California law requiring diversity on corporate boards ruled unconstitutional

By JOSH FRIEDMAN

A Los Angeles judge ruled on Friday that a California law requiring corporations to include members of underrepresented groups on their boards of directors is unconstitutional. [LA Times]

The 2020 law requires boards of publicly traded companies with a main executive office in California to include a member of an “underrepresented community,” which could be LGBT, Black, Latino, Asian, Native American or Pacific Islander. Corporations that were not complying had until California the end of 2021 to do so, either by adding a seat or filling a vacant one.

Additionally, corporate boards with a makeup of four to nine directors needed to include at east two underrepresented community member directors by the end of 2022. For even larger boards, the law requires three such directors. 

Companies that do not comply could face fines of $100,000 for first violations and $300,000 for repeat violations. Thus far, no businesses have been fined, and no tax dollars have been used to enforce the rules, according to the state of California.

Judicial Watch, a conservative legal group, sought a permanent injunction against the law, arguing it violates California’s equal-protection clause. 

On Friday, the Los Angeles judge granted summary judgment to Judicial Watch. The judge’s brief ruling did not explain why.

The ruling declared unconstitutional “one of the most blatant and significant attacks in the modern era on constitutional prohibitions against discrimination,” Judicial Watch President Tom Fitton said in a statement. 

State officials have argued the law does not discriminate against or grant preferential treatment to any individual or group on the basis of race, sex, color, ethnicity or national origin.

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