408 | 2023 Cal-Peculiarities ©2023 Seyfarth Shaw LLP www.seyfarth.com the amount by which the debtor’s disposable earnings for the week exceeds 48 times the state minimum hourly wage. 20.8 Diverse Representation on Corporate Boards of Directors Pursuant to legislation effective in 2019, every publicly held corporation36 with a principal executive office in California—whether incorporated in California or elsewhere—must have women on its board of directors.37 Previously, such corporations must have had at least one female director and now must have a minimum number of board seats filled by women, based on the total size of the board of directors.38 Under similar 2020 legislation, such corporations must also, by the end of 2021, have had at least one director from “an underrepresented community”—someone who self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native, or who self-identifies as gay, lesbian, bisexual, or transgender.39 And by the end of 2022, a corporation with more than four but fewer than nine directors must have had at least two directors from underrepresented communities, and such a corporation with nine or more directors must at least three directors from underrepresented communities. In 2022, the Secretary of State published an annual report of how many publicly held corporations have principal executive offices in California and which corporations (1) complied with requirements, (2) moved their headquarters in or out of California, and (3) are no longer publicly traded.40 For each director’s seat not held by a female or individual of an underrepresented community, when by law it should have been, the corporation was subject to a $100,000 fine for the first violation and a $300,000 fine for further violations. Corporations that failed to timely file relevant information with the Secretary of State also were subject to a $100,000 fine.41 If you thought that race- and gender-based mandates on corporate board representation raised constitutional issues, then you would not be alone. In April 2022, a Los Angeles Superior Court judge ruled that the board diversity statute concerning underrepresented communities was unconstitutional and enjoined implementation and enforcement of the statute.42 In May 2022 another Los Angeles Superior Court judge similarly ruled that the gender diversity board mandate was unconstitutional.43 The ruling reasoned that the gender-based quota was subject to strict constitutional scrutiny and lacked a compelling government interest to justify it. The judge rejected the state’s argument that remedying discrimination in director selection was a compelling government interest, because the state did not specify any intentional, unlawful discrimination to remedy. The judge also denied that there was a compelling interest in benefiting the public and state economy, as the law instead aimed to achieve gender equity or parity. Moreover, there were no conclusive connections between women on corporate boards and improved corporate performance and governance. The judge cited expert testimony that attributed the differences in the numbers of men and women on corporate boards to reasons other than actual discrimination, such the lack of open board seats, women’s networking issues, board members’ propensity to select persons they already, know, and board preferences for choosing CEOs to fill board positions. Finally, the judge held that the law was not narrowly tailored to California’s stated interest, because the Legislature failed to consider amending existing discrimination laws or to adopt more finely tuned legislation to root out alleged discrimination in the board selection process. Accordingly, the judge enjoined implementation and enforcement of the gender diversity board statute. The State of California appealed both board diversity statute decisions to the Court of Appeal, where they are currently pending.44 Implementation and enforcement of both statutes is enjoined pending the appeals.45
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