One Size Does Not Fit All: The Need for a Tailored Code of Conduct

Codes of Conduct are designed to set forth an organization’s values and principles, while detailing expectations for employees. In many ways, it is one of the most important documents an organization can develop. At times, when an employer decides it needs to develop a Code, it often asks counsel whether there is a sample Code or boilerplate language the company can adopt. But is an “off-the-shelf” Code of Conduct really of any value to an organization? The answer should be apparent – sufficient consideration should be devoted to a task that the organization will say this is the standard by which our business will operate!

Legal sources recommending or requiring Codes of Conduct and Business Ethics typically offer little in the way of details as to what an effective Code must include. For example, Section 802.1(a) of the Federal Sentencing Guidelines provides that in order for an organization to mitigate vicarious liability for the criminal conduct of its employees, it must have an effective compliance and ethics program in place. However, in describing an effective compliance and ethics program, the Guidelines provide little guidance other than requiring the organization to use due diligence to prevent and detect criminal conduct and otherwise promote an organizational culture that encourages ethical conduct by its employees and a commitment to compliance with legal requirements. The Guidelines state that compliance and ethics programs must be “reasonably designed, implemented, and enforced so that the program is generally effective in preventing and detecting criminal conduct.”

Similarly, Item 406 of Securities and Exchange Commission Regulation S-K requires covered companies to adopt a Code applicable to the principal executive officer, financial officer, accounting officer or controller or other persons performing similar functions. The Code must be reasonably designed to deter wrongdoing and to promote:

  • honest and ethical conduct;
  • full, fair and accurate timely and understandable reports to the Commission as well as public disclosures;
  • compliance with applicable laws; and
  • prompt internal reporting and accountability for adherence to the Code.

In addition to the requirements of Item 406, companies listed on the New York Stock Exchange are required to have a Code that applies to all directors, officers, and employees that addresses conflicts, corporate opportunities, confidentiality, fair dealing, protection of company assets, and legal compliance. Companies listed on NASDAQ must have a Code that applies to all directors, officers, and employees and contains an enforcement mechanism that ensures prompt and consistent enforcement of the Code, provides for anti-retaliation protection, clear and objective compliance standards, and a fair process to determine violations.

Beyond statutory and regulatory requirements, the particular industry a company operates within also may present particularized challenges that should be addressed in a Code. For example, is the company in a heavily-regulated industry like healthcare? Does the company have operations outside the United States? Does the company have government contracts that impose obligations on the company? In drafting or reviewing a Code of Conduct, these various factors must be taken into consideration. What works for one company might not work for another, even if the companies operate in the same industry. Since the fundamental principle underlying a Code of Conduct is that it be part of an effective compliance and ethics program, due consideration must be paid to what topics the Code needs to cover, whether the Code accurately and adequately reflects the company’s mission and core values, and whether the policies and reporting structures set forth in the Code are adequately designed to ensure issues raised by employees are timely and appropriately addressed.

Best Practices for Boards and Individual Directors

In today’s climate, boards are under increased scrutiny and governance continues to be a key compliance function. As a result, sound governance practices are an important focus for organizations.

Boards are expected to set organizational culture and foster an environment that encourages ethical conduct and a commitment to legal compliance. These expectations have played out in the wake of the #MeToo movement, with many boards reviewing their contribution to the company’s culture and their role in monitoring that culture. Board members are now overseeing the addition of anti-harassment policies, establishing procedures for addressing workplace harassment complaints, and taking an active role in the company’s response to such complaints.

In order to further its goal of sound governance practices, the board should first understand its legal duties to the organization. These include:

  • The Duty of Care. Directors should exercise diligence and attentiveness to their board responsibilities by attending meetings and actively participating. They should exercise reasonable prudence in carrying out their duties in the best interest of the organization.
  • The Duty of Loyalty. Directors owe a duty to faithfully pursue the interests of the organization, rather than their own personal interests or that of any other person or organization. Directors should avoid conflicts of interest or even the appearance of them. Directors are prohibited from self-dealing or diverting opportunities for their own personal gain.
  • The Duty of Obedience.Directors should act with fidelity, within the law, to the organization’s mission. Directors should be familiar with federal, state, and local laws related to the organization, as well as be familiar with and follow the organization’s governing documents.
  • Fiduciary Responsibilities. Financial oversight is a core responsibility of the board. Directors have equal and shared fiduciary responsibility for the organization. They should understand the content and significance of the organization’s financial statements and audits, and protect and appropriately use the organization’s resources.

