From [HERE] A judge struck down a California law that requires public companies based in the state to have at least one board director from underrepresented groups, a setback to efforts to mandate board diversity.

Judge Terry Green of the Superior Court of California in Los Angeles County granted on Friday a summary judgment in favor of a lawsuit challenging the law as unconstitutional. Judge Green said the law improperly mandated heterogeneous boards and must protect the right of individuals to equal treatment.

The law, enacted in 2020, required the boards of publicly traded companies based in the state to have at least one racially, ethnically or otherwise diverse director by 2021.

A lawsuit backed by Judicial Watch, a conservative foundation, said the law, known as Assembly Bill 979, violated the equal protection clause of the state’s constitution.

The board-diversity quota was the first of its kind in the U.S. and followed a similar California measure enacted in 2018 that mandated female directors on all boards of the state’s public companies. That measure is also facing legal challenges in state and federal courts.

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Under the board-diversity law, individuals who identify as Black, African-American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian or Alaska Native, or who identify as gay, lesbian, bisexual or transgender, would be considered eligible for meeting the requirement.

In a statement following the judge’s decision, Judicial Watch President Tom Fitton applauded the court for upholding “the core American value of equal protection under the law.”

It wasn’t clear if the defendant in the case, the California Secretary of State’s office, would appeal the decision. The agency didn’t immediately respond to requests for comment.

The requirements are now on hold pending any potential appeals.

Esther Aguilera, president and chief executive of the Latino Corporate Directors Association, said the ruling wasn’t unexpected. “Even when the law was passed, there was always discussion that this might be the outcome. Are we surprised? No.” 

She added that her organization would continue its work on advancing Latino board membership, including reaching out directly to CEOs, board chairs and corporate secretaries. 

The killing of George Floyd in police custody in 2020 and subsequent protests prompted pledges from U.S. business leaders to fight racism and increase diversity. Since then, some states, regulators and investors have pushed for greater diversity on corporate boards. Most of these efforts have called for more disclosure and stopped short of mandates or quotas. Many of the measures have faced legal challenges.

In August 2021, the Securities and Exchange Commission approved a Nasdaq Inc. proposal to include gender and race in its listing rules. Under the Nasdaq proposal, listed companies would need to meet certain minimum targets for the gender and ethnic diversity of their boards or explain in writing why they aren’t doing so. For most U.S. Nasdaq companies, the target would be to have at least one woman director, as well as a director who self-identifies as a racial minority or as lesbian, gay, bisexual, transgender or queer. Companies would also be required to disclose diversity statistics about their boards.

A Texas-based nonprofit has filed a federal lawsuit in the U.S. Court of Appeals for the Fifth Circuit, arguing that the SEC’s approval of Nasdaq’s rule violated the Equal Protection Clause of the U.S. Constitution and federal antidiscrimination laws.

Advocates of greater board diversity say that mandates or quotas are sometimes the only way to achieve meaningful progress in improving representation among key decision makers on corporate policy. [MORE]