January 26, 2022

Volume XII, Number 26

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January 25, 2022

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January 24, 2022

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Study Finds "A Robust and Significantly Negative Stock Market Reaction" To California's Gender Quota Mandate

A study by an international team of scholars has concluded that California's imposition of a gender quota on publicly held corporations with their principal executive offices in the state resulted in a "robust and significantly negative stock market reaction".  von Meyerinck, Felix and Niessen-Ruenzi, Alexandra and Niessen-Ruenzi, Alexandra and Schmid, Markus and Davidoff Solomon, Steven, As California Goes, So Goes the Nation? Board Gender Quotas and Shareholders' Distaste of Government Interventions (August 31, 2021).   Specifically, these researchers found that the mean reduction in shareholder value amounts to $104.51 million and $328.31 million for non-California for California firms, respectively (based on the mean market capitalization in the two groups).

What I found most interesting was the authors' theory that "independent of the nature the quota, shareholders may have a general distaste of governmental interference with company affairs and do not appreciate legislation that forces companies to change their organizational structure to achieve non-monetary goals."   This should be something for the Securities and Exchange Commission to take into account when it considers mandating ESG disclosures.

California's gender quota mandate is codified at Sections 301.3 and 2115.5 of the California Corporations Code.   A constitutional challenge to the law is scheduled to go to trial on December 1.  Crest v. Padilla (Cal. Super. Ct. Case No. 19STCV27561.

© 2010-2022 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume XI, Number 322
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About this Author

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

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...

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