Successful boards are self-aware, function in constructive partnership with chief executives, and are committed to continually improving performance. Best practices for meeting these responsibilities and incorporating good governance principles often include:

  • Meeting Attendance. Board members should make it a priority to attend all board meetings unless exceptional circumstances exist. One of the legal obligations for all directors is the duty of care. Without attending meetings — and preparing for them conscientiously — a board member is less capable of participating in educated and independent decision-making.
  • Member Recruitment. The board should be strategic about member recruitment and define its ideal composition based on the organization’s priorities.
  • Strategic Planning. The board should play a substantive role in developing, approving, and supporting organizational strategy. One of the board’s primary responsibilities is to set the direction for the organization.
  • Chief Executive Oversight. The board should develop a written job description for the chief executive, define the annual expectations jointly with the chief executive, and evaluate the chief executive’s performance annually.
  • Audit. The board often oversees the organization’s annual audit, selects the auditor, and meets with the auditor in an executive session without staff present to discuss the results.
  • Review of Bylaws and Policies. The board should review and amend its bylaws periodically as necessary. Board members should also review company policies and training requirements to ensure they remain legally compliant and reflect best practices.
  • Use of Committees. The board’s standing committee structure should be lean and strategic. Typically only ongoing board activities warrant a standing committee.
  • Complaints and Investigations. The board should understand how to identify complaints in their various forms, take those complaints seriously, and ensure they are investigated by the right people. This includes ensuring that no employee is punished or discriminated against because he or she reported improper conduct.

Because the trend of increased board scrutiny will likely continue, board members should understand their roles and comply with the corresponding legal requirements.

Ninth Circuit Rules Alleged FCPA Violation Cannot Support SOX Claim

In Wadler v. Bio-Rad Labs., Inc., the Ninth Circuit narrowed the circumstances under which a plaintiff can prove a Sarbanes-Oxley Act (“SOX”) claim.

Sanford Wadler, the former general counsel of Bio-Rad Laboratories, Inc., alleged that during his tenure, he raised concerns that Bio-Rad violated the Foreign Corrupt Practices Act (“FCPA”) in connection with certain business dealings in China. The CEO of Bio-Rad allegedly discovered that Wadler had reported his concerns to the Board’s Audit Committee and two days later, the CEO allegedly told human resources that “Wadler had ‘been acting a little bizarre lately’” and that he “might ‘want to put him on an administrative leave.’”

Wadler’s concerns were investigated, but the investigation concluded there was no evidence of an FCPA violation in China. Three days after the investigation findings were reported to the Board, the CEO fired Wadler.

Wadler sued under SOX, the Dodd-Frank Act, and California public policy. The jury returned a verdict in Wadler’s favor, resulting in an approximately $11 million award. The Defendants appealed, claiming the district court erred when it instructed the jury that the FCPA constitutes “‘rule[s] or regulation[s] of the Securities and Exchange Commission’ (‘SEC’) for purposes of whether Wadler engaged in ‘protected activity’ under SOX § 806[.]”

Applying concepts of statutory interpretation, the Ninth Circuit held that “an FCPA provision is not a ‘rule or regulation of the [SEC].’” The Ninth Circuit reasoned: “That the phrase ‘rule or regulation’ is used in conjunction with an administrative agency, the SEC, suggests that it encompasses only administrative rules or regulations,” not statutes such as the FCPA.

Wadler argued that the phrase “rule or regulation” should be interpreted broadly because of “SOX’s remedial purpose.” The Ninth Circuit swiftly rejected Wadler’s plea, reinforcing its conclusion that the statute’s text is paramount.

