Gender Based Board Quotas, the Fourteenth Amendment, and Meland v. Weber
On June 21, 2021, the Ninth Circuit Court of Appeals ruled a shareholder-plaintiff had standing to sue California’s secretary of state. Creighton Meland, a shareholder at OSI Systems, Inc., sued, alleging that Senate Bill 826, which was signed into law in 2018, violates the Fourteenth Amendment because it requires corporations to elect a sliding scale quota of women to corporate board member seats. The district court had ruled that Meland had no standing because SB 826 governed corporations, not shareholders, and at the time of Meland’s suit OSI was in compliance so any controversy was moot.
The Ninth Circuit disagreed, allowing Meland’s suit to go forward by finding that the practical effect of SB 826 was to govern shareholders and direct them to vote on the basis of gender to avoid the imposition of fines or penalties for noncompliance. The court further held that Meland’s suit alleged a direct harm and did not rely on prudential standing since he alleged personal harm rather than injury to the corporate entity.
Although this transcript is largely accurate, in some cases it could be incomplete or inaccurate due to inaudible passages or transcription errors.
Evelyn Hildebrand: Welcome to The Federalist Society’s virtual event. This afternoon, July 29, we discussed gender-based quotas, the Fourteenth Amendment, and Meland v. Weber. My name is Evelyn Hildebrand, and I’m an Associate Director of Practice Groups at The Federalist Society. As always, please note that all expressions of opinion are those of the experts on today’s call. Today, we are fortunate to have with us an excellent lineup and we are very pleased to welcome our speakers and our moderator this afternoon.
I’ll introduce Megan Brown, our moderator, who will then introduce our speakers. Megan is a partner at Wiley Rein. She is also a member of The Federalist Society’s Litigation Practice Group Executive Committee.
After our speakers give their opening remarks, we will turn to you, the audience, for questions towards the end of the call today. If you do have a question, please enter it into the Q&A feature at the bottom of your screen. Again, if you have a question, please enter it in the Q&A feature at the bottom of your screen, and you can enter a question at any time, although we’ll try to get to those questions towards the end.
With that, thank you for being with us today. Megan, the floor is yours.
Megan L. Brown: Thanks so much. I’m really excited we have this ability to hear from folks about this really important case that I don’t know if a lot of people have been paying attention to, but when I saw it was decided in June, I thought it would make a perfect way to pull some really interesting women together to talk about these issues. You have two great speakers here and I’m going to try and let them have most of the floor.
Ann Ravel is currently a lecturer at Berkeley Law School and is of counsel in the law firm McManis and Faulkner in the Bay Area, but Ann has had a very distinguished and varied career in public service and in litigating civil rights cases.
Some highlights include a recent $300 million settlement with Google in a shareholder derivative case over various employment practices and governance issues, which included some novel commitments by the company with respect to diversity, equity, and inclusion. Ann’s public service includes four years at the Federal Election Commission from 2013 through 2017, including a stint as the chair. She’s also served as the appointed chair of the California Fair Political Practices Commission, FPPC, where she oversaw campaign finance, lobbyist registration, and reporting and public integrity issues.
Prior to that, she was a deputy assistant attorney general in the U.S. Department of Justice. She was also county counsel to Santa Clara County and she has been involved in California State Bar leadership judicial selection issues. She was named California Attorney of the Year for her work in government and the State Bar of California named her the Public Attorney of the Year for her contributions to public service.
Ann has been very outspoken on a lot of these issues and it was really great that she agreed to join us so that we could have a nice, balanced discussion here of different perspectives.
I was also really thrilled when I reached out to Anastasia Bodine. She is at the Pacific Legal Foundation where she leads their Economic Liberty Practice Group. Pacific Legal Foundation, for those of you who don’t know, is a national non-profit legal group that mainly focuses on defending individual liberty and constitutional rights of Americans threatened by government overreach. Anastasia’s work includes challenging anti-competitive licensing laws and laws that restrict freedom of speech.
In addition to litigating, Anastasia testifies in front of legislatures on occupational licensing and their economic impacts, so her writings have been featured in the Washington Post, the Chicago Tribune, Forbes, and other publications.
She also co-hosts Pacific Legal Foundation’s Supreme Court podcast, Dissed. If you haven’t taken a listen, I recommend it. She previously worked at the Cato Institute and Washington Legal, and as I noted, she litigated the case we’re here to talk about today, including argument in the Ninth Circuit which led to the reversal of the District Court’s dismissal of that case on standing grounds.
So, I thought I would give a real brief overview of SB 826 just too level-set for our audience. The California legislature, after several years of looking at the question of representation of women in corporate boards, found that more women serving on boards of directors of public companies would boost the California economy, improve opportunities for women in the workplace, and benefit California taxpayers, among others.
They had previously passed resolutions calling on boards and companies to, sort of, do better to increase their women’s representation. But they found, as a legislature, that hadn’t worked. So in 2018, they passed SB 826, which was signed into law. This law phases in requirements over time that California corporations, or foreign public companies that have their principal office in California, have a minimum number of female directors on their boards.
