California AB 979 and Other State Laws on Board Diversity: Corporate Governance and Requirements for Directors from Underrepresented Groups

Description

The United States continues to lag in corporate board diversity, with most corporate boards dominated by majority men. Progress on this issue has been slow. In late 2020, California passed, and the governor signed Assembly Bill 979 requiring boards of California public corporations to include directors from underrepresented communities beginning by Dec. 31, 2021. This new California law aims to increase diversity on boards, and is evidence of a larger trend although some legal challenges have been asserted.

Multiple states (including New York, Delaware, Illinois) and several countries have passed laws instituting some diversity requirements for corporate boards, regardless of their size. Some statutes include potentially serious penalties for failure to comply, including fines of $100,000 to $300,000 per violation.

The emphasis on corporate board diversity expands beyond individual state legislatures and relates to various facets of diversity. Both the NASDAQ and Forbes have acknowledged the need for board diversity to promote market performances and benefit corporate culture overall. Board diversity relates to such familiar considerations as gender, race, nationality, LGBTQ+, and age, and also to the lesser-known concept of professional diversity (i.e., the range of professional backgrounds) to broaden diversity of thought at the highest levels of corporate leadership.

Listen as our expert panel discusses the current and proposed legal requirements for corporate board diversity and recommended practices for ensuring that skills and expertise are front and center in achieving diverse boards.