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Legislation

California law creates gender requirement for corporate boards

California Gov. Jerry Brown supports the new law but warned of potential legal issues.

California Gov. Edmund G. "Jerry" Brown Jr. signed a bill Sunday requiring domestic and foreign corporations with its principal executive office in California to have a minimum of one female director on its board by Dec. 31, 2019.

The law makes California the first state in the nation with such a requirement. Passed by the California Legislature on Aug. 30, the law also requires further gender parity by Dec. 31, 2021, mandating that corporations with six or more directors have three female directors, corporations with a five-member board have two female directors and boards with four or fewer directors have one female director.

"Given all the special privileges that corporations have enjoyed for so long, it's high time corporate boards include the people who constitute more than half the 'persons' in America," Mr. Brown wrote in a "signing message" to the state Senate on passage of the bill. But he also noted potential flaws. "There have been numerous objections to this bill and serious legal concerns have been raised. I don't minimize the potential flaws that indeed may prove fatal to its ultimate implementation," he said.

The California Chamber of Commerce and 30 other organizations argued in a May 29 letter to the state Senate that the bill would be unconstitutional because "if there are no vacancies on the board and the shareholders of the company do not approve of additional positions as (the proposed law) contemplates, the company will have to displace an existing board member, solely based upon gender," violating a section of the California Constitution which states: "A person may not be disqualified from entering or pursuing a business, profession, vocation or employment because of sex, race, creed, color or national or ethnic origin."