Introduction to AB 979
California's AB 979 law requires publicly traded companies to have a minimum number of directors from underrepresented communities on their boards. This law aims to increase diversity and inclusion in corporate governance.
The law applies to companies with principal executive offices in California and is part of a broader effort to promote diversity, equity, and inclusion in the corporate sector.
Board Diversity Requirements
Under AB 979, companies must have at least one director from an underrepresented community by the end of 2021. This includes individuals who self-identify as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native.
Companies with more than four but fewer than nine directors must have at least two directors from underrepresented communities, while those with nine or more directors must have at least three.
Implementation and Compliance
Companies must submit an annual report to the California Secretary of State, disclosing the number of directors from underrepresented communities on their boards. Failure to comply with the law may result in penalties and fines.
To ensure compliance, companies should review their board composition and develop a plan to increase diversity and inclusion, if necessary.
Benefits of Board Diversity
A diverse board brings unique perspectives and experiences, leading to better decision-making and more effective governance. It also enhances a company's reputation and contributes to a more inclusive and equitable corporate culture.
Furthermore, a diverse board can help companies tap into new markets, improve customer relationships, and increase their competitive advantage.
Conclusion and Next Steps
AB 979 is an important step towards promoting diversity and inclusion in corporate governance. Companies must take proactive steps to comply with the law and create a more diverse and inclusive board.
By doing so, they can reap the benefits of a diverse board, improve their reputation, and contribute to a more equitable and just society.
Frequently Asked Questions
What is the purpose of AB 979?
The purpose of AB 979 is to increase diversity and inclusion in corporate governance by requiring publicly traded companies to have a minimum number of directors from underrepresented communities on their boards.
Which companies are subject to AB 979?
Companies with principal executive offices in California are subject to AB 979, regardless of their size or industry.
How many directors from underrepresented communities are required?
The number of required directors varies depending on the size of the board, ranging from one to three directors.
What are the consequences of non-compliance?
Companies that fail to comply with AB 979 may face penalties and fines, as well as damage to their reputation.
How can companies ensure compliance with AB 979?
Companies can ensure compliance by reviewing their board composition, developing a plan to increase diversity and inclusion, and submitting an annual report to the California Secretary of State.
What are the benefits of having a diverse board?
A diverse board brings unique perspectives and experiences, leading to better decision-making, improved governance, and a more inclusive and equitable corporate culture.