Today’s Solutions: January 30, 2023

California legislation requires that most corporate boards in the state have at least three female members by the end of the year. Now, the progressive state is building upon this law with a newly passed bill that would require boards to also have at least one member from an underrepresented community. 

The bill defines underrepresented communities as individuals who identify as Black, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native. By 2022, the bill expands requirements and mandates that boards with nine directors or more include at least three minority members. To hold companies accountable, the California Secretary of State would also be required to publish an annual report on board diversity.

The state’s success with its gender diversity law offers promise for the new bill. After mandating that boards have female representation, the proportion of women on boards increased dramatically, surpassing the baseline requirements. According to Bloomberg, women accounted for about 45 percent of new board seats among Russell 3000 companies based in California this year, compared with about 31 percent nationwide.

Racial disparities among company leadership is a big issue across the country. Research shows just 31 percent of African Americans and 22 percent of Latinx people work in management and professional roles, compared with 54 percent of Asian and 41 percent of White people. Bill author Assemblymember Chris Holden hopes the legislation will help ameliorate these trends. “People of color must have a seat at the table,” he said, “Especially in a state as diverse as California.”

Employing one board member from an underrepresented group is a far cry from achieving actual racial diversity and inclusion, but it is a starting point and a catalyst for mandatory change in all companies. If signed into law, hopefully, the bill is a solution for initiating more diverse hiring practices and encouraging companies to go beyond the minimum requirements on diversity.

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