California Gov. Gavin Newsom has signed the first bill in the country that requires all corporate boards to possess at least one director from an "underrepresented community." The requirement will take effect by the end of 2021.
The law defines an "underrepresented community" as those who identify as lesbian, gay, bisexual, or transgender or as part of a racial minority.
The law also says that any corporation that has nine or more directors on its board must increase that quota to three "underrepresented community" directors by the end of 2022.
Democratic lawmakers in the state celebrated the new law.
"While some corporations were already leading the way to combat implicit bias, now all of California's corporate boards will better reflect the diversity of our State," Democratic Assemblyman Chris Holden said. "This is a win-win as ethnically diverse boards have shown to outperform those that lack diversity."
Republicans were more skeptical, arguing it was not the state's place to intervene in these kinds of corporate decisions.
"I support the idea of boards being diverse and reflecting the community of consumers," Republican National Committeewoman Harmeet Dhillon said, "but Gavin Newsom really has nothing to do or say about it, nor should the state. There are well-established mechanisms for activist shareholders to demand change in companies, demand divestment, demand leadership and management, and these have worked well for over a century."
Dhillon argued that laws like this will drive even more companies out of California.