California is First State to Mandate Public Company Board Diversity – JD Supra

California is First State to Mandate Public Company Board Diversity – JD Supra

With the issues of social justice, systemic racism, bias and inequality drawing heighted attention since George Floyd’s killing, the passage of AB-979 makes California the first state to require public companies with their principal executive offices located in California to have at least one or more directors be from an “underrepresented community.” According to data cited in the bill, there are 662 publicly traded companies headquartered in California and 35 percent of these companies currently have all white boards of directors. This new law builds on California’s existing law SB-826, which requires public companies headquartered in California to meet minimum requirements for female board representation.

AB-979 applies to any corporation, whether incorporated within or outside California, with principal executive offices located in California (as disclosed in the corporation’s Annual Report on Form 10-K filed with the Securities and Exchange Commission) and with shares listed on a major U.S. stock exchange. The law requires such a corporation to, no later than December 31, 2021, have at least one director from an “underrepresented community” on its board of directors. A director from an “underrepresented community” for purposes of AB-979 means an individual who self-identifies as: 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.  According to data cited in the bill from Deloitte and the Alliance for Board Diversity, the percentages of Fortune 500 company board seats held by people identified as African American/Black, Hispanic/Latino(a) and
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