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Corporate diversity measures under attack

On Behalf of | Dec 8, 2021 | Business Law, Litigation |

It has long been a trend for California to lead the way in progressive measures in business. A law passed last year further cements this reputation. However, the law supporting diversity measures is finding resistance in the court system.

What is the law?

Called Assembly Bill 979, this legislative initiative requires – among other things –diversity measures at the board level. Building a more diverse corporate board would naturally lead to a more diverse corporate culture. The hoped-for benefits include a more compassionate stance towards employees and consumers with their struggles.

Additionally, by opening up boardrooms to populations frequently left behind, you create greater opportunity. This opportunity is a vital necessity for broader growth of the community and the economy.

Why are groups opposed to these measures?

There are potentially many reasons that groups would oppose the installed measures. Most legislative changes experience tense opposition. The legal teams and groups pushing this litigation feel the imposed regulations go too far and violate shareholder rights.

However, some view these objections as having an ulterior motive, alleging the plaintiffs are against the concept of diversity. Regardless of the motives, there is an interesting question at hand:

Are shareholder rights being violated?

The law makes a requirement that board members must come from certain groups. However, shareholders nominate and vote for the members of the board as private citizens. If the board must have certain representatives, some argue that their choices are taken away.

However, that claim relies on several hypotheticals, and its ultimate accuracy is a long-debated matter in diversity issues. How ever this case moves forward will make for a great deal of changes to the boardrooms of California head-quartered businesses.