Ultimately, the Ninth Circuit “vacate[d] the SOX verdict” and remanded to the trial court with instructions “to consider whether a new trial is warranted.”

Seeking Unity, Not Uniformity*: Diversity and the Corporate Board of Directors

New board of directors appointments such as Indra Nooyi joining Amazon, Nikki Haley nominated by Boeing, and Michelle J. Howard as IBM’s latest director illustrate the accelerating trend of gender and minority diversity on corporate boards – an apt topic for Women’s History Month. And there are plentiful reasons for promoting board diversity.

Sometimes board diversity is required by law. Outside the U.S., primarily in Europe, gender diversity on boards is often required. Since 2003, when Norway adopted a 40% women directors standard, a number of other countries (including Germany, Spain, and France) now require various minimum women directors. In the U.S., California has become the first state to set gender diversity rules by law for all public corporations headquartered in the state. California’s SB 826 requires one woman director for such company boards by year-end 2019. By 2021, the number of women directors required rises to two (for boards of five) and three (for boards of six or more). Recent research published by the Board Governance Research LLC indicates that covered California companies must fill 1,060 existing or new board seats with women by year-end 2021. Several other states have taken the softer approach of adopting resolutions supporting voluntary actions. In fact, California began with this approach years ago and ended up with modest diversity improvements. Whether a state should or can properly legislate requirements for board diversity is controversial and legal challenges will likely follow the California law. Meanwhile, corporations continue to add diverse candidates to their boards, often for practical business reasons.

Over the past two years, women and minorities totaled a solid 50% of new S&P 500 directors, as reported in Spencer Stuart’s 2018 Board Index. Women candidates appear to be making particularly big strides and now represent 24% of all directors. Smaller public companies have more work to do. Why is this progress so important for a business? Institutional investors and proxy advisors (such as Blackrock, State Street, Vanguard, ISS, and Glass Lewis) have adopted voting policies requiring diversity progress, some with specific goals and consequences of negative voting recommendations. Further, firms like Russell Reynolds point to business research and studies showing that leadership diversity, beginning with board diversity, simply improves business performance. See 2019 Corporate Governance Trends and Harvard Business Review.

The trend toward board diversity will continue. We’ll be on the watch for legislative developments, court challenges, and corporate announcements.

*“Treasure diversity. Seek unity, not uniformity. Strive for oneness, not sameness.” Dan Zadra

Guideposts for Successful Internal Investigations: Part 2 – Commencing and Concluding the Investigation

Part 1 of this two-part series explored the five steps to consider before and at the start of any internal investigation.

The next five steps focus on conducting and concluding the investigation and will help guide a company during the actual investigation, after establishing its framework.

  1. Gather Information. The investigator should: (a) assess the complaint itself; (b) gather relevant policies and documents; (c) confirm contractual requirements (if any); (d) interview the complainant to understand the complaint, its substance, relevant documents, and the identity of relevant witnesses; (e) gather and assess additional policies and documents (if any); and (f) interview other witnesses to fully understand their knowledge of events, including additional relevant documents and witnesses. Each witness should be advised of the company’s anti-retaliation policies and told to report any retaliation to the company. If the investigation is being conducted by outside counsel, each witness should be informed that counsel represents the company and not the witness, among other things. This is commonly referred to as an Upjohn warning.
  2. Prepare findings and conclusions. Findings and conclusions can vary in form. An organization may dictate the charge of the investigator and whether it is requested that the investigator provide more than factual findings and in what format. An organization may choose an oral report, a written executive summary, or a detailed factual findings and analysis, depending on the circumstances. Any report should summarize the complaint, the information, interviews held and documents reviewed, and typically, the factual conclusions reached. It should be fact-based and generally devoid of legal analysis and opinions. At times, legal analysis might be requested by an organization and care should be taken to make certain such analysis is properly subject to attorney-client privilege and perhaps outside the fact-finding portion of the investigation.
  3. Take remedial measures (if necessary). If the investigation uncovers errors, mistakes, or wrongdoing, the company should take reasonably appropriate steps to remedy those issues and to prevent their reoccurrence. This could be through discipline of employees (up to and including termination), policy changes, or additional training. It could also involve a report to a government agency about potential violations of law.
  4. Follow-up with the complainant to close the investigation. This will build rapport and show the complainant that the company took her complaint seriously. In general, companies should explain that the investigation has been completed, that the company has taken appropriate action, and that the employee should continue to report any wrongdoing in the future. It should also include a reminder that retaliation is prohibited and if the employee experiences any retaliation, she should immediately report it.
  5. Prepare the investigative file. The investigator should prepare a file of conclusions, notes, and documents reviewed in reaching its conclusion. Attorney-client privileged communications and materials should be maintained in a separate file.

