Stephanie Lindemuth Quoted on Court Decision Striking Down Board Diversity Quotas

For its article “Ruling declaring California corporate board diversity quotas unconstitutional could impact similar measures, proposals in other states,” Northern California Record quoted Akin disputes & investigations partner Stephanie Lindemuth. The article looks at a decision by a federal judge in California that struck down a state law requiring diversity quotas for corporate boards.

Stephanie said that the district judge relied on Supreme Court precedent in his May 15 ruling in Alliance for Fair Board Recruitment v. Weber, but noted that it is unclear whether this and a 2022 case decided by a Los Angeles Superior Court judge will send a message to other states: “What is clear is that issues such as boardroom diversity and other initiatives intended to foster diversity, equity and inclusion (DEI) are likely to remain hot-button issues for the foreseeable future.”

Although California was one of the first states with a law on its book promoting boardroom diversity, Stephanie noted that, in 2020, Washington state had enacted a law requiring public companies headquartered there to have gender-diverse boards of directors.

She said that Washington’s law requires disclosures regarding board diversity unless they have met and maintained a set quote for directors who self-identify as women, noting, “The law included a January 2022 compliance date, requiring at least one-quarter of board members must be/identify as women by January 22, 2022, unless before that time they had such a demographically diverse composition for at least 270 days beforehand. The law does not impose fines for non-compliance, but boards that do not meet this level must issue a diversity report. We are not aware of an active litigation challenging the measure at this time.”

Stephanie said that states are not the only stakeholders looking at how to enhance board demographic diversity: “Corporations themselves, as well as various private stakeholders, including large asset managers, proxy advisory firms, and shareholder activists, have committed to or considered ways to push companies to embrace demographic diversity in boardrooms and C-suites.” She did note, however, that there has also been private and public sector resistance to some of these efforts.