Must Directors Self-Identify?
California's existing board gender quota law (Cal. Corp. Code §§ 301.3 and 2115.5) is based on an individual's self identification as a woman, without regard to that individual's designated sex at birth. AB 979, which would impose additional quotas on board composition, also relies upon self-identification. However, AB 979 does not state that the self-identification is "without regard" to extrinsic facts such as a person's actual ancestry.
If Governor Newsom signs AB 979 into law, directors may find that they are pressured, or even required, by the corporation to self-identify as being members of the law's favored categories (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). See Lynn Jokela's blog post this morning on this subject. If a director refuses to self-identify and the corporation cannot establish compliance with California's quota, the question will arise whether that director's refusal constitutes a breach of his or her fiduciary duty. If a board adopts a policy requiring a director to self-identify, could that policy result in a Section 1983 claim that the corporation has violated the director's First Amendment right not to be forced to speak? See Will AB 979 Expose Corporations To Section 1983 Liability?
Another tricky issue will be whether the director's self-identification may be entirely subjective. If it is, then the self-identification, no matter how baseless, can never be incorrect. If there must be some objective basis for the self-identification, the stockholders or the SEC could challenge a self-identification as constituting a misstatement or breach of the director's duty of good faith.