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Bloomberg Law: California Board Diversity Bill Enters Uncharted Legal Waters

September 04, 2020

O’Melveny corporate partners Shelly Heyduk and John-Paul Motley are quoted in this Bloomberg Law article, which discussed new legislation that would require publicly traded corporation boards to include directors from underrepresented communities.

The proposed legislation would require that boards with nine or more directors would need a minimum of three minority or LGBT members by the end of 2022. The legislation “would create increasing pressure for companies to reconstitute their boards,” Heyduk told the publication. “That is a lot of change for one board in such a short time.”

Additionally, companies would need to calculate the cost of compliance versus penalty. The women-on-boards law imposes a fine of US$100,000 for the first offense, and US$300,000 for the second, Bloomberg noted. “The US$100,000 fine isn’t much for most of the companies that would fall under the bill’s requirements, and because of the likelihood of court challenges, they could always argue that they don’t have to comply,” Motley said. “I don’t think they’re as concerned about litigation and penalties as they are about shareholder action.”

Bloomberg Law subscribers can read the full article here.