California Maintains a Public “Shame List” of Companies Not Reporting Diversity

Some of the nation’s most famous corporations, including Lions Gate Entertainment and Live Nation, have not reported compliance with a
California
law that required boards of directors to meet a diversity quota.

The law has just been declared unconstitutional by a Los Angeles judge, and yet a “shame list” remains online for the public to scrutinize which corporations have the most ethnic minorities on their boards.

Judicial Watch
won a lawsuit last week against the secretary of state regarding the legality of
a 2020 law
requiring publicly held companies to select board members from a preapproved state list of underrepresented communities. The required number of directors is based on a sliding scale.

“It’s telling when you have the biggest corporations in America not wanting to go along with this government Big Brother reporting scheme,” Judicial Watch Senior Counsel Robert Sticht told the Washington Examiner. “I don’t blame them for not wanting to be on this public shame list.”

The secretary of state published a report March 1 indicating that while 716 corporations were listed with the Securities and Exchange Commission as headquartered in California, only 301 reported compliance with the “Underrepresented Communities on Boards” in a 2021 state disclosure statement, the state website read.

Other companies that did not file statements include Fisker, Broadcom, Levi Strauss, and Tilly’s, along with a host of Silicon Valley tech and pharmaceutical companies. The failure to file “timely” board member information is subject to a minimum $100,000 fine, the law indicates.

For the companies that did comply, many listed numbers exceeding the quota, such as Tesla, The Gap, Walt Disney, Visa, and Williams-Sonoma.

The law states that 90% of chief executives were white in 2019 and that “directors that hold numerous board seats exert considerable influence over United States corporations and broader society. As directors gain seats on more boards, they gain influence over the creation of policy in more companies and rise in corporate status amongst the corporate elite.”

But forcing companies to elect directors violates the Constitution’s equal protection guarantees, Superior Court Judge Terry Green ruled on April 1. Three taxpayers sued on the theory that public funds were utilized to promote unlawful legislation.

Green blasted state attorneys over creating selective groups that would benefit from the law at the expense of others. The list names people who are black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native or self-identify as gay, lesbian, bisexual, or transgender. It omits Jewish, Indian, and Muslim individuals, among others.

“This was the first thing the judge brought up in oral argument,” Sticht said. “Initially Asians, for example, weren’t on the list. When the state was asked how they selected the groups, they said it was decided based on who advocated for it.”

Sticht said if someone can self-identify as gay, it doesn’t guard against another person like Sen. Elizabeth Warren from saying they are Native American to comply with state regulations.

“It’s entirely arbitrary, a pure quota and unconstitutional,” he said.

Green wrote in his opinion: “In effect, the included groups were included simply because they asked to be. Excluded groups were excluded because they didn’t show up.”

He added, “The Legislature and the Secretary blame a ‘secretive, insular’ selection process for the problem with current board compositions. Yet there has been no attempt to improve that process, nor has any good explanation been offered for that lack of effort.”

The state has 60 days to appeal. The judge has not said whether the webpage will stay public, given that the companies were required to report based on a law that has been declared invalid.

“Everyone knows the annual report is a name and shame list, an obvious attempt to enforce compliance with a law the Legislature knew was unconstitutional,” Sticht said.

A spokesperson for Gov. Gavin Newsom was asked for comment on the judge’s ruling and issued the following statement: “California’s diversity is our greatest strength, helping to drive our innovation, creativity, and leadership on the global stage — as well as better financial outcomes for businesses with a range of perspectives represented in the board room. Our state is committed to ensuring that all of our communities can access pathways to opportunity and recognizes the work that still must be done to counter discrimination and create a more inclusive and equitable future.”

*As an Amazon Associate I earn from qualifying purchases