California is being sued over its unprecedented law requiring all public companies headquartered there to have at least one female board member by 2020.
Why it matters: Pressure to diversify corporate boards has historically come from shareholders and special interest groups, not the government.
- But with at least three states weighing similar legislation, critics are raising the question of government overreach.
Driving the news: The California law, signed last year by then-governor Jerry Brown, sets a penalty of $100,000 for public companies that don't have at least one woman on their board by yearend 2019. The looming deadline has drawn two lawsuits.
- The most recent, filed last week by an investor in a company that makes X-ray security scanners and other products, argues that the "women quota" law is "not only deeply patronizing to women" but also "plainly unconstitutional."
Opponents are hoping to block the law before it gets stricter: By 2021, companies with five-person boards will have to have at least two women, while boards of six or more will have to have three.
- A coalition led by the California Chamber of Commerce said in a letter to lawmakers that by focusing "only on gender," the law "potentially elevates it as a priority over other aspects of diversity."
- Anastasia Boden, the lead lawyer in the most recent suit, told AP: “The law mandates exactly what the equal protection clause forbids — taking into account things like sex or race" in hiring.
- Of note: Other countries, like Norway and France, have laws similar to California's.
Corporate stragglers in California are racing to expand or switch up their boards.
- Skechers, the footwear company, has been pressured to add women to its board since at least 2014 — but didn't take action until seven months after the law was signed.
- According to new data by the nonprofit 2020 Women on Boards, California saw the biggest annual increase of all U.S. states in companies with boards that are at least 20% female.
- 70 of the 602 publicly traded companies headquartered in California still had all-male boards as of July, according to research by Clemson University and the University of Arizona.
What they’re saying: The latest lawsuit strikes "at one of the principal areas of vulnerability that was identified when the law was passed,” Teresa Johnson, a partner at law firm Arnold Porter, tells Axios.
- “The state will also have to show that the quota solution under the law is the least restrictive way to remedy past discrimination.”
- When he signed the law, Brown said, "It's high time corporate boards include the people who constitute more than half the 'persons' in America."