims in court documents that it is not using taxpayer funds to enforce the law. Dresdner and the Office of the Attorney’s Office refused to comment on the proceedings in dispute.

Proponents of the law said it had already had a major impact in California and beyond. Washington passed a similar bill this year, and lawmakers from other states, including Massachusetts, New Jersey, and Hawaii, have proposed similar bills. Illinois requires listed companies to report the composition of their board of directors.

Several European countries, including France, Germany, Norway and Spain, require women to be included in corporate boards.

Prior to California law, women occupied 17% of the board of directors of companies in the state, based on the Russell 3000 Index, the largest company in the United States. This is due to the advocacy group 50/50 Women on Boards. As of September, women’s board of directors accounted for 26% nationwide, compared to more than 30% in California.

Still, about 40% of California’s largest companies need to add women to their boards to comply with the law, the group said.

As the deadline approaches, “a lot of scrambling is taking place,” said Betsy Berkhemer-Credaire, CEO of 50/50 Women on Boards. She also heard the anecdotal story that other companies are waiting to see how the court decides.

Berkhemer-Credaire said he was confident that it would be supported. If it turns out to be unconstitutional, it can slow down progress, but she believes pressure from institutional and individual investors will increase the number of women appointed to the corporate board of directors.

“The train left the station,” said Barkemark Redea.

Putting pressure on this issue, the US Securities and Exchange Commission in August said that most of the approximately 3,000 companies listed on the exchange had at least one female and one of the racial minorities, or homosexuals. Approved Nasdaq’s proposal that someone would identify it as. , Lesbian, bisexual, transgender or queer.

There are no penalties for companies that do not meet Nasdaq’s diversity standards, but they must publicly explain why they failed to comply.

By January, California law requiring the board of directors of companies that are publicly traded with the NASDAQ rules signed last year will be black, Latin, Asian, Pacific Islander American, indigenous, or gay, lesbian, We have members of the underrated community, including those who are self-aware as bisexual. , Or transgender — also facing litigation.

When California law was proposed, a state legislature analysis said, “As proposed in this bill, it is difficult to defend the use of systems such as quotas to correct past discrimination and differences in opportunity. Maybe. ” Brown signed in the up-and-coming #MeToo movement over sexual misconduct.

In a letter, the Democratic Governor said, “We do not really minimize potential flaws that could be fatal to its final implementation. Nevertheless, recent events have been … It makes it clear that many people have not received the message. “

Judiciary Watch filed a proceeding in August 2019, and the Pacific Legal Foundation filed a proceeding on behalf of shareholders three months later. Shareholders said the law would force discrimination by gender. The latter case was dismissed by a federal judge, but was revived by a unanimous panel of the 9th US Circuit Court of Appeals.

The California Chamber of Commerce opposed the law, but no company did not sign the proceedings and participated in a legal effort led by three California residents in Los Angeles. They sued under provisions that would allow taxpayers to prevent illegal government spending.

Can California legally require women to be on the corporate board of directors? | Work

Source link Can California legally require women to be on the corporate board of directors? | Work

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