These five steps, when combined with the five steps establishing the framework of an investigation, will help companies make appropriate decisions, understand internal areas of concern, build appropriate defenses, and minimize or mitigate risks.

Guideposts for Successful Internal Investigations: Part 1 – Establishing an Investigation’s Framework

The ability to effectively conduct internal investigations is essential to any business.

From fiscal year 2014 to fiscal year 2018, the number of whistleblower retaliation complaints filed with OSHA has increased by 29 percent. Between 2007 and 2017, retaliation claims filed with the EEOC nearly doubled. In fiscal years 2017 and 2018, the Justice Department recovered over $6.5 billion from False Claims Act cases. The recoveries, settlements, and defense costs in these matters are real.

Not only do internal investigations help ensure ongoing legal and regulatory compliance, they also give companies a chance to correct any mistakes and identify potential risk areas before they become true liabilities. They can also fortify future defenses and minimize risk in litigation about alleged corporate misconduct.

Given the stakes, we have prepared this two-part blog series exploring effective steps for internal investigations.

This first post explores five steps to ensure the company identifies complaints when they arise and establishes an appropriate framework for investigating those complaints.

  1. Train board members, executive leadership, and managers on identifying, receiving and ensuring investigation of internal complaints. Not every complaint is couched as a complaint. A complaint might be embedded in an email or conversation between an employee and her manager about how the business is run. It might be raised “informally,” but it is nonetheless a complaint. Because complaints are not always clear, managers (from line supervisors to board members) need to understand how to identify complaints in their various forms, take those complaints seriously, and ensure they are investigated by the right people (e.g., in-house counsel’s office, compliance, or human resources). Failure to identify complaints can have serious ramifications.
  2. Identify and articulate the purpose or goal of an investigation. A company should endeavor to understand why it is conducting the investigation. Every internal investigation should have the following goals: (a) obtain a full, objective understanding of the facts; (b) facilitate fact-based decision-making; (c) take prompt corrective action and confirm disclosure requirements; and (d) preserve evidence and a complete record.
  3. Account for attorney-client privilege considerations. In-house or outside counsel should be informed about most investigations to ensure proper legal advice and maintain privilege. If a company intends to use the investigation and its results to defend a lawsuit or allegation of wrongdoing, it should be prepared to disclose underlying investigation interview notes, factual conclusions, and remedial steps, if any. Courts will generally not allow a company to use an investigation as a shield against liability while asserting attorney-client privilege regarding supporting documents obtained during the investigation. This does not mean all communications to or from the investigator must be disclosed. Steps can be taken to ensure attorney-client privilege is maintained where appropriate. For instance, the investigator can report findings to the business for decision-making purposes and separately to counsel for legal advice or in anticipation of litigation. If an attorney acts in the role of fact-finder, organizations should not necessarily assume there will be attorney-client privilege in subsequent proceedings. Understanding attorney-client privilege issues early can help a company maintain privilege to the maximum extent possible.
  4. Identify the appropriate investigator(s). Not every complaint requires the same investigator. An investigator may be qualified in one area, but another investigator might be more qualified in a different area. Sometimes, it may be important to have counsel investigate the complaint to provide legal advice or if litigation is anticipated. An attorney investigator might also be employed as an expert witness down the road, depending on the circumstances. The investigator should be as independent as possible. The investigator should also understand the importance of attorney-client privilege and the outer limits of its protections. This can help guide the investigator on when and how to share certain information with appropriate parties. The investigator should ultimately be someone the company is comfortable representing it as a witness in any potential dispute that later arises.
  5. Determine the scope of the investigation. Any investigation should be broad enough in scope to establish independence of the investigator. The investigator should not be limited in a way that might lead a third party to believe the results were preordained. Most investigations should encompass the complaint and any circumstances and facts reasonably related to the complaint and its subject matter.

