Close this search box.
Close this search box.

California Board Diversity Law Overturned: Debate Could Rekindle

© AdobeStock
The ruling will likely cause confusion and potential heated debate in boardrooms.

The pushback against diversity and inclusion in corporate boardrooms accelerated this month as California Judge Terry Green of the Los Angeles County Superior Court ruled that a state law mandating diversity on corporate boards was in violation of the state’s constitution, and therefore, illegal. The decision will likely focus more attention on how much progress that has been made since California Assembly Bill 979 went into effect in 2020—sparking debates among corporate board members and shareholder groups.

California Assembly Bill 979, which applies to publicly traded companies headquartered in California, requires “a corporation with 5 directors to have a minimum of 2 female directors and such a corporation with 6 or more directors to have a minimum of 3 female directors.”

The bill also required that, by the close of the 2021 calendar year, corporations “have a minimum of one director from an underrepresented community, as defined. The bill would require, no later than the close of the 2022 calendar year, such a corporation with more than four but fewer than nine directors to have a minimum of two directors from underrepresented communities, and such a corporation with nine or more directors to have a minimum of three directors from underrepresented communities.”

The bill defines underrepresented communities as persons who self-identify as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, Alaska Native, gay, lesbian, bisexual or transgender.”

Judge Green ruled that the law violated the equal protection clause in California’s state constitution. The court decision could rekindle the debate over diversity and inclusion efforts at companies nationwide. Companies that have made a commitment to diversity will likely ignore the California court ruling. However, boards that have been slow to move on diversity or haven’t moved at all may want to consider and prepare for the following possibilities:

• Discord among board members over diversity and inclusion. Many companies have begun meeting the California law’s mandate to add women and underrepresented groups to corporate boards. The Los Angeles County Superior Court ruling that the law is illegal may stir up negative feelings between board members about the need for board diversity. Unfortunately, boards may find they might have to monitor whether microaggressions or hostile behaviors are being aimed at directors who were recently added to comply with diversity mandates. Boards may also find themselves engaged in heated debates over whether to slow or discontinue diversity efforts that were started within the last few years. The board and management team will need to work together to confirm the company position on diversity and inclusion in light of the new court ruling.

• Increased shareholder and stakeholder actions. Boards should be prepared to communicate and engage with stakeholders and shareholders on this issue. Boards should expect some shareholders to advocate more aggressively for board diversity. Expect to see more shareholder proposals requesting boards become more diverse and requesting diversity audit reports on the company employee base. Additionally, employees and community groups may actively protest companies that state publicly that they are against diversity. Boards will need to develop a strategy to communicate their position on diversity and inclusion that can mitigate some of the negative actions that may result from opposing board diversity.

• Incumbent board members losing reelection votes. The largest institutional shareholders have stated that they will vote against directors up for reelection who oppose board diversity. Proxy advisory firms may advise investors to vote against directors who oppose board diversity as well. Directors who come out in favor of rolling back board diversity measures could very well risk their board seats.

• Expect more lawsuits that challenge whether board diversity can be mandated. The California decision opens other diversity efforts to legal challenges. Lawsuits challenging California’s gender diversity law (California-based public companies must have at least one woman on their bord) and Nasdaq’s listing rules that require companies disclose board-level diversity statistics have yet to be decided. In the meantime, diversity advocates will need to determine whether to appeal the ruling striking down California Assembly Bill 979.


  • Get the CEO Briefing

    Sign up today to get weekly access to the latest issues affecting CEOs in every industry
  • upcoming events


    Strategic Planning Workshop

    1:00 - 5:00 pm

    Over 70% of Executives Surveyed Agree: Many Strategic Planning Efforts Lack Systematic Approach Tips for Enhancing Your Strategic Planning Process

    Executives expressed frustration with their current strategic planning process. Issues include:

    1. Lack of systematic approach (70%)
    2. Laundry lists without prioritization (68%)
    3. Decisions based on personalities rather than facts and information (65%)


    Steve Rutan and Denise Harrison have put together an afternoon workshop that will provide the tools you need to address these concerns.  They have worked with hundreds of executives to develop a systematic approach that will enable your team to make better decisions during strategic planning.  Steve and Denise will walk you through exercises for prioritizing your lists and steps that will reset and reinvigorate your process.  This will be a hands-on workshop that will enable you to think about your business as you use the tools that are being presented.  If you are ready for a Strategic Planning tune-up, select this workshop in your registration form.  The additional fee of $695 will be added to your total.

    To sign up, select this option in your registration form. Additional fee of $695 will be added to your total.

    New York, NY: ​​​Chief Executive's Corporate Citizenship Awards 2017

    Women in Leadership Seminar and Peer Discussion

    2:00 - 5:00 pm

    Female leaders face the same issues all leaders do, but they often face additional challenges too. In this peer session, we will facilitate a discussion of best practices and how to overcome common barriers to help women leaders be more effective within and outside their organizations. 

    Limited space available.

    To sign up, select this option in your registration form. Additional fee of $495 will be added to your total.

    Golf Outing

    10:30 - 5:00 pm
    General’s Retreat at Hermitage Golf Course
    Sponsored by UBS

    General’s Retreat, built in 1986 with architect Gary Roger Baird, has been voted the “Best Golf Course in Nashville” and is a “must play” when visiting the Nashville, Tennessee area. With the beautiful setting along the Cumberland River, golfers of all capabilities will thoroughly enjoy the golf, scenery and hospitality.

    The golf outing fee includes transportation to and from the hotel, greens/cart fees, use of practice facilities, and boxed lunch. The bus will leave the hotel at 10:30 am for a noon shotgun start and return to the hotel after the cocktail reception following the completion of the round.

    To sign up, select this option in your registration form. Additional fee of $295 will be added to your total.