October 19, 2019

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October 17, 2019

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As The Clock Winds Down, Criticism Of California's Gender Quota Bill Winds Up

The Governor has until this Sunday to sign or veto bills passed by the legislature before September 1.  Cal. Const. Art. IV, Sec. 10(b)(2).  One bill in the Governor's inbox is SB 826.  If signed by the Governor, SB 826 would impose gender quotas on the boards of directors of publicly held companies headquartered in California.  See California Bill Would Mandate Gender Quotas For Publicly Traded CompaniesImpossibility And California's Proposed Gender Quota Law, and Why California's Gender Quota Bill Is More Likely To Be Unconstitutional Than California's Pseudo-Foreign Corporation Statute.  

Although I have been writing about this bill for several months, it has only recently attracted widespread notice and criticism.  Professor Grundfest recently posted a working paper concluding:

"The bill will increase the number of board seats occupied by women by trivial amounts, if at all.  These trivial changes will, however, come at great risk to the evolution of affirmative action jurisprudence.  California's own legislative analysis concludes that 'the use of a quota-like system, as proposed by this bill … may be difficult to defend.'  A successful equal rights challenge means that SB 826 will have no effect at all.  The legislation thus offers a poor bargain for diversity advocates: gain a trivial number of board seats, if any, but increase the risk of judicial rulings inimical to broader affirmative action initiatives."

And then SEC Commissioner Hester Peirce made the following observation in a speech given in California:

"Counting the number of female directors may tell you something about how well a company is run. Or it may simply tell you that the company has more female directors. There are studies going both ways.  In most cases, the companies themselves are ill equipped to make these determinations."

Footnote omitted.  

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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm

Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...