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California will now require more diversity on company boards

Starting next year, public companies headquartered in California will be legally required to diversify their boards racially, ethnically and in terms of sexual and gender identity.

Posted: Sep 30, 2020 3:46 PM
Updated: Sep 30, 2020 5:03 PM

(CNN) -- Starting next year, public companies headquartered in California will be legally required to diversify their boards racially, ethnically and in terms of sexual and gender identity.

The law, which was signed by California Governor Gavin Newsom on Wednesday, requires companies to have at least one board member from an underrepresented community by the end of 2021 and at least two or three -- depending on the board's size -- by the end of 2022.

People from underrepresented communities are defined in the bill as anyone who self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian or Alaska Native, or who self-identifies as gay, lesbian, bisexual or transgender.

"This new law represents a big step forward for racial equity... This is a win-win as ethnically diverse boards have shown to outperform those that lack diversity," California State Assemblyman Chris Holden, a coauthor of the legislation, said in a statement.

The new law is likely to establish a new minimum threshold for corporate diversity across the country, much like the state's 2018 law requiring a minimum number of women directors.

Public companies are not required to report on the racial and ethnic mix of their boards, but a number of analyses have shown that corporate boards remain overwhelmingly White. And the biggest strides they've made in terms of diversity is to give women -- primarily White women -- a seat at the table.

A report earlier this month from ISS ESG, the responsible-investment arm of Institutional Shareholder Services, found that only 16.8% of large cap company boards had racially or ethnically diverse directors, up from 13.6% in 2015. By contrast, the growth in the number of women directors has been much greater. Women directors now account for 27.4% of such boards, up from 18.3% five years ago.

While bolstering diversity at corporations is now part of the national conversation, it won't amount to much without action.

"For all the good will and good intentions out there, most of us believe if you don't count it, it doesn't happen. You have to have measurable goals," said Aida Alvarez, a founding member of the Latino Corporate Directors Association, who herself sits on the boards of four public companies, including Hewlett-Packard.

Alvarez noted that despite Hispanics making up nearly 40% of California's population, 86% of the public companies based there don't have a Latino on their boards. "There's clearly underrepresentation right now. And there's a lot of great talent out there," said Alvarez.

The-CNN-Wire
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California Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 898799

Reported Deaths: 17305
CountyConfirmedDeaths
Los Angeles2968216974
Riverside657571279
San Bernardino617261070
Orange580101440
San Diego53928867
Kern33669416
Fresno30471436
Sacramento25094482
Santa Clara23881388
Alameda23133456
San Joaquin21528488
Contra Costa18413240
Stanislaus17509396
Tulare17425284
Ventura14124162
Imperial12700336
San Francisco12032140
Monterey1128487
San Mateo11002159
Santa Barbara9715120
Merced9439154
Sonoma9163134
Kings820183
Solano728674
Marin7045128
Madera498174
San Luis Obispo412132
Placer408857
Yolo314458
Butte304652
Santa Cruz275325
Napa192815
Shasta183930
Sutter183712
San Benito143215
El Dorado13084
Yuba129310
Mendocino112121
Tehama8528
Lassen7641
Lake67915
Glenn6523
Nevada6038
Humboldt5619
Colusa5496
Calaveras33917
Amador31716
Tuolumne2624
Inyo22715
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Del Norte1781
Mono1762
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Friday was a quieter weather day for much of northern California with a wide range of temperatures from morning to afternoon, and wind that wasn't quite as strong. Saturday will also be quiet, but much higher fire danger returns Sunday.
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