Senate Bill 826, authored by Senators Hannah-Beth Jackson and Toni Atkins, is pending before Governor Jerry Brown after having passed both houses of the Legislature. SB 826 would require a publicly-held corporation (domestic or foreign) whose principal executive offices are located in California to have a minimum of one female on its board of directors by the end of 2019.

Thereafter, two female directors would need to be in place by the end of 2021 if the corporation has five directors, or three female directors would be needed if the corporation has six or more directors. The average publicly-traded corporation has nine board members.

For purposes of enforcing these new mandates, the California Secretary of State would be required to publicly report corporate compliance with this bill and the Secretary would be authorized to impose fines for any violation of the bill. Because SB 826 would establish a gender-based quota, it would likely violate federal and state laws and, as such, Governor Brown should veto the measure.

While California’s business community is committed to workplace diversity, including their boards of directors, the approach taken by this bill is not the right answer. SB 826 would place gender as the most important basis for membership on a corporation’s board of directors over all other criteria as well as other classifications protected under federal and state discrimination laws. Why is gender chosen in this bill over race or ethnicity, or sexual orientation or any other form of protected classification?

The practical impact of the bill would be to place these publicly-traded corporations in a legal conflict as they attempt to comply with diversity goals, state and federal constitutional constraints, and the provisions of SB 826. Businesses, especially those that are publicly-traded, want to comply with both state and federal laws and diversity goals in hiring of employees and corporate directors. This bill creates an untenable position for those companies.

How are boards of directors of publicly-held corporations chosen? Directors are chosen by a vote of the corporation’s shareholders, rather than the corporation itself. This raises the question whether government can mandate that those shareholders choose a specific individual?

While increasing the number of women on corporate boards has been slow, it is occurring. According to the Harvard Law School Corporate Governance Forum, the percentage of women currently holding board seats on Fortune 500 companies has increased by 21.2% over the past six years. This has been taking place without any government mandate or threat of financial punishment. Of course, more can be done to encourage an increase in female directors, but a requirement coupled with monetary penalties is not the right answer.

Moreover, in Europe, where several countries have had board director quotas as proposed by SB 826, they have had mixed results, including in Norway with a 40% quota. In some of these countries, by the way, the penalty for failure to meet the specified quota includes corporate dissolution, so there is plenty of incentive to meet those gender quotas. As described in an article in The Economist magazine, however, “Studies from at least six countries on companies’ performance, decision-making and stock market returns fail to show that quotas make a consistent difference, good or bad.”

Finally, numerous legal commentators have not only questioned the policy rationale for a gender quota on corporate boards, but also the constitutionality of such a mandate. Both the United States and California Constitutions contain equal protection provisions that prohibit discrimination on the basis of gender. This may be why no other state has enacted a similar bill – it cannot withstand judicial scrutiny.

While the intent behind SB 826 is valid as corporations’ boards of directors should look more like the diverse citizenry of California, a governmental mandate is unwarranted and Governor Brown should veto this measure.

Chris Micheli is a Principal with the Sacramento governmental relations firm of Aprea & Micheli, Inc.