Judge questions need for quotas on corporate boards

Pointing to the growing number of women on college campuses and in professional schools, a skeptical Los Angeles County judge on Tuesday wondered whether California's law mandating women on corporate boards was necessary.

Superior Court Judge Maureen Duffy-Lewis said she has noticed the "pendulum swing" in academic settings, and that there has actually been a struggle to find men in certain university programs, as "they've become uniquely, maybe rightly, but uniquely full of women."

"There are professional schools that were once all men," the judge said. "The women were, 'Oh, look at her.' She was the exception walking down the hall. Now it's a complete reversal. It's now actually like, 'Oh, look at him. There's a guy walking down the hall.'"

According to recent reports, women now make up 60% of undergraduates and slightly outnumber men in law and medical schools.

"You start seeing the diversity fill the boards, because when you look for relevant people who understand the relevant business that's being engaged in, those individuals are starting to fill the ranks of boards, because they're out there in the multitude," the judge continued. She suggested corporate boards would likely become more diverse naturally. "I'm just saying that there is a swinging of a pendulum."

Duffy-Lewis heard arguments for summary judgment Tuesday in a lawsuit the organization Judicial Watch filed two years ago seeking to stop enforcement of Senate Bill 826, which was enacted in 2018 and requires California's publicly traded corporations to have at least one and possibly up to three female directors. Crest et al v. Padilla, 19STCV27561 (L.A. Super. Ct. filed Aug. 16, 2019).

Last year, Judicial Watch's case survived a dismissal motion, when Duffy-Lewis ruled that it had standing to represent taxpayers in a challenge to the law. On Tuesday, the judge closely questioned the notion of legally imposed quotas.

"Would there have been a law required to have an X number of women in a law school class, an X number of women in a veterinary class, an X number of women in a medical school class, or do you educate to that?" Duffy-Lewis asked Deputy Attorney General Lara Haddad, who represented the state defendants.

The law doesn't create a quota nor does it impose a strict numbers requirement for public corporations, Haddad responded. All it does is impose a minimum diversity board, she said.

The state has a compelling interest to eliminate discrimination against women, which was a view also held by the state and U.S. supreme courts, Haddad continued. The secretive board selection process is "an old boys' network" where there is no open application enrollment or interview process like a typical job, and candidates are almost always men, Haddad said.

More women with advanced degrees doesn't translate to corporate board appointments, Haddad said. The number of women directors had not kept pace with the growing number of women getting masters of business administration, she said.

According to Forte, a foundation that seeks to promote women in business, women make up 39% of MBA students and hold 27% of board seats in the Fortune 500. Women hold 26% of board seats of California companies, according to Forbes.

Duffy-Lewis suggested that greater transparency in the board selection process might remedy the gender disparity.

"What about if you were more transparent and in educating to that -- in more transparency in the board selection process in public corporations?" Duffy-Lewis asked.

Haddad explained that that approach has been tried and not found to work, "because discrimination exists."

"That's because these women are not being chosen, not because of the lack of information on the benefits that diversity brings to corporate boards, but because of discrimination in the process itself," Haddad said.

Robert P. Sticht, who represents Judicial Watch, told the judge that lawmakers didn't consider transparency in the selection process as a less intrusive means in which to obtain their goal. The state could have instead done more to improve corporate performance without resorting to mandating a gender based quota by reducing corporate taxes, regulations and the cost of doing business, he argued in court papers.

"They considered the secretive process as though that was somehow justifying the bill," Sticht told the judge Tuesday. "Bring transparency to the table, and you won't have that secretive process."

Duffy-Lewis said she will issue a ruling by the end of the week.