It phases it in over time and the numbers that they have to hit for the end of 2021 — and both Ann and Anastasia, correct me if I mess up these details — by the end of 2019, there had to be one female on every board. By the end of this year — it’s a staggered set. If you have under four directors, you need to have one female director. If you have five directors, you need to have two female directors. If you have six or more, you need to have three. So, you can see it shifts. It authorizes penalties of $100,000 to $300,000 per violation, which each violation is a seat that is not occupied by a female director.
It requires the Secretary of State to make public reports about what the companies tell it about their representation. I will note I was looking at the 2020 report that was released this spring. I think it had approximately 650 impacted companies. I want to say, around 315 answered that they did have a female on the board. So, I think it’s going to be interesting to see what happens going forward as the requirements ratchet up.
So, to bring us forward to today, in 2019, a shareholder of a covered company filed suit arguing he was being forced or encouraged to discriminate on the basis of sex in exercising his duty as a shareholder to vote for members of the board of directors. His suit was dismissed at the District Court for lack of standing, but Anastasia won his appeal for him in June when the Ninth Circuit found that his equal protection lawsuit could proceed.
I find this case really interesting and timely because clients of ours are looking at questions of environmental social governance, diversity and inclusion efforts, so I think this is a really interesting set of legal issues that now will go to the merits. And so we’ll see what happens from here.
So, the way we’ve structured this is Anastasia is going to talk for a few minutes, Ann’s going to talk for a few minutes, I think Anastasia might get a little bit of a rebuttal time, and then we’ll jump into Q&A. So get your questions ready for the Q&A box. And Anastasia, the floor is yours.
Anastasia P. Boden: Sure. Well, despite our very exciting win recently, I’m going to leave the standing discussion to any questions there might be because as much as I find standing thrilling—and I’m actually serious, I kind of do—what everyone has their eyes on now is the merit, so I want to talk about that.
As you all may know, sex-based laws of any kind, whether they are purportedly benign or even helpful to women or outright malicious, are subject to intermediate scrutiny. And that means that the law must be substantially related to an exceedingly persuasive justification. So, does the woman quota satisfy that test? Well, what is it trying to do?
Quite self-consciously, the quota is about equal representation, pure and simple. It’s about balancing. The bill’s text itself talks about parity—about how equal representation can’t be reached without a quota. So the state simply wants to see corporate boards mimic female representation in society. But the problem with that is that the government is not supposed to be in the business of doling out benefits and burdens on the basis of the groups we are born into. On the contrary, the purpose of government is to secure individual rights and to make sure that those rights aren’t being infringed on the basis of the groups we are born into.
So, equal protection was meant to ensure that we’re free to be ourselves without regards to things like race or sex. And the idea of parity flips that idea on its head. It privileges equal outcome on the basis of group membership above equal treatment based on individual traits. So, what this means is that several courts, including the Supreme Court, have repeatedly said that this type of numbers game is unconstitutional.
If we were to treat everyone equally without regards to race or sex, we wouldn’t see equal numbers in every single board room and every single industry. So it’s actually balancing that affirmatively requires discrimination to get the state’s preferred balance and that’s why it’s unconstitutional. So that first purpose of achieving parity or increased representation is just, per se, unconstitutional.
But SB 826 explicitly says, also, that it’s trying to make corporations better because women purportedly have certain characteristics that they bring to corporations that make them have a healthier culture, that make them more risk-averse, that make them less likely to carry corporate debt and things of that sort.
And I don’t know who made running corporations the government’s job, but assuming that’s the proper role of government, let’s just think about how offensive this is. We need more women because all women think a certain way. Women are more risk-averse. Women don’t like to carry corporate debt. This is exactly the kind of sex stereotyping that the Equal Protection Clause was meant to protect against. And all of that language is actually in the bill’s text where it’s just laying out these stereotypes.
And it actually reminds me of a famous Supreme Court case Craig v. Boren, wherein the state of Oklahoma used to allow women to purchase beer at a younger age than men. And the State had trotted out all of these statistics about women, saying, “Look, women drink less. They drink and drive less. They’re simply, overall, better behaved and so it’s right for us to draw this line in the sand between men and women and to give women a lower drinking age.”
And Ruth Bader Ginsburg, who was an attorney at the time for the ACLU, wrote an amicus brief arguing against the law, saying, “Look, this is not a compliment. These generalizations reinforce harmful stereotypes about women. They reinforce the notion,” she said, “that women are men’s quiescent companions.” And she said that “What is at one time gallantry, in hindsight is often Victorian condescension.”
And I think it’s extremely condescending to also say that women all think in lockstep and would lead to risk-averse corporations with similar governance policies. So that’s the second justification and it also fails. But the bill has a third one that is not actually mentioned anywhere in the text, but it would be the only legitimate thing for the government to argue, and that’s that the law is related to remedying discrimination.
