California-Headquartered Public Companies Must Include Women as Directors by 12/31/2019

Public Companies Must Include Women as Directors

New Requirement in Corporations Code – Public Companies Must Include Women as Directors

The California Legislature recently added Section 301.3 to the California Corporations Code. To comply with this new law, publicly-held corporations must have specific minimum numbers of female directors on their boards of directors. This applies only to publicly-traded companies with the “principal executive office” (PEO) in California.

This requirement applies both to California corporations and foreign corporations — both domestic and foreign public companies must include women as directors.

At Least One Female Director (Then Perhaps Two or Three)

By the end of 2019, all public, California-PEO corporations must include at least one female director on the board.

By the end of 2021, public, California-PEO corporations with five or more directors must include at least two female directors.

Also by the end of 2021, public, California-PEO corporations with six or more directors on their boards must include at least three female directors.

How Long Must Female Directors Sit and Who Qualifies as “Female”?

The new section only requires that a female director be in place “a portion of the year.”

For requirements of two and three women, it is sufficient that the minimum number of women held seats “during at least one point” in the prior calendar year.

Who qualifies? A “female” is defined as “an individual who self-identifies her gender as a woman, without regard to the individual’s designated sex at birth.”

Penalties

Financial penalties were written into the new law:

  • $100,000 for \failure to timely file board member information;
  • $100,000 for a first violation;
  • $300,000 for a second or subsequent violation.

Analysis

The Legislature here makes efforts to battle ongoing discrimination women continue to face (both as a class and individually) in leadership opportunities, wages, and basic rights.

This law will likely face challenges such as those raised as to quota systems adopted in other contexts. This will be an interesting law to track.

This office has successfully represented male and female executives in employment controversies of many types, including claims of pay inequality, harassment, discrimination, retaliation, and wrongful termination. If it critical to retain counsel early in a controversy. Please contact us if you have an employment dispute – we can help.

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