September 27, 2022

Volume XII, Number 270

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September 26, 2022

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UPDATE: California Court Says Second State Board Diversity Law Is Unconstitutional

California courts have now struck down the second of the state’s two board diversity laws as unconstitutional.  The recent decision affects California's gender diversity requirement for certain boards of directors.  In April, AB 979, California’s law requiring publicly held California companies to appoint a certain number of board members from what the law termed “underrepresented communities” met a similar result.  You can read our update on that decision here.

California Corporations Code 301.3, also known as SB 826, is the gender diversity compliment to AB 979, requiring publicly held California companies to appoint a minimum number of women directors based on board size.  At a high level, hearing a similar challenge to what the same plaintiffs made against AB 979, the court held that under a strict scrutiny test, the law’s basis lacked a compelling governmental interest. 

It remains uncertain whether California will appeal either decision.  In any event, as we covered in our previous alert, other more recent rules remain intact, including for NASDAQ listed companies, that mandate similar requirements.  Finally, and again, most importantly, board and leadership diversity initiatives remain popular among the business and investor community.  Many, if not most companies subject to the regulations considered here have willingly complied with or undertaken their own board diversity efforts, in part to meet definitive shareholder expectations, or those among their workforce, clientele, or target markets.

Copyright ©2022 Nelson Mullins Riley & Scarborough LLPNational Law Review, Volume XII, Number 157
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Gregory P. McGuire Attorney Nelson Mullins Riley & Scarborough
Partner

Greg has more than 26 years of experience as a litigator and for seven years served as a trial judge on the North Carolina Business Court for Complex Business Cases. As a judge, he presided over hundreds of cases involving the interpretation and application of corporate law, business torts, trade secrets, non-competition agreements, trademarks, and administrative law. As a former shareholder of an international law firm, he has litigated matters in a broad range of areas of civil law.

  • As a judge on the North Carolina Business Court, 89...

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James S. Rollins Nelson Mullins Boston Broker Dealers Investment Management and Bankruptcy Litigation Attorney
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Jim conducts comprehensive security, corporate governance, and regulatory practice in which he represents investment advisers, broker-dealers, banks, investment companies, transfer agents, issuers, independent directors, and their employees before the U.S. Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), state regulators, state and federal courts, and others. Jim regularly advises clients on all aspects of compliance with federal, state, and self-regulatory organization (SRO) securities and commodity regulation. He also conducts internal...

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P. John Veysey Employment Attorney Nelson Mullins Boston
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John maintains a national practice focused primarily on business litigation and labor and employment law. He has experience litigating complex matters in state, federal, and MDL venues throughout the country, including at trial, mediation, arbitration, and before administrative bodies. John represents and advises Fortune 500 companies, private and publicly held corporations, manufacturers, individual executives, and numerous other technology, financial services, healthcare, investment banking, private equity, insurance, media, energy, food, travel, hospitality, and...

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