Another Conservative Group Challenges California's Board Gender Diversity Law

Author:Mr Cydney Posner
Profession:Cooley LLP
 
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There's now another legal challenge to SB 826, California's board gender diversity statute, filed today in the federal district court in the Eastern District of California. In Creighton Meland v. Alex Padilla, Secretary of State of California, a conservative legal organization filed a complaint on behalf of a shareholder of a publicly traded company that is incorporated in Delaware and headquartered in California. The case seeks a declaratory judgment that the statute is unconstitutional under the equal protection provisions of the 14th Amendment and a permanent injunction preventing implementation and enforcement of the statute. A representative of the legal organization contended that the statute "puts equal numbers above equal treatment....This law is built on the condescending belief that women aren't capable of getting into the boardroom unless the government opens the door for them. Women are capable of earning a spot on corporate boards without the government coercing businesses to hire them." This case appears to be the second complaint filed to challenge the new law, the first being,Crest v. Alex Padilla. (And here is the amended complaint.) As you may recall, Crest, filed in California State Court, was framed as a "taxpayer suit" that sought to enjoin Padilla from expending taxpayer funds and taxpayer-financed resources to enforce or implement the statute, claiming violations of the equal protection provisions of the California constitution. (See this PubCo post.)

The legislation requires that public companies (defined as corporations listed on major U.S. stock exchanges) that have principal executive offices located in California, no matter where they are incorporated, include, as then-Governor Jerry Brown phrased it, a "representative number" of women on their boards of directors. Under the new law, each public company will be required to have a minimum of one woman on its board of directors by the close of 2019. That minimum increases to two by December 31, 2021, if the corporation has five directors, and to three women directors if the corporation has six or more directors. As required by new Section 301.3(c) of the California Corporations Code, the Secretary's office published on its website, by July 1, 2019, a report "documenting the number of domestic and foreign corporations whose principal executive offices, according to the corporation's SEC 10-K form, are located in California and who have at least one female...

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