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California’s Corporate Board Diversity Quota Law Held Unconstitutional

California’s Corporate Board Diversity Quota Law Held Unconstitutional

“… the Legislature is thinking in group terms. But the California Constitution protects the right of individuals to equal treatment.”

https://www.youtube.com/watch?v=LZSxmyjKGEY

“Equity” was just dealt a blow. The problem with equity, as opposed to equality, is that it is unconstitutional and violates anti-discrimination laws when applied to protected categories, such as race. People have an individual right to equal protection.

As Judge James Ho of the 5th Circuit Court of Appeals put it:

Prohibiting racial discrimination means we must be blind to race. Disparate impact theory requires the opposite: It forces us to look at race—to check for racial imbalance and then decide what steps must be taken to advance some people at the expense of others based on their race. But racial balancing is, of course, “patently unconstitutional.”

Similarly Judge William Young of the Masschusetts federal District Court:

“… a hard pivot away from equality and towards equity simply has no support in the Equal Protection jurisprudence of the Supreme Court.”

Yet the equity agenda is the main thrust of “social justice” activism. In California in 2020, Gov. Gavin Newsom signed a law mandating certain minimum diversity requirements for corporate boards of major California corporations:

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…..

AB 979 requires that by the end of 2021 California-headquartered public companies have at least one director on their boards who is from an underrepresented community, defined as “an individual 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.”

In addition to that initial 2021 requirement, the law mandates that the number of directors from underrepresented communities be increased by the end of calendar year 2022, depending on the size of the board, as follows:

A lawsuit was filed by Judicial Watch on behalf of several Californians. Judicial Watch moved for summary judgment that the law was unconstitutional:

Plaintiff taxpayers sue to enjoin Defendant from spending public funds on California’s race,
ethnicity, sexual preference, and transgender quotas for boards of directors of publicly-traded
corporations with their headquarters in California. They also seek a judgment declaring the State’s
quota system to be unlawful. Plaintiffs demonstrate herein that the quota system violates article I,
sections 7 and 31 of the California constitution.

* * *

) AB 979 violates section 31 because it
requires California-based publicly-held or traded public contractors to grant preferential treatment to
certain races, ethnicities, sexual preferences, or transgender statuses on their boards. AB 979 therefore
cannot survive with respect to corporations under public contracts with the state or bidding for public
contracts with the state.

The Court Court just ruled the law to be unconstitutional.

From the Judicial Watch Press Release on the victory:

Judicial Watch announced today that the California Superior Court has released its full opinion in the case decided last week declaring that the State’s racial, ethnic, and LGBT quota for diversity on corporate boards of California-based corporations violates the California Constitution. The court found that only in “very particular cases should discrimination be remedied by more discrimination.”

The ruling and opinion come in the case (Robin Crest, et al. v. Alex Padilla, in his official capacity as Secretary of State of the State of California (No.20STCV37513)) granting Judicial Watch’s motion for summary judgment in its lawsuit on behalf of taxpayers who are asking the court to declare the quota scheme unconstitutional under California’s constitution and seeking to enjoin its enforcement. This lawsuit was filed by Judicial Watch on October 2, 2020, in the Superior Court of the State of California, County of Los Angeles, on behalf of three California taxpayers (Robin Crest, Earl De Vries and Judy DeVries) to prevent California from enforcing Assembly Bill 979 (AB 979). The law requires that boards of directors of California-based, publicly held domestic or foreign corporations satisfy a racial, ethnic, and LGBT quota by the end of the 2021 calendar year….

Judicial Watch completed a trial in a separate lawsuit in Los Angeles County Superior Court on behalf of California taxpayers to prevent the state from implementing a 2018 law (SB 826) requiring publicly-held corporations headquartered in California to have at least one director “who self-identifies her gender as a woman, without regard to the individual’s designated sex at birth” on their boards by December 31, 2019 (Robin Crest et al. v. Alex Padilla (No.19ST-CV-27561)).

From the ruling:

If demographically homogenous boards are a problem, then heterogeno s boards are the
immediate and obvious solution. But that doesn’t mean the Legislature can skip directly to
mandating heterogenous boards. The difficulty is that the Legislature is thinking in group terms.
But the California Constitution protects the right of individuals to equal treatment. Before the
Legislature may require that members of one group be given certain board seats, it must first try
to create neutral conditions under which qualified individuals from any group may succeed. That
attempt was not made in this case.

