Small Businesses

A landmark California law requiring board diversity has been struck down as unconstitutional

  • 2 min Read
  • April 22, 2022

Author

Escalon

Table of Contents

A California law that required diversity on corporate boards of directors has been ruled unconstitutional by Judge Terry Green of the Los Angeles County Superior Court, in a blow to the state’s efforts to address gender and racial disparities in the workplace.


The law, Assembly Bill 979, which came into effect in 2020, requires publicly traded companies based in California to have members of the board from underrepresented communities including Black, LGBT, Asian, Latino, Native American or Pacific Islander.


In signing the bill, Gov. Gavin Newsom remarked that it was crucial for minorities to have a voice on the boards of powerful organizations. He said, “when we talk about racial justice, we talk about empowerment, we talk about power, and we need to talk about seats at the table.”


The lawsuit argued that the law violated the state’s constitutional equal protection clause because it mandated quotas. 


In its court filings, on the other hand, the state argued that the measure did not “discriminate against, or grant preferential treatment to, any individual or group on the basis of race, sex, color, ethnicity, or national origin in the operation of public employment, public education, or public contracting.”


The ruling granted summary judgment to the conservative legal group Judicial Watch, which sought a permanent injunction against the measure. According to Judicial Watch President Tom Fitton, the decision “declared unconstitutional one of the most blatant and significant attacks in the modern era on constitutional prohibitions against discrimination.” 


Assembly Bill 979 required organizations to appoint at least one member from an underrepresented community on their boards by the end of 2021, either by filling a vacant seat or by adding one.

It also mandated at least two such directors on boards that have four to nine directors and three directors for boards that have nine or more directors by the end of 2022. Companies that failed to comply could face fines of US$ 100,000 for first violations and US$ 300,000 for any subsequent ones.


The state in its argument said that no businesses were fined to date and that no tax dollars were used to enforce Assembly Bill 979.


It defended the law as constitutional, arguing it was essential to reverse a culture of discrimination that favored men (and majorities) and was only put in place after other measures failed.

Talk to our team today to learn how Escalon can help take your company to the next level.

  • Expertise you can trust

    Our team is made up of seasoned professionals who bring years of industry experience to the table. You gain a trusted advisor who understands your business inside out.

  • Quality and consistency

    Say goodbye to the hassles of hiring, training and managing in-house finance teams. You will never have to worry about unexpected leave of absence or retraining new employees.

  • Scalability and Flexibility

    Whether you’re a small business or a global powerhouse, our solutions scale with your needs. We eliminate inefficiencies, reduce costs and help you focus on growing your business.

Contact Us Today!

Tap into the latest insights from experts in your industry

People Management & HR

Benefits Administration, What Small Business Need to Know

Benefits administration can be a game-changer for small businesses aiming to attract and retain top talent. While salaries remain an...

Read More
Accounting & Finance

AAP vs. Cash Accounting: Which Method Is Best for Your Growing Business? 

Choosing the right accounting method can significantly impact how you track financial performance, manage taxes, and plan growth. Two common...

Read More
Accounting & Finance

Beyond Bootstrapping: Advanced Cash Flow Management for Scaling Companies 

Bootstrapping—financing growth through internal cash flow—is a hallmark of many successful startups. But as businesses mature past their initial stage,...

Read More
Technology & Security

Building a Scalable Tech Stack: How to Choose the Right Tools for Growth 

In today’s business landscape, technology is more than a convenience—it’s a strategic asset that can supercharge growth. But as you...

Read More
Accounting & Finance

How to Reduce Month-End Close Time Without Sacrificing Accuracy 

The month-end close can feel like a perpetual scramble—collecting invoices, reconciling accounts, fixing last-minute errors. A drawn-out close not only...

Read More
uncategorized

How to Reduce Overhead Costs Without Impacting Productivity 

Overhead costs—from utilities and rent to administrative staffing—can quietly swell until they erode profit margins and slow your ability to...

Read More
Accounting & Finance

How to Structure Your Finance Team as Your Business Scales

Growth triggers a tidal wave of financial complexity, multi-entity operations, new product lines, overseas expansion, or investor relations. If your...

Read More
Accounting & Finance

M&A Readiness: How to Prepare Your Financials for a Successful Acquisition or Sale 

Mergers and acquisitions (M&A) can dramatically alter a company’s trajectory—unlocking new markets, technologies, or customer bases. Yet, many deals stumble...

Read More
Accounting & Finance

Optimizing Working Capital: Strategies to Maximize Liquidity Without Raising Funds 

Working capital: The difference between your current assets and your current liabilities. It’s a key barometer of financial health.  While...

Read More