Last week, three ISS staffers,Mikayla Kuhns, Rudy Kwack and Kosmas Papadopoulos, published their conclusions regarding the impact of California's new gender quota law.  Among other things, they found:

"Of the 689 companies with their executive offices in California, only 78 companies (11 percent) are fully-compliant with the 2021 requirements of the new law."

There are several reasons to be suspicious of this conclusion.  As an initial matter, they do not explain how they determined compliance.  The SEC currently does not require companies to disclose the gender of their board members.  Reliance on directors' given names is likely to be inaccurate.  Many given names (e.g., Glenn, Kim and Terry) are not exclusive to either gender.  Additionally, California's law defines "female" as "an individual who self-identifies her gender as a woman, without regard to the individual’s designated sex at birth."  Cal. Corp. Code § 301.3(f)(1).  Thus, the only way to accurately determine whether a director is a female is to ask that director.

More importantly, the new law applies to corporations with "outstanding shares listed on a major United States stock exchange".  Cal. Corp. Code §§ 301.3(f)(2) & 2115.5(b).  While the legislature left it to others to determine what makes a stock exchange "major", it clearly excluded (i) corporations with shares traded in the over-the-counter markets (such as the OTC Bulletin Board), (ii) corporations having only other types of securities (such as American Depositary Shares and bonds) listed on a major U.S. stock exchange, and (iii) companies with securities listed on a major U.S. stock exchange that are not organized as corporations (such as limited partnerships, real estate investment trusts).  The staffers say only that they identified 689 "companies" and make no mention of the fact that the statute applies only to corporations with shares listed on a major U.S. stock exchange.  Thus, I am suspicious that the 689 "companies" includes companies not subject to California's new statute.

Legislature Reconvenes Today

Pursuant to Joint Rule 51(a)(1), the California legislature reconvenes today.  As they enter into the current session, the legislators may want to reflect on Thomas Cromwell's first experience in the 1523 Parliament:

"I amongst other have endured a parliament which continued by the space of XVII whole weeks where we communed of war, peace, strife, contention, debate, murmur, grudge, riches, poverty, penury, truth, falsehood, justice, equity, deceit, oppression, magnanimity, acuity, force, moderation, treason, murder, felony . . . and also how a commonwealth might be edified and a[lso] continued with our Realm.  Howbeit in conclusion we have d[one] as our predecessors have been wont to do that is to say, as well we might and left where we began."

Letter to John Creke (Aug. 17, 1523) reprinted in Life and Letters of Thomas Cromwell, 313 (Roger Bigelow Merriman, ed. 1902) (spelling modernized and emphasis added).