But I think that’s a farce because where is the evidence of discrimination? The bill mentions disparities, but under clear precedent, disparities alone are not sufficient to evidence discrimination because there can be other things that lead to disparities, like the qualified labor pool, discrimination in other sectors, people’s individual talents, proclivities, the decisions that they make and the careers they decide to enter into, what have you.
And it’s also important to note that disparities also say nothing about current hiring patterns. Regardless of what the disparities would make you think, or what this bill would make you think, nearly 40 percent of open board seats were going to women before this law went into effect. So even though there were disparities, current hiring patterns were almost at parity. Women were catching up without government help. It was just going to take some time to replace that disparity even though current hiring patterns were about even.
So, further than that, the State has no evidence of discrimination in every boardroom, in every corporation, in every industry across the entire state of California. The law is simply overbroad and we’re still — it’s perpetual. It goes on forever. And courts have repeatedly said that if you have a quota into perpetuity, that essentially converts a so-called remedial program into a program aimed at perpetuating numerical representation, which in turn requires discrimination and is illegitimate.
So I think, overall, this law is deeply problematic for women. It’s based on stereotypes about women and it creates new ones because any woman who is now hired under the quota will be considered a quota hire. And this law also perpetuates the notion that women can’t get to the boardroom without government help when we know that these things just aren’t true, because corporate representation increased for seven straight quarters in a row for women prior to the quota going into effect, and again, nearly half of open board seats were going to women at the time.
So in sum, the State can’t show that this law was intended to remedy discrimination and I think that’s because the law wasn’t actually intended to remedy discrimination. It’s part of a broader effort to achieve balance for the sake of it, and balance based on group membership is simply not a legitimate goal. It privileges group identity over individual opportunity and it elevates the very thing that is supposed to be meaningless when it comes to how we are treated to the deciding factor in how we are treated.
So, I just want to end with an RBG quote because, incidentally, she’s been my muse in litigating this case considering her early career at the ACLU. And she said, “Sex-based classifications keep women not on a pedestal, but in a cage.” And I think that’s true of the woman quota and it informs why the law is unconstitutional.
Megan L. Brown: Well, thank you, Anastasia. You hit your timing marks as well, so I really appreciate that as the moderator. Ann, I’m very eager to your thoughts because there’s so much in both the law and its findings and this discussion. I really want to hear your perspective and how you come at this.
Anne Ravel: Thank you. First, I want to congratulate Anastasia for the wrong decision that the Ninth Circuit made on shareholder standing because, in this case, the holding that he had standing because he plausibly alleged that SB 826 requires or encourages him to discriminate on the basis of sex is erroneous, the whole decision. But, for one thing, they also had an erroneous description of the law that it is ruling on, stating that 826 requires all corporations headquartered in California to have a minimum number of females on their boards, which is not true. It only applies to publicly held corporations whose principal executive offices are located in California.
But the fact is that the statute doesn’t impede his right to vote freely in corporate elections. It doesn’t impair his right to vote. He didn’t have to change his vote and he didn’t have to vote at all, pursuant to the law. He can vote for his preferred candidate, as his individual vote wouldn’t — in this case, wouldn’t be determinative of the outcome. There wasn’t any injury to the corporation because the corporation was already in compliance with the law.
So in addition, there was no showing that there is a ripe claim. For one thing, many boards have also expanded the boards in order to deal with this issue and that wasn’t taken into account. And for a shareholder to have standing, it has to be shown that there was invasion of legally protected interest, which is concrete, particularized, and actual or imminent, not conjectural or hypothetical, which was the case here. It was hypothetical or conjectural.
And then to speak about the Fourteenth Amendment and its purposes — it was served by 826, for sure. The original purpose of the amendment, and even the quote from Ruth Bader Ginsburg at the end, is really about the issue of protecting women from discrimination. Honestly, the purpose is to prevent discrimination against blacks and other groups that it’s applicable to in order to deal with historical prejudice. And the state of California has a legitimate and substantial interest, based on the Fourteenth Amendment, to eliminate the effect of identified discrimination against women.
And what isn’t required is what was indicated by Anastasia as specific in every single corporation. Courts have held that past discrimination and differences in opportunity, when demonstrated with specificity, can permit classifications. Government classifications all draw distinctions and, of course, need to be justified with a sufficient government interest that it is serving a legitimate government purpose and that the means are reasonably related.
Diversity is considered to be a compelling state interest. And while quotas are constitutionally suspect under some Supreme Court jurisprudence — in fact, jurisprudence shows that quotas such as the one in SB 826, which are not preferences — that are so large as to trammel unduly on the opportunities of others or interfere harshly with the legitimate expectations of persons in once preferred groups. And that is a U.S. Supreme Court case and, as we know, Megan, in the introduction, spoke to the new requirements that hardly trammel unduly on the opportunities of white men.
Justice Ginsburg, in her dissent, in a case, Gratz v. Bollinger, explained the Fourteenth Amendment by stating that “The Constitution instructs all who act for the government, that they may not deny to any person the equal protection of laws. In implementing it, government decision-makers can properly distinguish between policies of exclusion and policies of inclusion.”
