Philanthropy Roundtable last week filed an amicus brief in the case Creighton Meland Jr. v. Shirley N. Weber, Secretary of State of California. The case challenges California’s discriminatory gender quota law for corporate boards. As we have noted in the past, we believe the state’s requirements force companies to discriminate on the basis of gender in their board member selections. Moreover, disclosure mandates provide ample ammunition for public shaming and pressure campaigns by activists, stakeholders and staff. As it relates to philanthropy, the implications of this law could be harmful for the charitable sector.
To review, the Meland case responds to a California law imposing gender mandates on public corporations incorporated or headquartered in the state. Under the law, which was passed in 2018, by the end of 2019, each corporation was required to have at least one female director and between one and three women serving on its board, depending on the board’s size, by the end of 2021. The state legislature imposed reporting requirements to track compliance with the law. Non-compliant companies could be penalized with fines ranging from $100,000 to $300,000 per violation.
The case is currently with the 9th Circuit Court under appeal following the district court’s December 2021 order denying Meland’s motion for preliminary injunction. The team at Pacific Legal Foundation continues to represent the plaintiff and argues the issue presented on appeal is whether the plaintiff “is likely to succeed on the merits of his claim that SB 826, which imposes a rigid, arbitrary and broad sex-based quota on all publicly held California corporations into perpetuity, violates the Constitution’s promise of equal protection.”
As we have discussed here before, while diversity, properly defined, is a laudable goal, this law imposes fines on companies that do not or cannot meet the quotas. This could cause many of them to flee the state and any drain from California means fewer resources for local charitable causes. The problem for the charitable sector is simple: less wealth and less money invested in California businesses means less charitable giving benefiting Californians.
Furthermore, our long-standing interest in this case runs deeper than the immediate loss of charitable resources. A major concern is the possibility these mandates may spill over into the charitable sector, creating a dual punishment of fewer funds and higher compliance costs. These serious concerns are the basis for our amicus brief last week, as well as our 2020 brief in support of the plaintiff. We will continue to work to protect the charitable sector from these types of unconstitutional mandates.
