California Enacts Gender Quotas For Board Of Directors
Posted October 8, 2018

By no later than December 31, 2019, SB 826 will make it mandatory for publicly-held domestic or foreign corporations whose principal executive offices (according to the corporation’s SEC 10-K form) are located in California, to have a minimum of one female director on its board. California is the first state in the union to enact such gender quotas. “Female” means an individual who self-identifies as a woman, without regard to the individual’s designated sex at birth. To make sure this happens, affected corporations are permitted to increase the number of directors on their boards (although this in turn could increase the number of female directors required – see below). Starting no later than December 31, 2021, these corporations must comply with the following:

  • If its number of directors is six or more, the corporation shall have a minimum of three female directors.
  • If its number of directors is five, the corporation shall have a minimum of two female directors.
  • If its number of directors is four or fewer, the corporation shall have a minimum of one female director.

A corporation will be in compliance if directors identifying as female, regardless of sex at birth, hold the requisite number of board seats for at least a portion of a given calendar year.

By March 2020, the Secretary of State will begin to publish reports documenting: “(1) The number of corporations subject to this section that were in compliance with the requirements of this section during at least one point during the preceding calendar year. (2) The number of publicly held corporations that moved their United States headquarters to California from another state or out of California into another state during the preceding calendar year. (3) The number of publicly held corporations that were subject to this section during the preceding year, but are no longer publicly traded.” Failure to abide by the new rules will trigger steep penalties – “(A) For failure to timely file board member information with the Secretary of State…the amount of one hundred thousand dollars ($100,000). (B) For a first violation, the amount of one hundred thousand dollars ($100,000). (C) For a second or subsequent violation, the amount of three hundred thousand dollars ($300,000).”

If you have any questions on this update or any other employment law matter, please call LightGabler at 805-248-7208 or email info@lightgablerlaw.com.

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