Bill Text: CA AB979 | 2019-2020 | Regular Session | Amended

California Assembly Bill 979 (Prior Session Legislation)

NOTE: There are more recent revisions of this legislation. Read Latest Draft

Bill Title: Corporations: boards of directors: underrepresented communities.

Spectrum: Partisan Bill (Democrat 5-0)

Status: (Passed) 2020-08-29 - Read third time. Passed. Ordered to the Assembly. (Ayes 26. Noes 8. Page 4432.). [AB979 Detail]

Download: California-2019-AB979-Amended.html

Amended IN Senate June 29, 2020

Amended IN Assembly January 06, 2020

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill

No. 979

Introduced by Assembly Member ~~Reyes~~ Holden
(Principal coauthor: Assembly Member Reyes)

February 21, 2019

~~An act to add Section 22228 to the Education Code, and to add Section 20136 to the Government Code, relating to public retirement systems.~~ An act to add Sections 301.4 and 2115.6 to the Corporations Code, relating to corporations.

LEGISLATIVE COUNSEL'S DIGEST

AB 979, as amended, ~~Reyes~~ Holden. ~~Asset management: emerging managers.~~ Corporations: boards of directors: underrepresented communities.

Existing law, no later than the close of the 2019 calendar year, requires a publicly held domestic or foreign corporation whose principal executive office is located in California to have a minimum of one female director on its board. Existing law, no later than the close of the 2021 calendar year, additionally requires such a corporation with 5 directors to have a minimum of 2 female directors and such a corporation with 6 or more directors to have a minimum of 3 female directors. Existing law requires, on or before specified dates, the Secretary of State to publish various reports on its internet website documenting, among other things, the number of corporations in compliance with these provisions. Existing law authorizes the Secretary of State to impose fines for violations of these provisions, as specified, and requires the moneys from these fines to be available, upon appropriation, to offset the cost of administering these requirements.
This bill would require, no later than the close of the 2021 calendar year, such a corporation to have a minimum of one director from an underrepresented community, as defined. The bill would require, no later than the close of the 2022 calendar year, such a corporation with more than 4 but less than 9 directors to have a minimum of 2 directors from underrepresented communities, and such a corporation with 9 or more directors to have a minimum of 3 directors from underrepresented communities.
This bill would require, on or before specified dates, the Secretary of State to publish various reports on its internet website documenting, among other things, the number of corporations in compliance with the bill’s provisions. The bill would authorizes the Secretary of State to impose fines for violations of the bill’s provisions, as specified, and would require the moneys from these fines to be available, upon appropriation, to offset the cost of administering these requirements.
The California Constitution grants the retirement board of a public employee retirement system plenary authority and fiduciary responsibility for investment of moneys and administration of the retirement fund and system.
The Public Employees’ Retirement Law creates the Public Employees’ Retirement Fund for the benefit of the members and retired members of this retirement system and their survivors and beneficiaries. The Board of Administration of the Public Employees’ Retirement System (PERS) has the exclusive control of the administration and investment of the retirement fund.
The Teachers’ Retirement Law establishes the State Teachers’ Retirement System (STRS) for the benefit of teachers and other persons employed in connection with the schools of this state. STRS is administered by the Teachers’ Retirement Board.
This bill would require the Board of Administration of the Public Employees’ Retirement System and the Teachers’ Retirement Board to each provide a report to the Legislature, commencing March 1, 2021, and annually thereafter, on the status of achieving appropriate objectives and initiatives, to be defined by the boards, regarding participation of emerging managers responsible for asset management within each system’s portfolio of investments. The bill would require that the report be based on contracts that the system enters into on and after January 1, 2020, and be based on information from the prior fiscal year. The bill would require each report to include certain elements and would require the boards to define emerging manager for purposes of these provisions.

Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NO

The people of the State of California do enact as follows:

SECTION 1.
The Legislature finds and declares as follows:
(a) According to United States Equal Employment Opportunity Commission (EEOC), “employment in computer science and engineering is growing at twice the rate of the national average. These jobs tend to provide higher pay and better benefits, and they have been more resilient to economic downturns than other private sector industries over the past decade. In addition, jobs in the high tech industry have a strong potential for growth.”
(b) The commission also found that the high tech sector employs about one-fourth of United States professionals and about 5 to 6 percent of the total labor force.
(c) Analysis has shown that highly ranked universities graduate African American and Latino computer science and computer engineering majors at twice the rate that leading technology companies hire them.
(d) The EEOC study shows that compared to overall private industry, the high tech sector employed a larger share of Whites (63.5 percent to 68.5 percent), Asian Americans (5.8 percent to 14 percent), and a smaller share of African Americans (14.4 percent to 7.4 percent), Hispanics (13.9 percent to 8 percent).
(e) The study also showed that in the tech sector nationwide, whites are represented at a higher rate in the executives category, which typically encompasses the highest level jobs in the organization.
(f) According to a study by the EEOC, fewer than 1 percent of Silicon Valley executives and managers are African American.
(g) According to a report by McKinsey and Company, for every 10 percent increase in racial and ethnic diversity on the senior-executive team, earnings before interest and taxes rise 0.8 percent.
(h) A study by Dalberg Global Development Advisors found that the high tech industry could generate an additional $300–$370 billion each year if the racial or ethnic diversity of tech companies’ workforces reflected that of the talent pool.
(i) Therefore, it is the intent of the Legislature to require, by January 2023, every publicly held corporation in California to achieve diversity on its board of directors by having a minimum of directors from underrepresented communities on its board, as specified in this measure.

