By Natalie Rodgers
On August 31, California lawmakers passed a new, unnamed piece of legislature that would increase diversity and inclusion rates in big California businesses.
Under this new law, large corporations would be required to have at least one board member on their team who comes from an underrepresented community. The legislature further clarifies the definition of underrepresented communities to include: Black and African American, Hispanic and Latino, Native American, Native Hawaiian, Alaska Native, Asian, Pacific Islander, or LGBTQ+.
“Corporations have money, power, and influence,” Assemblyman and author of the law Chris Holden stated. “If we are going to address racial injustice and inequity in our society, it’s imperative that corporate boards reflect the diversity of our state.”
Holden hopes that the bill will make large representative changes resulting in racial justice, similar to the gender equality shown after the passing of the 2018 bill, requiring big-name corporations that have a certain number of women on their board.
While presenting the new legislature, lawmakers strived to prove the necessity for its existence by referring to various studies that showed a lack of diversity in big corporations and the state of California alike. One such study, done by the Deloitte and Alliance for Board Diversity in 2018, stated that out of the 1,222 new board members that were introduced to Fortune 100 companies, 940 of them identified as Caucasian, a whopping 77 percent. Another study, done by the Latino Corporate Directors Association in July 2020, stated that 87 percent of California business boards did not have Latino representation, despite making up almost 40 percent of the total population. Many large technology companies, such as Apple and Facebook, were also tested to have all-white executives in the top executive positions on the board.
“There is enough evidence to show there is discrimination,” Holden told lawmakers. “The numbers simply don’t lie.”
Besides the presence of discrimination, lawmakers also showed evidence of the economic impact that diversity can have on large corporations. Companies that present a larger understanding and representation of diversity have shown to increase in profit as their target audience begins to draw in more people from various backgrounds.
Under Holden’s law, diversity would be required to increase in the coming years in California businesses. Corporations with more than nine board members would need to have a minimum of three members that come from underrepresented communities and corporations with five to eight board members would be required to have at least two of these members. If signed into law by Governor Gavin Newsom, the law would also penalize those violators with fines starting at $100,000.