Even Justice Powell, in Brown v. Board of Education, said that the purpose of the Fourteenth Amendment is protections of groups who are subjected to a history of purposeful treatment or relegated to a position of political or economic powerlessness which commands extraordinary protection. So, classifications, when not invidious in implication but are advanced to correct inequalities, are clearly permissible. And contemporary human rights documents also draw just this same line—distinguishing between policies of oppression and measures that are designed to accelerate de facto equality.
These principles are contained in the United Nations Conventions on the elimination of all forms of discrimination against women and so, clearly, remedial discrimination is not the same as invidious discrimination. And there’s a fundamental, in my view, moral and political difference between discriminatory laws that seek to exclude groups of people as opposed to other benign classifications that seek to redress past discrimination and correct inequalities by making economic and political privilege more accessible to those who have been historically excluded. And that’s precisely the real purpose and effect of 826 despite some of the other pretty things that were said in the bill and some of the purposes—ultimately, that is the purpose.
And the statistics that were cited are really, actually, not quite accurate because showing the impact of 826 is very striking and show clearly that when the law was changed, the glaring disparity of women in leadership positions on boards in public corporations changed radically. In 2013, just 15.5 percent of board seats in California’s publicly traded companies were held by women. Eighty percent of board members were men in 2018, prior to the enactment of 826. Thirty percent of boards were all male and only 16 percent were filled by women — of the seats.
Of the 5,599 board seats on California’s company boards, 1483—or 26.5 percent—are held by women and the number of boards with all-male members now is 1.3 percent, down from 29 percent in 2018 when the bill was enacted. Today, 93 percent of California’s 142 publicly-traded micro-cap companies have at least one woman on their board, up from 47 percent in 2018. And since 2018, the number of public board seats that have women on them has increased by 93.6 percent.
These statistics show clearly there was drastic improvement after the enactment of SB 826, and prior, there was almost no change in the previous years which shows that just having an open-door policy isn’t sufficient. If we have any hope of defeating the prejudice in appointments to corporate boards—which we can talk about more because there clearly were—we have to take gender into account with benevolent quotas for the purpose of remedying the discrimination.
And important to this case, the statistics show that these changes have had little impact on men’s ability to be on corporate boards. One point five percent of California public companies have majority-women boards, while 96.9 percent of them are still majority male. And it is true, while there’s some discussion that this is about the particular personalities or qualities of women — but there have been many studies that have shown that women’s presence are a major benefit to corporations, that companies with female directors are more profitable, having more than one woman on the board has improved crisis management, sustainability practices, workforce engagement, and resilience during recessions. And I might add that — you mentioned my experience litigating the Google case — and that walk-out, and the results of that case, would never have happened had there been women on that board.
Megan L. Brown: Super interesting perspective there at the end. Lots that, I think, I’d like to follow up on, but Anastasia, do you want to take, like, three minutes and rebut and then we can — or respond? It doesn’t have to be like this is an oral argument, although I’ll – yeah. And then we can jump into questions because there are so many fascinating things about how you guys, I think—and the State, probably, in its litigation posture, is kind of talking past what the real issues are. Right? Is it remedial or is it economic regulation? So, Anastasia, go ahead.
Anastasia P. Boden: Yeah, sure. I didn’t know I was going to have to relitigate the case considering we just won 3-0, with a mixed panel, might I add—a panel with various backgrounds being appointed by different political parties. But in any event, with regards to the merits of the standing argument, shareholders elect board members. There is no change in board membership without a change in shareholder vote. The entire purpose of the law is to change the way that shareholders vote and I think it was sort of unfair for the government to know that, to put that in the bill, and then to come into court and say, “No, shareholders are free to do whatever they want.” If that’s true, the bill would serve no purpose.
And so the entire point was to affect shareholder behavior. And even if our client did not vote or voted for a man, his vote would be put on equal footing with votes for women because the entire point of the law is to slant the playing field in favor of women board members. So, it’s lose-lose for our client. If he accedes the law, he’s been forced to vote on the basis of sex. If he flouts the law, his vote has been put on an unequal playing field, and that’s why he suffered an injury. Either way, regardless of outcome of any election, every single election he suffers that injury.
The second thing I will say is, of course the State has an interest in remedying discrimination, but the Court has recognized that it’s an ugly business, this doling out benefits or burdens on the basis of immutable characteristics. It threatens to perpetuate or create stereotypes about the benefited class. Just in general, we’re picking and choosing winners and losers based on the groups they were born into. And so, when the state or the federal government chooses to engage in remedial action, it must have actual evidence of discrimination and it must do so in a meaningful way and be able to show that, in every instance, it’s actually remedying discrimination. I think it just doesn’t work here.
I mean, we know that there are various industries where women are over-represented. There are women-dominated industries. And yet, this law applies to all publicly-held corporations that are headquartered in California. And so, we know that we are burdening people who played no role in discrimination and we’re benefiting people who never suffered discrimination and, in that way, the law is just overbroad.
