California Passes Law Requiring Public Companies to Include Women on Boards of Directors | Practical Law

California Passes Law Requiring Public Companies to Include Women on Boards of Directors | Practical Law

California has passed a law requiring publicly-held companies headquartered in California to have at least one female director on their board of directors by the end of 2019.

California Passes Law Requiring Public Companies to Include Women on Boards of Directors

by Practical Law Corporate & Securities
Published on 02 Oct 2018 • California, USA (National/Federal)
California has passed a law requiring publicly-held companies headquartered in California to have at least one female director on their board of directors by the end of 2019.
On September 30, 2018, California Governor Jerry Brown signed Senate Bill 826 into law, making California the first state to require public companies to include women on their boards of directors. Under the new law, publicly-held domestic and foreign corporations with their principal executive offices in California (as listed on the company's Form 10-K filed with the Securities and Exchange Commission (SEC)) must have at least one female director on their board by the end of 2019. By the end of 2021, these companies may need to have additional female directors depending on the size of their board:
  • If the number of directors is six or more, the company must have at least three female directors.
  • If the number of directors is five, the company must have at least two female directors.
  • If the number of directors is four or less, the company must have at least one female director.
Companies can be fined $100,000 for a first violation and $300,000 for subsequent violations.
The bill also requires the California Secretary of State to issue an annual report beginning no later than March 1, 2020, providing:
  • The number of corporations subject to the law that were in compliance at some point in the previous year.
  • The number of public corporations that moved their headquarters to or from California in the previous year.
  • The number of public corporations that were subject to the law in the previous year but are no longer publicly-held.
The law has received both significant praise and strong objections since its initial proposal and now passage. While widely viewed as well-intentioned and a step towards better representation for women in the boardroom, Gov. Brown admits the law is expected to face legal challenges. A coalition of businesses represented by the California Chamber of Commerce has opposed the law based on possible violations of the US Constitution, California Constitution, California's civil rights law, and the "internal affairs" doctrine.
For more information, please see Practice Note, Section 2115: California's Corporate Long-Arm Statute.