California Imposes Diversity Dogma on Corporate Boards

By K. Lloyd Billingsley. He is a Policy Fellow at the Independent Institute.

"On September 30, California governor Gavin Newsom signed Assembly Bill 979, mandating that publicly traded companies place members of “underrepresented communities” on their boards. The bill’s author, Pasadena Democrat Chris Holden, claims that “all of California’s corporate boards will better reflect the diversity of our state,” but in California and across America, people have cause to wonder exactly what Holden is thinking.

For example, one board member could boast proven expertise in economics, another in marketing, manufacturing, and so forth. Or one board member could have proved her worth in New Zealand, another with success in Norway, Ireland, or Italy.

But that is not the kind of diversity the author has in mind.

“Underrepresented community” means African-American; Hispanic; Latino; Asian; Pacific Islander; Native American; Native Hawaiian; Alaska Native; and those who self-identify as gay, lesbian, bisexual, or transgender. By contrast, Asians and “whites” are held to be overrepresented in management.

Proportionality dogma dictates that all institutions must reflect the ethnic breakdown of the population. If they do not, the reason must be deliberate discrimination, and the only remedy is government action such as the bill Newsom just signed.

The trouble is, proportionality dogma ignores the realities of personal differences, effort, and choice. With those in play, statistical disparities among groups and individuals are the rule, not the exception. For diversity activists, there are “too many” of some groups in college and on corporate boards.

Holden claims that his legislation is “a win-win as ethnically diverse boards have shown to outperform those that lack diversity.” A look at California’s government could prove instructive.

Ana Matosantos, a Latina from a wealthy family in Puerto Rico, earned degrees in political science and feminist studies. Republican governor Arnold Schwarzenegger established his diversity credentials by naming Matosantos as state director of finance. She brought about little if any improvement, but recurring governor Jerry Brown duly kept her on the job.

In similar style, Newsom named Matosantos as his Cabinet secretary and also made her California’s “energy czar.” Whatever Matosantos managed to accomplish in that role did not prevent the power blackouts now assailing Californians amid raging wildfires. So in the crucial energy sector, Newsom’s “diverse” administration did not exactly set an example of performance.

Assemblyman Holden also claims his new law represents “a big step forward for racial equity.” Californians could believe it’s a big step backward.

In 1996, California voters passed Proposition 209, the California Civil Rights Initiative, which stated: “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.” California was the first state to adopt such a measure, and the disaster predicted by diversity alarmists never occurred.

After Proposition 209 passed, economist Thomas Sowell noted in Intellectuals and Race, the number of African-American and Hispanic students graduating from the University of California system went up, including a 55-percent increase in those graduating in four years with a GPA of 3.5 or higher. Even so, in 2020, along comes Proposition 16, which would repeal Proposition 209. That means reinstatement of state-sponsored racial and ethnic discrimination.

Newsom has signed a law that imposes such discrimination on corporate boards without regard to proven performance or educational and employment backgrounds. Failure to comply can bring fines of $100,000–$300,000. If more corporations start leaving the Golden State, it would be hard to blame them."