California now leads the nation in corporate affirmative action as Democratic Gov. Gavin Newsom signed into law Wednesday a bill mandating racial and sexual identity quotas for corporate boards.
The new law requires publicly traded businesses with headquarters located in California to hire at least one diverse board member from an "underrepresented community" by 2021, Fox Business reports. To qualify as underrepresented, an individual must self-identify as black, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native, or as gay, lesbian, bisexual, or transgender.
Corporate boards with four to nine directors must hire at least two diverse individuals by the end of 2022. If a company has nine or more directors they must make three diverse hires. Punitive fines of $100,000 for the first violation and $300,000 for repeat violations will be levied against companies that do not comply with the state quotas.
The new law builds on a 2018 law that required boardrooms to hire at least one female director by 2019. Conservative groups have challenged the diversity statute in court, arguing the law is unconstitutional under the equal protection clause of the 14th Amendment.
Newsom hailed the law as an important step toward ensuring racial representation in powerful corporations.
"When we talk about racial justice, we talk about power and needing to have seats at the table," Newsom said at the online signing ceremony for the new law.
"The new law represents a big step forward for racial equity," said Democratic state Assemblyman Chris Holden, one of the authors of the bill, in a statement. "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."
The new diversity quotas are part of a larger package of racial legislation signed into law on Wednesday. The package includes a law creating a task force to study and make recommendations on reparations to the black community for slavery. New laws also prohibit the use of peremptory challenges to remove potential jurors based on racial, ethnic, religious, or gender identity and allow judges to alter sentences that are believed to involve racial or ethnic discrimination.
"As a nation, we can only truly thrive when every one of us has the opportunity to thrive. Our painful history of slavery has evolved into structural racism and bias built into and permeating throughout our democratic and economic institutions," said Gov. Newsom. "California's rich diversity is our greatest asset, and we won't turn away from this moment to make right the discrimination and disadvantages that Black Californians and people of color still face. While there is still so much work to do to unravel this legacy, these pieces of legislation are important steps in the right direction to building a more inclusive and equitable future for all."