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Forbes featured Haub Law Professor Darren Rosenblum's piece: "California Pioneers New Quotas For People Of Color & LGBT People"
Forbes featured Haub Law Professor Darren Rosenblum's piece: "California Pioneers New Quotas For People Of Color & LGBT People"
California’s state government is nothing if not famous for its progressive legislation. It’s no surprise then that on October 1st, 2020, Governor Gavin Newsom signed into law a mandate on California-headquartered corporations to include on their boards “underrepresented communities” which includes 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. While most of the top ten economies now have quotas for sex, this is the first quota in the world to address racial inequality, sexual orientation and gender identity.
While the statute addresses new classes of identity, it mimics California’s recent quota for women, which is still in the process of implementation, and is facing substantial constitutional challenges. That quota copied other countries’ quotas for women on boards. Starting in 2003, Norway required forty percent of boards be women. By 2020, many countries have followed suit, including much of Europe. Quotas use either hard mandates, such as California has pursued, or softer “comply or explain” rules. The goal is to diversify corporate leadership, which counts men as 96% of its executives and 80% of its board members in many developed economies. Numbers for people of color remain even lower. With a recent 2018 study finding that of the Fortune 100 board members only 19.5% identified as belonging to an underrepresented racial group. The top 10 public companies based in California are barely doing better in 2020 having only 23.5% POC board members.
These executive numbers perpetuate structural discrimination, since former executives typically become board members. Firms would benefit from improved governance with increased board diversity. One reason the new quota proves so necessary is that while the quota for women has increased women on boards, women of color still comprise a very small number of these board members.
Kristin Johnson, a law professor with technology firm expertise, observes the absence of underrepresented women of color serving on the boards of technology firms is deeply disappointing. Given California’s concentration of technology firms in California, the new quota holds tremendous promise to foster inclusion. She notes that board diversity “may foster broader inclusion in the C-Suite as well as among programmers who design, train and develop artificial intelligence and similar sophisticated technologies.”