And finally, the Supreme Court has recognized that quotas are a particularly pernicious way to go about remedying discrimination and, at least in the racial context, are, per se, unconstitutional in part because they’re just a sloppy tool for remedying discrimination. It’s an arbitrary, rigid quota. It’s not narrowly tailored. It doesn’t make sense. It’s not a preference, it’s a quota, and the result will be to — once again, to perpetuate discrimination in some instances and to burden people unduly and to benefit people unduly.
Maybe just one more thing, which is — yeah, of course the law has accelerated the effect that was already happening, but I don’t think we should undersell that. Again, female representation was increasing for seven straight quarters in a row and that — half of new open board seats, whenever they became open, were going to women. So yeah, I guess we can argue about whether this is remedying discrimination, but a law like this, which is so broad, which lacks clear instances of discrimination, which applies in perpetuity, which employs an arbitrary, rigid quota, just isn’t, to my mind, related to that goal.
Megan L. Brown: So, I’d love to ask both of you — one thing that has been interesting about this — while you guys were discussing, sort of, the remedial possibility, or the remedial justification — and Anastasia, you said the State does or can have an interest in remedying past discrimination if it meets the right kind of evidentiary burdens. I have not litigated as many constitutional cases as you both have, but it struck me that the findings for the law were so focused on prospective and predictive judgments about what needed to happen, as well as some evidence about these various studies that found historically better board performance and corporate performance when there were females — more females on boards.
I’m curious for either of you to, sort of, take a stab at — and I’m going a little off-script here, so my apologies, ladies. But do you think the State can or should come in and try and make the remediation argument? Or are they kind of stuck—as I think they would be if this was a strict scrutiny type situation—with the basis on which they legislated, which does not seem to be remedying past discrimination? Right? You could see them having drafted a whole bunch of findings that say, “The board of this company discriminated, and the board of this company discriminated,” but they didn’t. So, either one of you want to take a whack at, sort of, are they stuck with what they found?
Anne Ravel: I definitely agree with you that they should have included more of that other information, but from what I know is — they knew they had some support of corporations. Some people were in agreement that women had been clearly not permitted on boards and so they wanted to, kind of, move forward about why this would be so good for the corporations. It was one way to, in my opinion — and this is a long-winded answer, but it was one way to encourage more corporations to participate and to comply and, maybe going forward, to do the same, which actually happened.
But I do think that that argument can still be made and that there is evidence of it even if it’s statistically — I don’t think you need to show that on every single board they did a specific vote when there was a woman and there was a man and they chose the man 99 percent of the time because we know they did. But yes, I think there’s still time to be able to make that argument.
Megan L. Brown: Anastasia?
Anastasia P. Boden: Yeah, I agree with that. I think if it were — if you were challenging the racial classification, they would be stuck with what they — they would be more stuck with what they argued at the outset and there’s a little bit more flexibility when it comes to intermediate scrutiny. So, they certainly can come back with some more statistics, but again, I think that’s going to be hard to do given how broad this quota is.
Historically, when courts have permitted the government to engage in remedies for previous discrimination, it’s been in a very narrow industry where it’s very clear that given the labor pool, given the representation, given anecdotal stories that you can prove that the remedy is actually needed. And this quota is just so broad. I’m not sure that they’ll be able to do that.
Megan L. Brown: So Ann, on this question — I know in your comments you talked a bit about, sort of, the benign rather than invidious discrimination. I think we all remember that from Adarand and some of the various cases that have gone before. But I did think an amicus in the case made what I thought was kind of a compelling argument about companies being stuck between two commands—one in federal law to not discriminate on the basis of sex, and now what seems to be a command from the state of California to do that very thing.
I mean, are you sympathetic to that position? Because I think if I’m a general counsel of a company, I’m sort of wondering, “Shoot, how do I do both of these things? Don’t I open myself up to something on the flip side of it?” So, what’s your sense of that, when the rubber really hits the road for the companies who may feel caught between these two imperatives?
Anne Ravel: You know, I actually think that the proper — and it’s interesting to me to see Anastasia’s — Ruth Bader Ginsburg’s [inaudible 00:34:29] because she felt strongly about these issues, in fact, and about the difference between invidious discrimination versus discrimination, in a sense, if you call it that, in order to remedy the effects of past exclusion. And I think that those companies — and I don’t blame them for being concerned because the Supreme Court — and I know you raised this before — I think that there is a really good chance that this may not succeed because of the way that the jurisprudence has been framed in the last number of years, which I think is unfortunate. And Ruth Bader Ginsburg was an exception, but she dissented in all those cases. So yeah, I can see that it would be worrisome for them, but obviously, if it were me, I think the better part of valor for those companies would be to recognize the importance of putting women on boards.
Megan L. Brown: So, based on that, Anastasia, I’m going to jump ahead to a question I had about, kind of, the fit portion of the analysis when you’re applying different levels of scrutiny. And you guys know all of the buzz words better than I, but at some point, you have to make the showing, or the State will have to make the showing, of fit between the means and the ends, whether that’s compelling, or legitimate, or whatever.
