Howard Dicker and Lyuba Goltser are partners and Erika Kaneko is an associate at Weil, Gotshal & Manges LLP. This post is based on their Weil memorandum. Related research from the Program on Corporate Governance includes The Market for Corporate Law by Michal Barzuza, Lucian A. Bebchuk, and Oren Bar-Gill and Federal Corporate Law: Lessons from History by Lucian Bebchuk and Assaf Hamdani.
Corporations with a principal executive office in California that have shares listed on a major U.S. stock exchange will be required to have a minimum number of women on their boards of directors, under a bill signed into law on September 30, 2018, by the Governor of California. Although the new law may be subject to challenge in court, affected public companies and those contemplating an initial public offering within the next year should begin to consider board composition and director recruiting, or risk future fines by the State, pressure from institutional investors, or exploitation by activists.
The new law, which had been California Senate Bill 826, requires any corporation (whether or not incorporated in California) with a principal executive office in California that has shares listed on a major U.S. stock exchange, to have at least one female director on its board by December 31, 2019. [1] By December 31, 2021, at least two female directors must sit on any board with five directors, and at least three female directors must sit on any board with six or more directors. Except for this initial phase-in, the new law does not provide any transition period for newly listed companies. [2] Therefore, for example, a corporation headquartered in California with a six person board of directors that undertakes an IPO in 2022 would need at least 50% of its board to be women at the outset.
