Judge Tosses California Law Mandating Diversity on Boards

Judge Terry Green of the Superior Court of California in Los Angeles County granted a summary judgment in favor of a lawsuit challenging the law as unconstitutional, according to a decision issued Friday. Judge Green offered no reasoning for his decision.

Under the board diversity law, individuals who identify as Black, African-American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian or Alaska Native, or who identify as gay, lesbian, bisexual or transgender, would be considered eligible for meeting the requirement.

Recent research found that the law led to a significant increase in board seats held by people from underrepresented groups. The share of directors from such groups rose from 13.9% of board seats in 2019 to 22.6% in 2021, according to a paper co-authored by Daniel Greene, a finance professor at Clemson University. Those figures probably undercount the percentage of board members who qualify under AB 979 because firms don’t always disclose the race or ethnicity, let alone the sexual orientation or gender identity, of their board members, Dr. Greene said.