California’s Board Diversity Law: More Seats at the Table for Different Voices and Increased Scrutiny of Board Composition

Robin Nunn and Mark A. Feller

Robin Nunn leads one of the country’s preeminent banking and financial services practices. Robin’s practice focuses on counseling financial institutions, as well as innovators in the digital space, in litigation and meeting compliance obligations. Robin has a wealth of experience gained in private practice and working in-house for Fortune 500 companies.

Mark A. Feller practices civil litigation in federal and state courts with experience in a variety of areas including securities and consumer class actions, shareholder disputes, and environmental litigation. He has advised clients in the oil and gas, automotive and technology industries throughout the United States.

On September 1, 2020, Governor Gavin Newsom signed Assembly Bill (AB) 979, the so-called board diversity mandate, into law.¹ This first-of-its-kind legislation in the United States mandates that public corporations based in California have one to three directors from underrepresented communities by 2023. The precise number depends on the board’s size.² The law sought to remedy historical injustices, change pervasive biases, and combat stereotypes that have caused most corporate boards to be overwhelmingly White and male. AB 979 was proposed amidst social movements, a series of shareholder lawsuits, and calls from the investment community for increased diversity on corporate boards. The law is an important tool to make boardrooms look more like the communities they serve. While it is subject to legal challenge, it represents one of many efforts that will affect how companies choose their directors for years to come. Companies are on notice and may need to reevaluate or begin their efforts to increase diversity to comply.