The authors of a bill to require racial diversity on corporate boards in
The authors of a bill to require racial diversity on corporate boards in
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Asians Tacked On to Calif. Board Diversity Bill

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August 12, 2020 | Agenda

The authors of a bill to require racial diversity on corporate boards in California have added Asian Americans to the list of minority groups that must be represented after the group was left out of the bill’s original language.
The original proposal in the California Assembly only specified that by the end of 2021, listed companies based in the Golden State would have to include at least one African American, Latino or Native American. Immediately after the bill passed out of committee on July 14, however, several professional and trade organizations for Asians and Pacific Islanders (API) notified Asian legislators in California about what they considered an oversight. The authors soon agreed to expand the group of underrepresented communities. On July 28, the bill was amended.
The new version of the bill now states that a director from an underrepresented community means a person who self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian or Alaska Native.
“The Asian community described to us what they called a bamboo ceiling and their limitations in getting access,” says Chris Holden, the Democratic assembly member from Pasadena who co-authored the bill. “I had no problem in ensuring that that was remedied. We want all boats to rise.” Before he and the co-sponsors changed the list, Holden told a newspaper that he realized that groups such as Asians are marginalized, but called the potential law “a crucial first step.”
Asian Americans were adamant about a chance to be statutorily included on California’s 660 listed company boards. David Chiu, a state assemblyman from San Francisco and the chairman of the API Legislative Caucus, and State Senator Richard Pan of Sacramento lobbied Holden about the issue and prevailed.
This is the second time in two years that Asians have been left out of a bill on board racial diversity.
In 2019, Illinois lawmakers proposed a law, HB 3394, that would have required every Illinois-based public company to seat at least one African American, Latino and female director. It did not require that there be Asian board members. Eventually, the teeth were taken out of the law as passed and it now merely requires companies there to report on their board demographics each year and for the University of Illinois to publish ratings on the companies’ diversity progress.
Still, Asian governance experts charge they are underrepresented in corporate America, “especially at the Board level,” says Janet S. Wong, a corporate board member herself and the senior advisor to the membership group for Asian American board directors, Ascend Pinnacle. Over 70% of Fortune 1000 companies did not have Asian directors in 2018 and 2019, according to a new study from her organization.
Indeed, even a new economic proposal for racial minorities from Democratic presidential candidate Joe Biden doesn’t clearly state whether it would fully include Asian Americans. Biden is fairly specific about the need to make policy changes that benefit Asian Americans and Pacific Islanders. Those include helping educational institutions that serve Asians and reducing language barriers.
But later, when he talks about a $50 billion apportionment in public/private venture capital, he uses the phrase “Black and brown entrepreneurs.” He describes pouring $100 billion into low-interest business loans for “Black and brown communities.”
Although the word “brown” can refer to Asians from the Indian subcontinent, it usually doesn’t refer to those from the Pacific Rim or so-called Far East.
One Asian board director who asked to remain anonymous said that although East Asians are typically not considered part of the “brown” community, they do face discrimination. “In the U.S., [we] have been referred to as bananas and twinkies. It’s possible that the South Asians are considered brown people, but it’s possible Biden is referring to Hispanics/Latinos.”
The Biden campaign didn’t return a request for comment.
Why aren’t Asians included in these efforts to benefit other racial minorities? One possible reason is that Asian Americans don’t appear to be economically disadvantaged, even though they’re seldom in corporate leadership.
Asians were the racial group with the highest household median income during the 2018 American Community Survey from the Census Bureau. Asians as a group earned more than $87,000 a year per household compared to whites’ nearly $66,000. A few ethnic groups within the Asian category exceeded the mean. Indian Americans generated more than $119,000 per family. Typical Taiwanese and Filipino American families hauled in more than $90,000 a year.
Many of those persons work in engineering or middle-management positions.
“You see a lot of Asians when you look at companies in California,” says Wong, who is a retired partner at auditing firm KPMG. “But when you look at how many are in upper management and on corporate boards, the numbers are scarce.
“It’s another example that Asians are hidden in plain sight.”
Wong and other Asian governance leaders have long heard the deeply entrenched stereotype that while Asian Americans are seen as the model minority, many whites consider them too passive for leadership and board settings. In 2018, Krishnan Rajagopalan, who is Indian and the CEO of board recruitment firm Heidrick & Struggles, told Agenda that boards working on diversity did not ask for Asian American directors, but they did ask for women, African Americans, Latinos and global persons.
“Having a diversity of voices, experiences, and backgrounds at the table is critical to running a modern day company. This obviously includes Asian representation as well as representation from other underserved and minority communities,” writes Martin Whittaker, the founding CEO of Just Capital, in an e-mail.
Just Capital is a nonprofit research firm that conducts polls to understand what average Americans consider to be fair business practices and then ranks companies on how they meet up to those standards.
“This not about box-checking, it’s about proactively ensuring that public companies are truly just and stakeholder led,” Whittaker concludes.
Of course, California is the only state with a law requiring women on all public boards based in the state. That 2018 law is facing two legal challenges. One is a taxpayer suit charging that the California secretary of state should not be allowed to use taxpayer funds to enforce a law that violates equal protection of males under the California constitution. The other charges that the plaintiff, a shareholder, would be forced to give up his right to vote for the directors of his choice if he didn’t want the company to be fined for noncompliance. He claims that violates the equal protection clause of the Fourteenth Amendment.
Assembly Bill 979 will likely face similar headwinds. Holden says he’s optimistic.
The current bill was created by using the shell of a previous proposal that had nothing to do with board diversity. Its joint authors — Holden and Cristina Garcia of Bell Gardens, and principal co-author Eloise Gomez Reyes of San Bernardino, who are all Democrats — then amended it in committee. The bill emerged from committee in mid-July focusing on race and board directors.
It now seeks to make companies add at least one underrepresented person per board no later than the end of 2021. That number would go up for larger boards in 2023. At companies with more than nine board members, three underrepresented communities’ directors would be required.
The bill authorizes California’s secretary of state to publish reports online naming the companies whose boards have complied with the rule and to fine those that have not. Failure to file timely information on board members with the secretary of state can lead to a $100,000 fine for a first violation, and $300,000 for subsequent violations.
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