February 6, 2023

Volume XIII, Number 37


February 06, 2023

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Secretary Of State Claims "Round Robin" Board Selection Process Solves Discrimination


"A Round Robin is a Name given by Seamen, to an Instrument on which they sign their Names round a Circle, to prevent the Ring-leader being discover'd by it, if found."

Weekly Journal (Jan. 1730) quoted in Alex Games,  Kick the Bucket and Swing the Cat: The Complete Balderdash Piffle Collection of English Words, and Their Curious Origins 348 (2011).

In seeking dismissal of a federal court challenge to California's director quota mandates, the California Secretary of State argues "SB 826 and AB 979 guarantees that a corporation can appoint new directors through a race- and gender-neutral board selection process".   Alliance for Fair Board Recruitment v. Weber, U.S. Dist. Ct. Case No. 2:21-cv-05644-RGK (RAOx).  For those wondering how a corporation can comply with laws that are neither race nor gender-neutral in a non-discriminatory fashion, the Secretary of State provides an example of how this might be done:

"For example, a corporation can conduct a first round of appointments through an anonymous screening process that does not reveal the race or gender of the persons under consideration.  If the composition of the board did not comport with either law after this initial selection process, the corporation could add positions through a further race- and gender-blind process until it achieved compliance with SB 826 and/or AB 979."

This example, however, seems utterly divorced from corporate law.  As an initial matter, corporations do not appoint their own directors.  At most, vacant seats may be filled by the board, but in some cases the power to fill vacancies is reserved to the shareholders.   See, e.g, Cal. Corp. Code § 304(a).  In the main, shareholders elect directors.   Nominees are often selected by the board and/or the shareholders themselves.  Shareholder nominations are often subject to advance-notice requirements.  Ultimately, however, neither the corporation or the board of directors can dictate who gets nominated and/or elected.   Thus, the Secretary of State's proffered example simply doesn't work.

© 2010-2023 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume XI, Number 295

About this Author

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

Keith Bishop works with privately held and publicly traded companies on federal and state corporate and securities transactions, compliance, and governance matters. He is highly-regarded for his in-depth knowledge of the distinctive corporate and regulatory requirements faced by corporations in the state of California.

While many law firms have a great deal of expertise in federal or Delaware corporate law, Keith’s specific focus on California corporate and securities law is uncommon. A former California state regulator of securities and financial institutions, Keith has decades of...