Gov. Newsom signs bill requiring California businesses including Silicon Valley firms to have more diverse boards

Governor Newsom has signed a first-in-the-nation bill requiring California businesses including some Silicon Valley giants to have diverse boardrooms.

The law, signed into law by Newsom Wednesday, legally requires all public companies headquartered in California to have at least one board member from a racial or sexual minority by the end of 2021.

This includes someone who identifies as black, Latino, Asian, Pacific Islander, Native American, Native Hawaiian or Alaska Native, or as gay, lesbian, bisexual or transgender.  

The new law, which is the first of its kind on US soil, will apply to more than 660 California-based corporations including the likes of publicly-listed Silicon Valley firms Apple and Facebook. 

It comes as companies face mounting calls to improve the diversity of their organizational make-up amid nationwide protests demanding an end to systemic racism following the killings of multiple black men and women by cops across America. 

Governor Newsom has signed a first-in-the-nation bill requiring California businesses including some Silicon Valley giants to have diverse boardrooms

Newsom said at an online signing ceremony it was important for minorities to have a voice on the boards of powerful corporations.

'When we talk about racial justice, we talk about empowerment, we talk about power, and we need to talk about seats at the table,' he said.

Assemblyman Chris Holden, who co-authored the bill, said many businesses had issued issued statements of support for diversity after the Minneapolis 'murder' of black man George Floyd by a white cop but few had put their words into action.  

'The new law represents a big step forward for racial equity,' he said Wednesday. 

'While some corporations were already leading the way to combat implicit bias, now, all of California's corporate boards will better reflect the diversity of our state. This is a win-win as ethnically diverse boards have shown to outperform those that lack diversity.' 

As well as having one diverse director by the end of 2021, companies with four to nine board members will then be required to have at least two members from an underrepresented community by the end of 2022.  

Three directors are required for boards with nine or more directors by the end of 2022. 

Firms that don't comply will face fines of $100,00 for first violations and $300,000 for repeated violations. 

Assemblyman Chris Holden , who co-authored the bill, said many businesses had issued issued statements of support for diversity after the Minneapolis 'murder' of black man George Floyd by a white cop but few had put their words into action 

The text of the corporate diversity bill cited the Latino Corporate Directors Association, which said 233 of 662 publicly traded companies headquartered in California had all-white boards as of this year. 

Nearly 90 percent didn't have any Latino directors, despite Latinos make up 39 percent of the state's population. 

Only 16 percent of businesses had an African American board member.

It follows on from diversity legislation adopted in 2018 requiring boardrooms to have at least one female director by 2019. 

The only official opponent to the bill was former California commissioner of corporations Keith Bishop.  

The only official opponent to the bill was former California commissioner of corporations Keith Bishop  

He said the bill, coupled with an existing diversity law, would lead to positive discrimination against some people and limit the chances of people who do not fit the diversity standard. 

He argued it makes it more desirable for corporations to pick women who also are members of the underrepresented communities to simultaneously meet both sets of quotas, to the detriment of men or women who do not meet the qualifications in the new bill.    

The bill may also face pushback from conservative groups who are expected to argue it is a discriminatory quota, as they did with the 2018 law.

Conservative group Judicial Watch filed a suit over the 2018 law saying quotas are 'unconstitutional'. 

The new legislation was part of a package of racial justice measures signed by Newsom before a midnight deadline Wednesday. 

Others include banning the use of peremptory challenges to remove potential jurors based on racial, religious or gender identity; allowing judges to alter sentences that are believed to involve racial or ethnic discrimination; and setting up a state task force to study the idea of reparations to African Americans for slavery.

The lack of diversity and equal opportunities across corporate America has been put under the spotlight in recent months, in the wake of the Memorial Day 'murder' of unarmed black man George Floyd.  

The new law will apply more pressure on Silicon Valley firms that have long faced criticism for their lack of diversity. In May, 10 House Democrats sent a letter to Google CEO Sundar Pichai demanding answers over the firm's diversity and inclusion initiatives 

Stark data from executive recruiting firm Heidrick & Struggles reveals African-Americans made up just 10 percent of new director appointments in the Fortune 500 last year despite making up 13 percent of the US population. 

New Hispanic directors were even more scarce, the study found.

Only 7.3 percent of the five highest-paid executives at financial companies in the Russell 3000 were racial or ethnic minorities, ISS ESG data shows.  

The new law will apply more pressure on Silicon Valley firms that have long faced criticism for their lack of diversity.

In May, 10 House Democrats including Reps. Yvette Clarke of New York and Andre Carson of Indiana sent a letter to Google CEO Sundar Pichai demanding answers following allegations the company had scaled back its diversity and inclusion initiatives since 2018.  

'It is no secret that companies across Silicon Valley and the tech sector have struggled to increase diversity, and Google is no exception,' the representatives wrote.