California Ushers In A Bold New Era Of Board Diversity

Efforts to secure diversity on corporate boards have reached a new level of intensity. Governor Gavin Newsom of California signed a statute into law on Wednesday, September 30, which will require publicly held corporations whose principal executive offices are located in California to satisfy mandated levels of racially, ethnically and other diverse directors beginning in 2021.

By emphasizing the interests of “underrepresented communities,” the new legislation promises to significantly increase the level of boardroom engagement on matters of leadership diversity. In so doing, it serves to broaden existing concepts of diversity to include specific ethnic groups and matters of sexual orientation. It is also a dramatic supplement to 2018 California legislation that required public companies headquartered in the state to assure the appointment of specified numbers of women to the board of directors—a groundbreaking development at the time.

While California politics are unique in many ways, this new law may well spark similar legislative initiatives in other states— as occurred with California’s 2018 legislation. For that and other reasons, the new law is noteworthy to the board nominating committees of public, private, and nonprofit corporations across the country and across industry sectors. Many boards may already believe, with some justification, that they have made great strides on matters of diversity. They just may no longer be enough, given the goals and objectives of the California statute, and the likelihood that they will be broadly promoted by corporate stakeholders and other interested parties.

The law provides for an escalating level of racial and ethnic diversity on the board, to be implemented over the next several years. Specifically, the new law requires affected companies to ensure that their boards have a minimum of one director from an