In a move that continues California’s push for increased diversity on corporate boards, Governor Gavin Newsom on September 30, 2020 signed into law a bill that requires publicly held companies headquartered in the state to include board members from underrepresented communities. The action follows passage of a similar law in 2018 mandating that public companies headquartered in the state have at least one woman on their boards of directors by the end of 2019 (SB 826), with further future increases required depending on board size.

The law significantly expands on the diversity categories included in the legislation as originally proposed (see our prior coverage of the draft legislation here).

Companies that do not comply with the new law, AB 979, will face similar penalties as those noncompliant with SB 826, the gender diversity law: fines in the six figures, in addition to ramifications to their brand and reputation. As with SB 826, the new law contains some open questions and ambiguities that may affect implementation.

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