California lawmakers passed a bill that would mandate a minimum amount of “people of color” on boards of corporations within the state. An existing mandate in California states that there must be at least three women on corporate boards. By the year 2022, California businesses’ boards must include at least three people from “underrepresented communities” including Black, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, and/or Alaska Native. If signed off by California Governor Gavin Newsom, the bill will become law after September 20th, 2020.
Is There A Reason For This?
Proponents of the bill say that non-white people, especially African-Americans, have been traditionally locked-out of high-level corporate positions and that it falls upon the Government to rectify that situation. Opponents of the law say that California’s government is over-reaching and micro-managing private businesses. Shades of socialism and communism begin to creep into society when socially-accepted regulations become burdensome red-tape that society does everything it can to avoid.
Executives have a legal obligation to do everything in their power to make their employer money. If they don’t, they risk violating their “fiduciary responsibility” which is actually a legal matter. This is to prevent corporate espionage. Independent (and sometimes biased, of course) studies suggest that more racial diversity on corporate boards increase profitability.
Big Fish Eat Little Fish
Having said all of that, a school of thought exists that it simply makes sense for corporate boards to be more diverse. It makes the company more money, the executives are handling their responsibility, and social justice is achieved. Congrats all around. The problem is that if more diverse boards actually made a company more money, rather than having the best talent, then companies would have already done it.
Business in California will go the way of the Dodo bird if their burdensome red tape continues to get more intrusive. Silicon Valley will, of course, remain on the left coast due to their proliferation into society and near-indispensable status. Now what about other companies that are not as lucky to have the privileged status of a Facebook or Twitter? Sooner or later, class warfare will become a thing in California and in other parts of the United States with draconian laws that seek to control businesses.
SOURCES:
California Lawmakers Approve Racial Quotas for Corporate Boards – Bloomberg
Racial Quotas Could Be Mandated for California Companies – Pacific Research Institute
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