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California SB-826 Violates Myriad American Principles

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California SB-826 Violates Myriad American Principles

California State Capitol govdocs.com

California State Capitol govdocs.com

California State Capitol govdocs.com

California State Capitol govdocs.com

Manav Midha '19, Contributor

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California Governor Jerry Brown made history last week by signing into law Senate Bill 826 (SB-826), a bill that requires California-based public corporations to include women on their boards of directors under penalty of law. There is no denying that hearing many perspectives—especially those of women—only strengthens policy making. Yet, this bill not only violates the free market principles that America was founded upon, but also the recognized doctrine of corporate personhood and the long-held policy that affirmative action programs may consider minority status, but not set exact quotas.

California has a long history of violating the established rights of corporations. In Santa Clara County v. Southern Pacific Railroad (1886), California’s specific denial of railroad companies’ rights to deduct the values of their mortgages from their tax liabilities was unanimously found illegal.[1] The often-cited headnote of this case, and a critical argument of the defense (the railroad companies), centers on the Fourteenth Amendment’s guarantee of “equal protection” under the law.[2],[3] Although this amendment was not referenced specifically in the Court’s decision, the Chief Justice at the time, Mr. Morrison Waite, repeatedly confirmed that all justices believed the Fourteenth Amendment applied to corporations, and thus did not even need to refer to this truth in their opinion.[4] Thus, corporations are considered persons under U.S. legal precedent, a determination affirmed in several additional cases—most notably Dartmouth College v. Woodward (1819) and Citizens United v. Federal Election Commission (2010).[5],[6]

SB-826 mandates that all California-based companies with “six or more” directors must by the end of 2021 include “a minimum of three female directors,” with different quotas per number of board seats (but always at least one).[7] This clearly violates the right of corporations that “no state shall deprive any person [or corporation] of life, liberty, or property, without due process of law.”[8] It also infringes on Congress’s right to “regulate Commerce… among the several states.”[9] By being forced to exclude well-qualified board members, California companies will be placed at a strategic disadvantage compared to their non-California-based competitors. This again violates these companies’ right to “equal protection” under the law.[10]

Another instance of illegitimate California affirmative action programs can be found in Regents of the Univ. of Cal. v. Bakke (1978).[11] While affirmative action programs to increase minority enrollment in universities were upheld, specific racial quotas were found unconstitutional under the Fourteenth Amendment and Civil Rights Act of 1964.[12] Established law is such that institutions are allowed to practice affirmative action and states can ban certain programs as long as other people are not discriminated against.[13],[14],[15] However, states setting quotas in a top-down fashion is a vast overstepping of even the most extensive affirmative action policy. The quotas created by SB-826 are no different from those of Bakke and as such should be found impermissible.

An argument can be made that in this vastly inter-connected world of transnational corporations, the question of companies operating across state lines is especially moot. Therefore, through this legislation, California is grossly overusing its power to affect companies that may be based in California but operate mostly in other states. This is Congress’s prerogative, not California’s.

California-based minority female lawyer and Republican national committeewoman Ms. Harmeet Dhillon acknowledged that “it would probably be better for American businesses if they had more diversity on their boards—women and minorities,” but also said that “having the government mandate that is completely ridiculous and counterproductive to how businesses should be run.”[16] She also stated that mandates would cause women appointed to corporate boards to “question whether [they] got that on their own merits.”[17]

Again, there is no rational argument in which it can be reasoned that including more women in corporate governance will not strengthen business. If companies fail to properly set their boards, they will by the free hand of the market suffer for it. Perhaps Jerry Brown believes that even if this legislation, as it should be, is found unconstitutional, it will raise a question that will force de facto change. However, as several lines of precedent sustain, SB-826 is a ludicrous, hostile, and incredibly detrimental piece of legislation. It will hurt both American business and American women and as such cannot be allowed to stand.

[1] Santa Clara County v. Southern Pacific Railroad Co., 118 U.S. 394 (1886).

[2] Ibid.

[3] U.S. Const.; Amend. 14, Cl. 1.

[4] Official Court Syllabus, Santa Clara County v. Southern Pacific Railroad Co., 118 U.S. 394 (1886).

[5] Dartmouth College v. Woodward, 17 U.S. 518 (1819)

[6] Citizens United v. Federal Election Commission, 558 U.S. 310 (2010).

[7] California Corporations Code, §301.3 and §2115.5.

[8] U.S. Const.; Amend. 14, Cl. 1.

[9] U.S. Const.; Art. I, §8, Cl. 3.

[10] U.S. Const.; Amend. 14, Cl. 1.

[11] Regents of the University of California v. Bakke, 438 U.S. 265 (1978).

[12] Ibid.

[13] California Proposition 209.

[14] Michigan 06-2.

[15] Washington Initiative 200.

[16] John Woolfolk and Levi Sumagaysay, California becomes first state to require a woman on corporate boards, Post Bulletin, 2018, https://www.postbulletin.com/news/business/california-becomes-first-state-to-require-a-woman-on-corporate/article_88187aa2-ba7a-5d9d-957d-a1952da5166b.html.

[17]Ibid.

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