Board Diversity Update: California
October 5, 2020
Last month, we summarized the several initiatives that governments and investors are advancing regarding increased diversity in public company boards of directors and workforces. The California proposed legislation we reported on has now become law.
By the end of 2021, California-headquartered publicly traded corporations (either domestic or foreign) will be required to have at least one director from an “underrepresented community.” By the end of 2022, any such board with between five and eight members must have at least two such directors, and any such board with nine or more members must have three such members.
A director from an “underrepresented community” is defined as someone who self-identifies as Black, Latino, Asian, Pacific Islander, Native American, Native Hawaiian or Alaska Native, or as gay, lesbian, bisexual or transgender.
Fines for noncompliance are stiff – up to $100,000 for the first violation and up to $300,000 for subsequent violations.
Companies needn’t necessarily replace existing directors; rather they can increase board size to comply with the new requirements. The law may be subject to challenge, but in the meantime, companies subject to the new law should begin seeking qualified candidates from those communities for service on their boards. As we also mentioned in our update last month, companies should also begin looking now at necessary bylaw or governance charter amendments in order to accommodate the new requirements.
If you have any questions, please contact your CFDB lawyer or:
About Croke Fairchild Duarte & Beres
Croke Fairchild Duarte & Beres is a corporate law firm providing services to businesses, private equity and venture firms and their portfolio companies, public companies, founders and family offices. Formed by partners who worked at preeminent international law firms, the firm boasts a deep bench of sophisticated and experienced corporate lawyers. With offices in Chicago, Lake Forest, and Milwaukee, our team provides exceptional legal service while affording our clients the benefits of working with a small, agile, and driven law firm. For more information, please visit us online at crokefairchild.com.
Board Diversity Update: California
October 5, 2020
Last month, we summarized the several initiatives that governments and investors are advancing regarding increased diversity in public company boards of directors and workforces. The California proposed legislation we reported on has now become law.
By the end of 2021, California-headquartered publicly traded corporations (either domestic or foreign) will be required to have at least one director from an “underrepresented community.” By the end of 2022, any such board with between five and eight members must have at least two such directors, and any such board with nine or more members must have three such members.
A director from an “underrepresented community” is defined as someone who self-identifies as Black, Latino, Asian, Pacific Islander, Native American, Native Hawaiian or Alaska Native, or as gay, lesbian, bisexual or transgender.
Fines for noncompliance are stiff – up to $100,000 for the first violation and up to $300,000 for subsequent violations.
Companies needn’t necessarily replace existing directors; rather they can increase board size to comply with the new requirements. The law may be subject to challenge, but in the meantime, companies subject to the new law should begin seeking qualified candidates from those communities for service on their boards. As we also mentioned in our update last month, companies should also begin looking now at necessary bylaw or governance charter amendments in order to accommodate the new requirements.
If you have any questions, please contact your CFDB lawyer or:
About Croke Fairchild Duarte & Beres
Croke Fairchild Duarte & Beres is a corporate law firm providing services to businesses, private equity and venture firms and their portfolio companies, public companies, founders and family offices. Formed by partners who worked at preeminent international law firms, the firm boasts a deep bench of sophisticated and experienced corporate lawyers. With offices in Chicago, Lake Forest, and Milwaukee, our team provides exceptional legal service while affording our clients the benefits of working with a small, agile, and driven law firm. For more information, please visit us online at crokefairchild.com.
