FARRELL: Challenging California’s Gender Quotas

From Chris Farrell’s Op-Ed for The Daily Caller:

California’s radical gender quota discrimination law for corporate boards has been successfully challenged in court by Judicial Watch. Last year, Judicial Watch filed a lawsuit on behalf of three California taxpayers seeking to prevent the state from implementing a 2018 amendment to the Corporations Code known as Senate Bill 826. SB 826 required that publicly held corporations headquartered in California have at least one director who self-identifies as a woman on their boards by December 31, 2019, and have up to three such persons by December 31, 2021, depending on the size of the board.

However, this type of gender quota falls afoul of Article I Section 31 of the California Constitution, which states that “the State shall not discriminate against, or grant preferential treatment to, any individual or group on the basis of race, sex, color, ethnicity, or national origin in the operation of public employment, public education, or public contracting.” Thus, as the complaint states, “any expenditure of taxpayer funds or taxpayer-financed resources enforcing or otherwise carrying out the quota system is illegal.” Recently Judicial Watch won an important procedural victory in the case when a California Court affirmed the plaintiffs’ standing to sue under state law. The case can now move on to discovery and plaintiffs can begin deposing state officials.

The illegality of SB 826 is utterly transparent. The preferential quota system for board members is explicitly gender-based, in violation of any clear reading of Article I Section 31. This has been known all along. When he signed the bill into law, then-Governor Jerry Brown wrote the Senate that “serious legal concerns have been raised” to the legislation and he would not “minimize the potential flaws that indeed may prove fatal to its ultimate implementation.” He implied that signing the unconstitutional bill was a symbolic gesture he thought was necessary because “recent events in Washington, D.C. – and beyond – make it crystal clear that many are not getting the message.”

These types of measures are not only discriminatory but may lead to worse outcomes than their authors intended. A 2011 study of a board quota in Norway found that “the constraint imposed by the quota caused a significant drop” in stock price, and “led to younger and less experienced boards, increases in leverage and acquisitions, and deterioration in operating performance, consistent with less capable boards.” Quotas can also lead to the “golden skirt” phenomenon, where elite women with insider access snap up multiple board memberships effectively blocking other women from advancement.

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