Do you think it would have been — I’m curious for Ann’s reaction to this, as well. Let’s assume for the moment that the exhortations and the proclamations didn’t resolve what California wanted to see happen, which is more women on boards. Do you think they would have been better off to go with something less directive? Maybe — there’s the report element of the law which says, “You have to tell us if you comply and then we put it on the website.” And I’ve gone through and looked at 300 companies’ statements. Do you think they would have been on better footing, Anastasia or Ann, to just have a reporting mechanism where you say, “Just tell us how many women are on your boards, we’ll make it public, and people can draw the conclusions that they might from that?” Would that have been a better way to go?
Anne Ravel: Anastasia, you can go in a minute, but I do want to jump in on this because there has been reporting about women on boards. There are — Governor Newsom’s wife has an organization that has been looking at these issues, as well, and posting reports and the like, and it did not, despite what Anastasia said — and yes, the numbers went up from zero to a couple of women on corporate boards throughout the state but not on each board. And I think that this was viewed as a more effective means to jumpstart the issue.
And a lot of corporations have actually said that. They have added women and they have said that it was 826 that made them think that it was an important thing to do, and did it, and not just for compliance of the law. So unfortunately, it would be nice if people responded to the more subtle pressures, but they do not.
Megan L. Brown: Anastasia?
Anastasia P. Boden: Yeah, I have a couple of thoughts in response, which is that, certainly, a disclosure requirement alone would’ve been less restrictive and probably would have been on better constitutional footing even though the First Amendment would still apply there. And I’m a free speech absolutist, but it would definitely have been on better footing considering that the legislature itself, the committee on the judiciary, both in the assembly and the senate, and the governor when signing the bill, said that this law was almost certainly unconstitutional. They said this is going to be an uphill battle and it was, more than anything, to send a message.
So yeah, it would have been on better footing had it done something restrictive, but I want to get to something, which is that I dispute the notion that there’s something inherently important about increasing representation in and of itself. I am interested in getting rid of discrimination. I’m interested in allowing women to thrive and not be held back on the basis of their sex. I’m not interested in pushing forward certain groups merely because they happen to have been born into that group. And so I think that’s a real distinction to be made.
Yeah. And the last thing I wanted to say in response to some of the things that have been said earlier is that, of course, Ruth Bader Ginsburg was on the losing end of whether there’s such a thing as benign discrimination. Even if you accept that, the Supreme Court has said that it’s such a dangerous thing, this drawing lines in the sand, telling some people you need not apply based on your skin color or your sex, and telling other people that even if you suffered no discrimination you’re now going to get a leg up, and all of these things, and perpetuating stereotypes — given how dangerous this whole business is, even if the law is benign, it’s subject to very careful scrutiny. And so that’s why we engage in this type of rigorous analysis and why I think the law has to fail.
Megan L. Brown: Anastasia and Ann, one thing that that colloquy just, kind of, made me think of is when I was going through the law and trying to just calculate the numbers, the categories and the numbers of required female representatives are not — they’re not the same, right? It’s one of four, and then it’s three of more than six. So does the mathematical imprecision there give either of you additional pause in terms of a, sort of, fit or a, sort of, what it’s doing? Or maybe is a, sort of, rough justice okay here because we’re just trying to move the needle a bit? But that — mathematically, it did, sort of, strike me — obviously, they couldn’t do 50 percent, because then you’d be slicing people in half. So, I get that they had play with the numbers, but what’s your reaction to the sort of numbers they picked and how they did that?
Anne Ravel: I have to say that I was a little surprised about the six or more. I mean, obviously some boards have 20 people in them and to have three women is not great anyway and would not be a problem, I would think. But to look like you’re asking for exact parity, I think, is more problematic when it relates just to the six-person.
Megan L. Brown: Anastasia?
Anastasia P. Boden: I think it just underscores the arbitrariness of it all. I’d be curious to see what the government’s reasoning is. I suspect it’s that they didn’t want to, as you say, slice it 50/50, because that comes off as balancing and so they did something different. But the burden on them is to explain how that actually remedies discrimination rather than — and the discrimination in the particular industries it applies to rather than just pulling a number out of the sky.
Megan L. Brown: So, if it’s okay with you, ladies, I was going to take — I was going to go to the Q&A thing because we have a couple of good questions in here. One I think I might even be able to dispense with because I read the law last night. One was whether the issue is complicated by recent gender laws — sort of, the increasing inclusivity of the law? And I did note there is a provision in the law that female means an individual who self-identifies her gender as a woman without regard to the individual’s designated sex at birth.
So that’s one answer to that question. And then this I don’t know, and maybe you guys do, “Has California actually fined anyone for failing to comply or for failing to report?” This sleuthy person looked at the website the same as I did and noted that it looks like 300-plus companies didn’t even report — and whether the failure to enforce the law is an effort by California to avoid litigation, at this point. So I want to toss that open to folks because it was raised in the briefing just, sort of, I think in the context of ripeness, perhaps.
