California Legislature Passes Bill to Mandate Female Board Members for California Companies

September 14, 2018

A California bill that would require publicly-traded companies based in the state to have a certain number of female directors depending on board size has been passed by the State Legislature and awaits the signature of Governor Jerry Brown (D).

The bill would impose the following requirements:

  • By the end of 2019, all California-based publicly-traded companies must have at least one female board member.

  • By the close of 2021, all California-based public companies must comply with the following framework:
    • For companies with six or more directors, the company must have a minimum of three female directors;
    • For companies with five directors, the company must have a minimum of two female directors; and
    • For companies with four or fewer directors, the company must have at least one female director.

Violations for non-compliance span from $100,000 for a first violation to $300,000 for each subsequent violation.

The bill would require the California Secretary of State to publish a report that includes the number of corporations in compliance with the director quotas as well the number of corporations that moved both in and out of the state.

Opposing the bill were the California Chamber of Commerce and other business groups, who argued that the bill violates both the U.S. and California constitutions.

Board diversity has received considerable attention in recent years and board and C-suite gender representation have become major issues among companies, shareholders, and other stakeholder groups.  Although other countries, including Germany and France, have already implemented mandates for women on corporate boards, large U.S. investors have been reluctant to impose quotas.  According to San Jose Mercury News, a handful of states have had nonbinding resolutions on board gender representation, but this would be the first quota. 

Outlook: Gov. Brown has not indicated whether he will sign the bill, which could potentially foster a larger movement, especially among traditionally Democratic states.