Local Assemblymember Pushes Bill Requiring Diversity on Corporate Boards

Saying that diversity in corporate boardrooms is “imperative” in the fight for true racial justice, Pasadena-area Assemblymember Chris Holden has co-sponsored a bill that will require publicly held corporations headquartered in California to have at least one member of an under-represented community on their boards by the end of 2021, and higher numbers for larger boards by 2022.

“Corporations have money, power and influence,” Holden, a Democrat, said. “If we are going to address racial injustice and inequity in our society, it’s imperative that corporate boards reflect the diversity of our state.”

“One great benefit of this action – corporations with ethnically diverse boards have shown to outperform those that lack diversity.”

The measure – Assembly Bill 979 – is co-sponsored by Assembly Member Cristina Garcia of Bell Gardens and co-authored by Assembly Member Eloise Gomez Reyes of San Bernardino, also Democrats.

In addition to the 2021 requirement of at least one board member from an under-represented community, the bill would require, by 2022, that boards with more than four members include a minimum of two members from under-represented communities, and that boards with more than nine members feature at least three such members.

A corporation would be allowed to increase the number of directors on its board to comply with the bill, should it become law.

The bill defines under-represented as “an individual who self-identifies as African American, Hispanic, or Native American.’’

It does not, in its current form, identify members of the Asian or Pacific Islander communities as under-represented populations. Holden – when asked by Pasadena Now to address that – called the current iteration of the bill a “crucial first step” in leveling the playing field in corporate boardrooms.

“We are having conversations with leadership in the API community to figure out how to address their concerns,’’ Holden told Pasadena Now.

“AB 979 focuses on African American, Latino and Native American communities as a crucial first step,’’ he added. “We took this approach because these communities have difficulty
breaking into the white-collar and professional workforce, even though eligible candidates have completed the educational requirements and have the professional maturity to succeed in these industries.

“We do recognize the glass ceiling for other groups, and will continue these important discussions as it relates to the bill.’’

According to the U.S. Census Bureau, California’s statewide Asian population is 15.3 percent, while L.A. County’s is 15.4 percent. The Pacific Islander population numbers are 0.5 percent statewide and 0.4 percent in L.A. County, according to the Census Bureau.

In a news release Wednesday, Holden’s office cited Harvard Law School’s “Missing Pieces Report: The 2018 Board Diversity Census of Women and Minorities on Fortune 500 Boards,’’ which found that, out of 1,222 new board members of Fortune 100 companies, 77 percent were white.

“Soon after the social unrest following the killing of George Floyd, many corporations publicly stated their support for diversity and Black lives,’’ Holden’s release said. “Critics, however, have pointed out that this public support for social justice movements often does not lead to long-term structural change in hiring and retention policies of a diverse staff and leadership.’’

The text of the Assembly bill, meanwhile, notes that, “According to the United States Bureau of Labor Statistics, only 31 percent of African Americans and 22 percent of Latinos worked in management, professional and related occupations while 54 percent of Asians and 41 percent of whites worked in the same occupation.’’

It also notes, “The United States Bureau of Labor Statistics also reported that in the year 2019, 90 percent of chief executives were white.’’

As for what kind of teeth AB 979 would have, boards would be required to file reports to the California Secretary of State, and would face fines starting at $100,000 for failure to comply or failure to report in a timely manner.

“Each director seat required … to be held by a director from an under-represented community which is not held by a director from an under-represented community during at
least a portion of a calendar year shall count as a (single) violation,’’ the bill says.

The bill would amend the state’s existing “Corporations Code,” adding another layer of diversity requirements. A 2019 law already mandates that public corporations have at least one female board member. By the end of 2021, public corporations with five directors must have a minimum of two female directors, and corporations with six or more directors must have at least three female directors.

“The lack of diversity on California’s boards and upper-level corporate positions is a challenge we urged corporations to address on their own during our time in the Legislature,’’ said Garcia, Holden’s co-sponsor.

“However, it is clear we can no longer wait for corporations to figure it out on their own. By ensuring diversity on their boards, we know the corporations are more likely to both create opportunities for people of color and give them the support to thrive within that corporation.”

AB 979 is now in the state Senate’s Banking and Financial Institutions Committee, where it could face amendments before returning to the Assembly side for a vote.