California has come out with rules requiring in effect Board diversity for public companies based in the state.  The New York Times reports:

California Gov. Gavin Newsom signed legislation Wednesday that will require the boards of publicly traded companies based in the state to have at least one racially, ethnically or otherwise diverse director by 2021.

[….]

Under the new law, individuals who identify as Black, African-American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian or Alaska Native, or who identify as gay, lesbian, bisexual or transgender, would be considered eligible for meeting the requirement.

My hunch is that under the right circumstances these changes could bring significant changes to corporate policy, especially for Silicon Valley firms whose Board make up lacks ethnic minorities. Among them: fiduciary duties might be exercised by new Board members in ways that prioritize mounting data about the higher returns on capital presented by diverse work forces–which in turn could catalyze significant changes in recruiting and promotions.  Management might also become more aware of how demographic changes might well usher in forms of cultural disruption that rival technological ones, leading them to take more socially responsible decisions in how they view the very missions of their firms.

Still, these statutory reforms are in themselves no panacea.  In order to catalyze change, newcomers will have to not only have a seat at the table, but also the power to speak up.  As in democracy more generally, numbers matter. And although the statutory reforms might end up upgrading a company Board, they won’t necessarily change its culture if diverse members find themselves ignored or excluded.

 

 

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