The NY Times notes that the gender quota law also is likely to fall, but not to worry, private sector pressures will achieve the same result:

It was not clear whether California would appeal Judge Green’s ruling. The office of the secretary of state, Shirley Weber, did not respond to a request for comment.

The decision was not a complete surprise, and California’s gender diversity law may face a similar fate, said David A. Bell, the co-chairman of corporate governance at the law firm Fenwick & West. “Under constitutional principles, the courts have generally been hostile to quotas,” Mr. Bell said.

Still, if Judge Green’s decision holds up after any potential appeals, Mr. Bell said he did not expect it to change much for companies that are already being pushed to diversify their top ranks.

“It has already set a benchmark for expectations by a lot of different stakeholders — institutional investors, employees, customers,” he said. “The benchmark exists and those expectations are going to carry forth in the world.”

More lawsuits need to be brought challenging discrimination in the name of “equity.”

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Comments

“But racial balancing is, of course, ‘patently unconstitutional.’”

We have gone way beyond racial balancing in this country and are now at the point where racial minorities and females far out number white males in more areas than I can name in 500 words or less.

henrybowman | April 6, 2022 at 9:29 pm

“The difficulty is that the Legislature is thinking in group terms.”
The Borg is incapable of thinking any other way.

If demographically homogeneous boards are a problem, then heterogeneous boards are the immediate and obvious solution. But that doesn’t mean the Legislature can skip directly to mandating heterogeneous boards. The difficulty is that the Legislature is thinking in group terms.

That’s one difficulty. But before you even get there, the premise at the beginning of that quote must be justified. What exactly is the problem with demographically homogeneous boards?

    daniel_ream in reply to Milhouse. | April 6, 2022 at 11:32 pm

    A fellow I know for his Master’s thesis researched corporate performance as correlated to “diversity” at the board or C-suite level. He discovered two things: first, that there was no extant research on this; the claim that “diverse” corporations perform better seems to have been just made up. Second, there’s no correlation whatsoever between diversity and corporate performance.

      Milhouse in reply to daniel_ream. | April 7, 2022 at 12:17 am

      Surprise, surprise.

      Temujin in reply to daniel_ream. | April 7, 2022 at 9:25 am

      The false concept, “Diversity is our strength”, is another misrepresented description. A devotion to “diversity” over everything else quickly leads to institutional paralysis and the irrelevance of ability !!!

        MajorWood in reply to Temujin. | April 7, 2022 at 11:12 am

        My guess is that the diversity argument was borrowed from agriculture and foresty practices. In nature, it can be argued that a diverse flora is more stable since eradicating one species doesn’t bring the whole system down. But in agriculture, and forestry, it is almost always a homogeneous crop which performs better. The only example I think where this isn’t true is hay, where a mixture of timothy and a nitrogen-fixing plant perform best, allowing the same field to be productive over a longer growing season with each variety performing best at a particular point in the season. So while nature itself might benefit from diversity, the minute one wants better performance, then homogeneity is key. If diversity is the key, then why were there no slow, short, white guys in the NCAA finals a few nights ago.

        MAJack in reply to Temujin. | April 7, 2022 at 1:00 pm

        Diversity only lowers standards.

      Valerie in reply to daniel_ream. | April 7, 2022 at 9:45 am

      There shouldn’t be a correlation between diversity and corporate performance. Businesses have long and notoriously relied on competence as the decisive selection factor. Donald Trump only became famous for his many “diverse” hires after he became a politician because most businessmen will take people who can deliver, wherever they may find them.

      “Diversity” has become a government-imposed burden on businesses that is separate from performance. Performance will only be affected when the burden becomes great enough to cause a decay in performance. If a company is lucky enough to find competent people who fit the diversity criteria, it will only have the usual performance.

      Obie1 in reply to daniel_ream. | April 7, 2022 at 12:22 pm

      Thus as it always was. The only diversity that can benefit an business is diversity of thought, which doesn’t require diversity of skin color.

    henrybowman in reply to Milhouse. | April 7, 2022 at 7:32 am

    Notice that’s perfectly fine under this law for a board to be ALL one “minority.” In fact if you want to claim government contracts set aside for black-owned or women-owned businesses, you practically have to.

    wsot23887 in reply to Milhouse. | April 7, 2022 at 7:40 am

    Diversity Über Alles!

