California boardroom gender quota bill is something for businesses in IL, elsewhere, "to watch," attorney says

By Gabriel Neves | Sep 19, 2018

SACRAMENTO, CALIF. - Eyes of business owners, executives and others across the country likely will be drawn to California in coming days, as that state's governor considers whether to sign controversial legislation enacted by the state's legislature, setting quotas for certain number of women on corporate boards of directors. 

SB 826, if signed by Gov. Jerry Brown, would require public companies with headquarters located in the state to include at least three women on corporate boards with six or more directors by Dec. 2021.

Companies that do not comply could face fines that could range from $100,000 to $300,000 per violation.

Attorney Eric Siegel, of Dechert LLP, whose practice focuses on corporate governance and finance, said companies "would have to identify women candidates for their boards and appoint them to fill vacancies or nominate them for election by shareholders so that they satisfy the quota."

Eric Siegel   Dechert LLP

Siegel also explained that the law "applies only to companies, whether or not incorporated in California, whose shares are listed on a major United States stock exchange and whose principal executive offices (as set forth in the company’s securities law filings) are located within the state of California."

In regards to whether other states, such as Illinois, might consider similar legislation, Siegel said that he has not seen a mandate like the California bill requires.

"A number of states, including Illinois, already have advisory legislation supporting board quotas for women. But California’s legislation is the first that would be mandatory," Siegel said. He said he would expect "other states to watch what happens in California – whether the governor signs the legislation into law and how any legal challenges play out – before moving to imitate the law."

And Siegel said he would expect significant legal challenges. 

"Opponents will likely claim these requirements amount to sex-based discrimination that violates the equal protection clause of the U.S. Constitution," Siegel said.

Siegel also believes that the California law is likely to reach the U.S. Supreme Court.

Siegel shied from predictin whether this legislation would lead to demands from other under-represented groups, such as LGBTQ, for the state to implement similar quotas. But he said such possibilities are among "some of the difficult questions critics have raised and are likely figure in court challenges to the California legislation, if signed by the governor."

The bill was presented to the governor for his consideration on Sept. 10.

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