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Friday, Jan 27, 2023
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Deadline Nears for Diversity on Public Boards

With less than a month to go to meet a deadline to add women members to the boards of public companies, the San Fernando Valley region is doing OK on the compliance scorecard. A bulk of the companies on the Valley 50 list – 27 – are in compliance for this year’s requirement for at least one female on the board and 11 more companies have two women. At least 10 of the companies on the Valley 50 list are not in compliance. The law, SB 826, signed last year by then-Gov. Jerry Brown, requires that public companies based in the state have at least one woman on its board by the end of 2019. By the end of 2021, two women are required to serve on five-member boards, and three women must be on boards of six or more members. Meanwhile, two lawsuits have been filed in both state and federal courts challenging the constitutionality of the law. One company, Flamemaster Corp., a manufacturer of sealants, protective coatings, and specialty compounds for the aerospace industry in Pacoima, did not list any directors. Another, ImmunoCellular Therapeutics Ltd., in Westlake Village, dropped off the Valley 50 list in the summer after selling off its assets to an unnamed biotech company and ceasing operations. Wesco Aircraft Holdings Inc. is in compliance for this year’s requirement, but it makes little difference as the company is being acquired by a private equity firm and will cease as a public company once the transaction closes. Annalisa Barrett, a senior advisor with the Board Leadership Center, of the Dutch professional services network KPMG, said that public company boards are teams of professionals coming together to make decisions that impact a company. “There is a whole body of research that shows that diverse teams make better decisions,” Barrett said. “They take into consideration more perspectives and they often have more effective deliberations.” While she didn’t expect to see 100 percent compliance with this year’s mandate, she added that “most companies that didn’t yet have a female director have added one.” Steven Bronson, who is chief executive of two publicly traded companies in Camarillo, Interlink Electronics Inc. and Qualstar Corp., conceded that Qualstar was not in compliance but added that would be changing shortly. Interlink is in full compliance, having had Angela Blatteis on its board even before the passage of SB 826. “The business should be about getting the best talent,” Bronson said. “We shouldn’t get to the point where the government, especially at the state level, should start to dictate what public companies should do.” Constitutional questions Two lawsuits are pending that challenge the law. The first was filed in Los Angeles County Superior Court this summer by conservative watchdog group Judicial Watch Inc. The three plaintiffs the group represents said that because they are taxpayers, Secretary of State Alex Padilla will illegally spend taxpayer funds and resources by enforcing the board requirement law. The plaintiffs contend that the law violates the state constitution by establishing a quota system and the legislation can only be justified by a compelling government interest. Additionally, the use of gender classifications must be narrowly tailored to serve that interest. “As (Padilla) cannot make these difficult showings and SB 826 cannot be interpreted to preserve the legislation’s quota system’s validity, it is unconstitutional and any expenditure of taxpayer funds or taxpayer-financed resources enforcing or otherwise carrying out the quota system is illegal,” the suit said. In the state’s motion to demurrer – an objection to a legal action based on the plaintiff not having a valid claim – filed last month, attorneys for Padilla argued the plaintiffs lack standing to bring their claim and their request for declaratory relief is not ripe. On the latter issue, the attorneys outlined the two-pronged ripeness analysis that they said the plaintiffs did not meet. Specifically, they did not meet the first prong because their claims were not fit for a judicial decision and did not meet the second prong of showing a hardship if judgment is withheld. “Plaintiffs suffer no immediate hardship if the court withholds its consideration at this time; they certainly have not alleged it,” the demurrer brief said. “As shown, there is no illegal waste by the Secretary of State to enforce provisions of SB 826, and it is speculative to assume that there will be any.” The second lawsuit was filed Nov. 13 in U.S. District Court for the Eastern District of California by the Pacific Legal Foundation, a California-based libertarian group on behalf of Creighton Meland, a retired corporate attorney in Illinois and current shareholder at OSI Systems Inc., in Hawthorne, according to media reports. A story in the Washington Post on the lawsuit said that California’s mandate is unconstitutional and in violation of the equal protection clause because it discriminates on the basis of sex, and that requiring Meland to consider gender when voting to add members to OSI’s board forces him to discriminate.

Mark Madler
Mark Madler
Mark R. Madler covers aviation & aerospace, manufacturing, technology, automotive & transportation, media & entertainment and the Antelope Valley. He joined the company in February 2006. Madler previously worked as a reporter for the Burbank Leader. Before that, he was a reporter for the City News Bureau of Chicago and several daily newspapers in the suburban Chicago area. He has a bachelor’s of science degree in journalism from the University of Illinois, Urbana-Champaign.
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