Anastasia P. Boden: Yeah, the government had – so, this has been their litigation position for a long time, that given that it’s at their discretion whether to punish any corporation, there’s no standing because there will only be standing once a corporation is actually punished and then the corporation itself will have to sue on the basis of that fine. And given that we sued pretty immediately and this was their litigation position from the start, it’s hard to tell why they’re not enforcing it.
I mean, it very well may be because that was their position all along—“Well, we may never enforce it, so you have no standing.” And of course, our response to that was, “People don’t have to wait for you to come around and fine them.” Of course, the fine’s not our injury to begin with, but in any event, you don’t have to wait for the government to fine you. You can have — you can seek prospective relief when they’re, sort of, exercising coercive pressure on you. And in fact, the law is having an effect regardless of whether they’re fining people because look at all the changes in corporate representation that have happened. So, in any event, we don’t think it’s relevant to standing and it’s hard to tell why they weren’t doing it, whether it was a tactical move or what.
Anne Ravel: I don’t think that it’s a tactical move. And the reason that I think that’s true is that the secretary of state is the enforcer and, obviously, as you know, involved in the litigation. And there was a change in secretary of state during the time period and my guess is that the desire was more to keep going to influence people to instead — to comply with the law rather than actually imposing fines which would seem, at least initially, more prohibitive.
Anastasia P. Boden: Yeah. I agree with that, that it’s certainly true that they didn’t need to fine anyone to get the effect that they wanted.
Anne Ravel: Right.
Anastasia P. Boden: So, yeah.
Megan L. Brown: So Ann, given that, I think, your position is that the exhortation approach has failed thus far, would you like to see them start to fine folks? Would you like the AG and the secretary of state to come out and, sort of, start following up with those 300 companies who seem to be silent? And we all know there’s another reporting date coming up.
Anne Ravel: Right, I think that while the initial exhortation approach was a failure, the fact that many people have been talking about the idea of having more women on boards, that it really didn’t have a measurable effect until this law. It really did make the difference. I would prefer not to see that sanction as a way to encourage people because I think it would create more problems.
Megan L. Brown: That’s fair. Thanks. So, in doing research preparing for this, I found that several other states either currently or have been considering similar laws like this. I think we identified Hawaii, Illinois, Massachusetts, Michigan, New Jersey, New York, and Washington. I don’t know — I did not track the status of all such proposals. I hope that Anastasia has so that she’s prepared to expand her business if she needs to. But the record in this case showed that the jurisdiction’s experiences — I recall some interesting data about Norway being, sort of, mixed.
Obviously, this litigation is pending, so what — Ann, we’ll start with you. What do you think other states should be doing now if they think that this is an important policy objective, but they’ve got this cloud of litigation and maybe a mixed factual record? What would you think that they should be doing?
Anne Ravel: I still think they should do it. They should implement the law and — if they can—if their legislatures agree to do it—because, as I indicated, I think that just having this law has changed a lot of corporate perceptions. It’s quite clear. They’ve come out and said it. There’s been a number of corporate groups that have endorsed it and said that they’re more than happy to comply with it. And I think that it — just its existence had enough effect to militate change in some of those states that, perhaps, have not had any great awakening that they might need.
Megan L. Brown: Anastasia, on that point about some companies embracing it — I didn’t go and look and see if any companies had filed suit. My perception, when I looked at the amicus list, was that, perhaps, some corporate organizations who might not love an aggressive state superintendence of business governance maybe were a little quiet because the politics here seemed tough, right? So, Anastasia, did you find yourself really wishing some corporation had stepped up and said this is a problem for us?
Anastasia P. Boden: Yeah. Well, certainly we could have avoided a nearly two-year standing fight if a corporation had been willing to stand up and I would have liked that. And I don’t enjoy forcing the government to spend taxpayer dollars on these lawsuits. So yeah, I think it would have sped things up and been an easier injury to demonstrate.
But yeah, I think they were reluctant. I think it’s not good PR nowadays to come out against these things even if you privately are. And that’s why there was some reticence in the corporate world to speak up.
Megan L. Brown: So, we’re running low on time. We have one question which is actually a — I did not get the gist of the one question that I answered which was about the, sort of, inclusivity. And I think where this questioner was going was, if the value of increasing female board membership comes from something about females—there’s something unique about women—does the possibility of including transgendered folks undermine that?
So there’s a little bit of a dogleg here, in terms of the question, but I’m curious for your reaction because I think it goes to the broader point of — and maybe this is first for Ann — is the real goal — is the real benefit here of increasing female representation on boards because of something unique about women? What would be the causation that led to the studies in the findings by the state? Right? Do you have a view on that?
