On the Cutting Edge of DE&I: CA’s New Board Diversity Law

2 minute read 

California made waves in 2018 when it enacted a law requiring publicly held corporations headquartered within the state to have a minimum of one female director on its board by the close of 2019. By no later than the close of the 2021 calendar year, such corporations with five directors must have a minimum of two female directors, and those with six or more directors must have a minimum of three female directors. That law, known as SB 826, authorized the California Secretary of State to issue penalties of $100,000 for the first violation, and $300,000 for a second or subsequent violation of its terms. Now, it turns out that SB 826 was just the beginning.  

On September 30, 2020, Governor Newsom signed AB 979 into law. AB 979 requires publicly held corporations headquartered in California to have a minimum of one director from an “underrepresented community” by December 31, 2021. “Director from an underrepresented community” is defined in the law as follows: “an individual 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.” Notably, AB 979’s mandate increases by the close of 2022; corporations with five to nine directors must have a minimum of two directors from underrepresented communities. For corporations with nine or more directors, the requirement is a minimum of three directors from underrepresented communities by December 31, 2022. As with SB 826, the Secretary of State is authorized to issue fines in the hundreds of thousands of dollars for non-compliance.      

While the new law is likely to be challenged in court by convervative groups, according to the Los Angeles Times, AB 979 is a bellwether for a growing trend. One of the bill’s authors, Assemblymember Chris Holden (D-41), noted that AB 979 “represents a big step forward for racial equity.” As AB 979 demonstrates, considerations of diversity, equity, inclusion, and access (DEI&A) will continue to be of critical import to operations. The costs for ignoring such considerations are high both financially and in terms of brand reputation. Yet, there are steps organizations can take now in order to be proactive. Experts across the human capital, legal services, and business intelligence industries recommend a pay equity audit as a critical tool in an employer’s risk management tool belt. A pay equity audit provides actionable intelligence to be proactive in addressing internal inequities with respect to DEI&A.

Not sure how to get started? Let Trusaic provide your organization with a free Pay Gap Assessment, which can be conducted confidentially and includes monthly DEI&A analytics. To learn more about achieving pay equity, and to receive a free pay gap risk assessment, click here.