California’s Non-Equal Protection

Why a judge tossed the state’s boardroom diversity mandate

WSJ editorial. 

"We told you a week ago that a Los Angeles judge blocked California’s corporate board diversity mandate, albeit without filing an opinion. It turns out Superior Court Judge Terry Green did file a 24-page opinion, though it wasn’t posted on the court’s website until after our editorial was published. We’re happy to recount his logic since politicians in Sacramento are clearly in need of legal instruction.

The Legislature’s premise for its diversity mandate was that corporate directors tend to select replacements who look like them, resulting in homogenous boards. Ergo, all public companies headquartered in the state were ordered to include at least one member of an “underrepresented” race, ethnicity or sexual orientation, and two to three for larger boards.

Judge Green writes that while “there is nothing outlandish or incredible about the idea that people generally tend to socialize with, and select, other people like themselves,” the Legislature “is thinking in group terms.” Yet the California Constitution “protects the right of individuals to equal treatment.” Equal protection “rights are individual rights, not group rights,” he emphasizes.

He also points out that “groups selected for preference” exclude other numeric minorities such as religious groups: “Does the Equal Protection clause compel the addition of any subsequently-identified group? Can the boundaries of these groups be policed in any rational way, given that the statute determines membership solely by self-identification?” The answer is no. 

While the state claims racial minorities are under-represented on boards, the judge says no one “appears to have made any effort to identify, define, or survey the qualified talent pool for director positions.” The state compared the makeup of boards to the generation population, but the “general population is manifestly not the qualified talent pool for corporate board seats.”

Evidence that increased boardroom diversity improves financial performance is mixed. Regardless, the judge says California’s stated “generic interest in healthy business” doesn’t suffice as compelling, and “there is precious little indication that the Legislature seriously considered or attempted other intermediate and race-neutral measures.”

The law thus fails the strict scrutiny test for equal protection. “Only in very particular cases should discrimination be remedied by more discrimination,” the judge concludes. This is a lesson we hope the U.S. Supreme Court reinforces as it also takes up racial preferences."