Anne Ravel: Well, I don’t know the answer to that — to what led to it, but I think — and it’s kind of interesting about what’s unique about women, but there have been a lot of studies. And the same is true in governance of countries. There were plenty of studies and articles about women who were heads of state during Covid and how they are more empathetic, more ethical, more open, more willing to admit that they’re wrong, have different perspectives. And I really think that the purpose of this is not someone’s particular trait, but getting different perspectives on the board. And I think that that is part of what has made those boards more successful. And so having someone who’s transgender would be the same.
It would be — they have different life experiences, different perspectives to bring to the conversation. And always, no matter whether it’s in government or in corporations, it helps to have different perspectives because, as I mentioned before about the Google case, had there been someone who was a woman who understood the history of sexual harassment and what it meant and why it was important, that might have made a difference — a $310 million difference.
Megan L. Brown: Interesting. Anastasia, any thoughts on that?
Anastasia P. Boden: Yeah. I’m struck by something RBG said—to take it back to RBG—which is that “men and women are different, but not all women are the same.” And I think that’s the problem with this law is it assumes something inherently different, and in fact, something specifically, inherently different where the bill itself lists out all these traits about women being more risk-averse and carrying less corporate debt and things like this. And I think that’s not benign. That’s very detrimental to women. And it looks at women as a monolith. And if we’re interested in a diversity of viewpoints, then we should implement measures that create a diversity of viewpoints rather than balancing people based merely on their group characteristic.
Megan L. Brown: Or you just have to — we’ll just have to make sure that everyone’s paired up, so it’s you and Ann on the next board. Viewpoint and experience, not necessarily gender, that is – are coming out as what makes things work. So, I have one last, sort of, question; I’m looking for something, sort of, proactive to end on. I think both of you — I don’t know you all super-well, but I have a sense. I see both of you as being interested and engaged in promoting women in your various ways, right, whether that’s on a peer-to-peer relationship or as a matter of policy in professional and private sector roles in government and leadership. What do you think would be the most effective way at this point to advance progress in — for women in corporate America? Assuming that’s a valid goal, but let’s assume for the moment it is, what do you think is most effective? Is it government nudges, government mandates? Is it more research in private sector activity? I’m curious for your thoughts to end on something proactive.
Anastasia P. Boden: For me, if we want to reduce barriers for women, because I think that’s important — we should reduce barriers that prevent women from making it because they were born women — I think that we need to look deeper than these simple quotas or proxies and look into what’s holding women back. If we think that women are being held back, why don’t we fix what that problem is? I can imagine a whole host of corporate policies that dissuade women from going into that industry or being a board member.
You can think about things like maternity leave. You could think about things like flexibility—the ability to work from home. I think changes of those nature would do far more to help women get there than these very simple and destructive proxies. Now, that’s not to say I think it’s the government’s role to impose those corporate changes, but I think as a society, if we care about allowing women to thrive, then we need to all push and vote as shareholders for corporate governance policies that will allow women to have more opportunity.
Anne Ravel: While, I agree that all of those things would be great, I do not think that they are the solution because what we know from studies and from interviews and experience, the reason that women have not been appointed to boards in great numbers is because men tend — who are on the boards now — tend to look to their own networks, which are other men, to appoint to the boards. That has been historically the way that it’s been done.
And many of them also believe that the women, even if they’re in the C-suites — that they do not have the requisite capabilities to function on a board. And that, of course, is because they’ve been denied access to boards for just those reasons. But many of them have great capabilities, it’s just a different view of what are capabilities for being on a board. So, I would love it if it was maternity leave, but a lot of the women who are being appointed to boards are probably beyond that period. And so I think, unfortunately, sometimes you really do need a government nudge in order for people to change their traditional ways of treating different groups of people.
Megan L. Brown: Well, I really appreciate this discussion. This has been exactly what I hoped to get out of it, which was to learn quite a bit and hear from two very accomplished lawyers on their different approaches to this. Again, Anastasia, congratulations for your win. Ann, thank you for taking the time and joining The Federalist Society. This is, I think, in keeping with the best of our traditions to insist upon balance and open discussion of interesting and complicated, and sometimes contentious, issues. So, I personally thank you, Ann, for joining us, and hope that maybe after the next round of litigation, maybe summary judgment, well, we can get an update on some of this.
Anne Ravel: We’ll do it again.
Megan L. Brown: Wonderful. Evelyn, did you have anything we need to do before we conclude?
Evelyn Hildebrand: No. I’ll just echo your thanks to our panelists for taking the time to comment this afternoon. It was a great discussion. Thank you, Megan, for moderating. Just a great afternoon all around. And I’ll add, thanks to The Federalist Society. To our audience, if you have any questions or comments, please send those comments in to [email protected] And if there’s no other business, I’d say we’re adjourned.
Director, Robert A. Levy Center for Constitutional Studies
Lecturer, Berkeley Law and
Former Commissioner and Chair at the Federal Election Commission
Wiley Rein LLP
Federalist Society’s Civil Rights Practice Group
The Federalist Society and Regulatory Transparency Project take no position on particular legal or public policy matters. All expressions of opinion are those of the speaker(s). To join the debate, please email us at [email protected].