SEC. 2.

Section 301.4 is added to the Corporations Code, to read:

301.4.
(a) No later than the close of the 2021 calendar year, a publicly held domestic or foreign corporation whose principal executive offices, according to the corporation’s SEC 10-K form, are located in California shall have a minimum of one director from an underrepresented community on its board. A corporation may increase the number of directors on its board to comply with this section.
(b) No later than the close of the 2022 calendar year, a publicly held domestic or foreign corporation whose principal executive offices, according to the corporation’s SEC 10-K form, are located in California shall comply with the following:
(1) If its number of directors is nine or more, the corporation shall have a minimum of three directors from underrepresented communities.
(2) If its number of directors is more than four but less than 9, the corporation shall have a minimum of two directors from underrepresented communities.
(3) If its number of directors is four or fewer, the corporation shall have a minimum of one director from an underrepresented community.
(c) No later than July 1, 2021, the Secretary of State shall publish a report on its internet website documenting the number of domestic and foreign corporations whose principal executive offices, according to the corporation’s SEC 10-K form, are located in California and who have at least one director from an underrepresented community.
(d) No later than March 1, 2022, and annually thereafter, the Secretary of State shall publish a report on its internet website regarding, at a minimum, all of the following:
(1) The number of corporations subject to this section that were in compliance with the requirements of this section during at least one point during the preceding calendar year.
(2) The number of publicly held corporations that moved their United States headquarters to California from another state or out of California into another state during the preceding calendar year.
(3) The number of publicly held corporations that were subject to this section during the preceding year, but are no longer publicly traded.
(e) (1) The Secretary of State may adopt regulations to implement this section. The Secretary of State may impose fines for violations of this section as follows:
(A) For failure to timely file board member information with the Secretary of State pursuant to a regulation adopted pursuant to this paragraph, the amount of one hundred thousand dollars ($100,000).
(B) For a first violation, the amount of one hundred thousand dollars ($100,000).
(C) For a second or subsequent violation, the amount of three hundred thousand dollars ($300,000).
(2) For the purposes of this subdivision, each director seat required by this section to be held by a director from an underrepresented community, which is not held by a director from an underrepresented community during at least a portion of a calendar year, shall count as a violation.
(3) For purposes of this subdivision, a director from an underrepresented community having held a seat for at least a portion of the year shall not be a violation.
(4) Fines collected pursuant to this section shall be available, upon appropriation by the Legislature, for use by the Secretary of State to offset the cost of administering this section.
(f) For purposes of this section, the following definitions apply:
(1) “Director from an underrepresented community” means an individual who is African-American, Hispanic, or Native American.
(2) “Publicly held corporation” means a corporation with outstanding shares listed on a major United States stock exchange.

SEC. 3.

Section 2115.6 is added to the Corporations Code, to read:

2115.6.
(a) Section 301.4 shall apply to a foreign corporation that is a publicly held corporation to the exclusion of the law of the jurisdiction in which the foreign corporation is incorporated.
(b) For purposes of this section, a “publicly held corporation” means a foreign corporation with outstanding shares listed on a major United States stock exchange.

SECTION 1.Section 22228 is added to the Education Code, to read:
22228.
(a)Commencing March 1, 2021, and annually thereafter, the board shall submit a report to the Legislature on the status of achieving appropriate objectives and initiatives, as defined by the board, regarding participation of emerging managers responsible for asset management within its portfolio of investments. The report shall be based on contracts that the system enters into on and after January 1, 2020.
~~(b)The report shall also identify and include all of the following:~~
(1)The name of each emerging manager providing investment portfolio or asset management services at the end of the prior fiscal year, including, but not limited to, fund of funds contracts, for all asset classes, as applicable.
~~(2)The amount managed by each emerging manager by asset class at the end of the prior fiscal year.~~
~~(c)The board shall define the term “emerging manager” for purposes of this section.~~
~~(d)The report required by this section shall be submitted in compliance with Section 9795 of the Government Code.~~
(e)Nothing in this section shall require the board to take action unless the board determines in good faith that the action described in this section is consistent with the fiduciary responsibilities of the board as described in Section 17 of Article XVI of the California Constitution.
~~(f)This section shall not require the board to disclose information that is excepted from disclosure under Section 6254.26 of the Government Code.~~
SEC. 2.Section 20136 is added to the Government Code, to read:
20136.
(a)Commencing March 1, 2021, and annually thereafter, the board shall submit a report to the Legislature on the status of achieving appropriate objectives and initiatives, as defined by the board, regarding participation of emerging managers responsible for asset management within its portfolio of investments. The report shall apply to contracts the system enters into on and after January 1, 2020.
~~(b)The report shall also identify and include all of the following:~~
(1)The name of each emerging manager providing investment portfolio or asset management services at the end of the prior fiscal year, including, but not limited to, fund of fund contracts, for all asset classes, as applicable.
~~(2)The amount managed by each emerging manager by asset class at the end of the prior fiscal year.~~
~~(c)The board shall define the term “emerging manager” for purposes of this section.~~
~~(d)The report required by this section shall be submitted in compliance with Section 9795.~~
(e)Nothing in this section shall require the board to take action unless the board determines in good faith that the action described in this section is consistent with the fiduciary responsibilities of the board as described in Section 17 of Article XVI of the California Constitution.
~~(f)This section shall not require the board to disclose information that is excepted from disclosure under Section 6254.26.~~