There have been times when I’ve had my doubts about Judicial Watch.

After this, I just might send them a little bit of money.

    amwick in reply to irv. | April 7, 2022 at 7:37 am

    Same here.
    I follow them on twitter.. all the lawsuits, tweet after tweet after tweet, and this is the first time I have seen a result..

    The Gentle Grizzly in reply to irv. | April 7, 2022 at 9:22 pm

    I stopped contributing to them when they were sending me more mailers each week than the NRA. If they have money for flashy brochures and all that sort of thing, what are they using to fund their cases?

E Howard Hunt | April 6, 2022 at 10:38 pm

There was an easy out to the law. The current boards could stay intact by having some members self-identify as gay or black. Perhaps a little lisping or tardiness would add verisimilitude.

    Milhouse in reply to E Howard Hunt. | April 7, 2022 at 12:22 am

    Yes, I suggested this when they first passed the requirement for a female director. I said that if there didn’t happen to be one on the board, the male directors could take it in turn to be the designated trans-woman at each meeting.

    But your suggestion that lisping or tardiness might add verisimilitude is homophobic and racist, and I condemn it vociferously. Condemn, I say! Shame on you! Thethe are bigoted thtereotypeth, and I’d condemn them some more but I’m half an hour late for work.

Someone please tell Kendi:
Prohibiting racial discrimination means we must be blind to race. Disparate impact theory requires the opposite: It forces us to look at race—to check for racial imbalance and then decide what steps must be taken to advance some people at the expense of others based on their race. But racial balancing is, of course, “patently unconstitutional.”

    Kendi? Forget it. She probably lost you at “…means:….”

    Ironclaw in reply to Rab. | April 6, 2022 at 11:53 pm

    Don’t try to confuse stupid communists with facts and logic.

    lawgrad in reply to Rab. | April 7, 2022 at 6:56 am

    Kendi is smart enough to recognize all along that what he was advocating is unconstitutional. That is why he published an article calling for a Constitutional amendment to make racial quotas and racial discrimination a Constitutional guaranteed right.

      Observer in reply to lawgrad. | April 7, 2022 at 4:04 pm

      Kendi knows full well that the “anti-racism” (i.e. racism against whites and Asians) that he advocates is both unconstitutional, as well as unfair on a fundamental level that most of us mastered in kindergarten (“two wrongs don’t make a right”).

      He simply doesn’t care.

I self-identify as African-American, based on my ancestors’ multi-generational residence in Egypt.

Instead of characterizing myself as cis male, I self-indemnify as a transsexual lesbian.

Does any Board want to hire me?

“Let the market decide.” What a novel concept!
.

One wonders how many corporations moved their corporate HQ out of California. No, not really…

These are businesses owned by shareholders and who knows if it is possible to determine the sexual orientation, gender, ethnic, race etc. of shareholders? Also, the shareholders vote in the directors. What would have happened if the shareholders voted the wrong way?

Seems like the simplest way to strike down this law is to point out that California’s government is prohibited under Prop 209 from granting racial preferences, so the legislature can’t direct that corporations do what the state itself is prohibited from doing.

This law was a malicious attempt to force companies to pay part of the Democratic Party’s bill for political activists. Another term for it is “featherbedding.”

2smartforlibs | April 7, 2022 at 9:53 am

When we stopped promoting on merit and started promoting a box of crayons is when the country lost its way.

“…Prohibiting racial discrimination means we must be blind to race. Disparate impact theory requires the opposite: It forces us to look at race—to check for racial imbalance and then decide what steps must be taken to advance some people at the expense of others based on their race. But racial balancing is, of course, “patently unconstitutional.”

What is the law other than words? If we are ‘forced” (please define by what or who with constitutional authority) to check for racial imbalance, then we can infringe upon one race to advance another. But that, of course, is unconstitutional as said in the very next sentence. So… forget the previous sentence? Talk about the fallacy of non-sequitur.

This is exactly the kind of muddied thinking that sees racial balancing as solution to racial discrimination. To balance something, you must add or subtract. And that cannot never be done without discriminating against what affects the balance. A circular trip on the crazy train.

    MajorWood in reply to George S. | April 7, 2022 at 11:17 am

    I always wonder about the white libtard parents who advocate promoting someone else’s children ahead of their own. It sure isn’t the way that nature runs.

Will this ruling bring white people back to television commercials?