These five initial steps to the investigation process will help companies minimize or mitigate risks associated with internal complaints.

In a separate blog, we will explore the next five steps to an effective investigation, focusing on the investigation itself, gathering information, and making reasonable assessments based on the evidence.

The Waiting Is the Hardest Part: Staff Decreases, Whistleblower Claim Increases Strain OSHA

A February 20, 2019 article from Bloomberg Law provides statistics to explain the significant delays experienced by litigators and attorneys alike in Occupational Safety and Health Administration’s investigation of whistleblower claims. A substantial increase in the number of whistleblower complaints filed with OSHA over the past five years and a contemporaneous decrease in the number of investigators available to investigate these claims has led to longer waits for OSHA decisions and delays in the adjudication of claims.

OSHA is charged with enforcing more than 20 whistleblower statutes. From fiscal year 2014 to fiscal year 2018, the number of whistleblower complaints filed with OSHA increased by 29 percent: from 7,408 to 9,566. Over this same period, the number of investigators available to investigate these claims decreased by 24 percent: from 100 to 76.

The staffing losses are due, in part, to a stagnant budget and a federal hiring freeze in 2017. The staffing restrictions resulted in OSHA opening full investigations into only 3,007 whistleblower cases in FY 2018, the fewest number of new investigations since 2013. This means, on average, each investigator opened approximately 40 new investigations in FY 2018, in addition to their already existing caseloads. Also during FY 2018, OSHA closed 2,964 investigations, down 15 percent from the prior year and the lowest since FY 2012. The average time to complete an investigation in FY 2018 for all types of whistleblower cases was 284 days, seven days more than the FY 2016 average. The Administration’s statistics are not likely to improve any time soon as it reportedly takes approximately two years for a new investigator to learn the requirements of the position.

The potential impact of these investigatory constraints is considerable. For example, under the Sarbanes-Oxley Act, a putative whistleblower has 180 days from an adverse employment action to file an administrative complaint with OSHA. The statute and regulations contemplate the entire administrative process, including OSHA’s investigation and decision, review of this decision by an Administrative Law Judge and subsequent by the Administrative Review Board, will be completed within 180 days. Based on current statistics, if OSHA opens an investigation into a complaint, it will take, on average, more than 100 days longer than the timeframe contemplated by the Act before OSHA completes its investigation. As the Act also permits whistleblowers to seek dismissal of their complaints in order to proceed de novo in federal court, more whistleblowers may elect to go this route, rather than have their claims languish at the administrative level. Since 2017, approximately 300 whistleblowers have elected to go this route, according to Bloomberg Law. However, as an employer only has 20 days to respond to a complaint filed with OSHA, the whistleblower is filing in federal court with full knowledge of the employer’s defense and the ability to craft a complaint that addresses any arguments raised by the employer. Additionally, while the claim languishes at the administrative level, an employer will typically have to deal with the loss of witnesses due to attrition or other factors, further complicating its defense of the whistleblower’s claim.

Please contact Jackson Lewis with any questions about avoiding whistleblower complaints.

A Look Back at Key Corporate Governance and Internal Investigations Issues in 2018

2018 was a transformative year for corporate governance. Record whistleblower awards, an increasing number internal investigations partly arising out of the #MeToo movement, an expansion of the role of companies’ boards, and corporate social responsibility all shaped 2018. This is our retrospective review of these trends.

 Record Whistleblower Tips and Awards and Possible Changes

Companies and regulatory agencies reported a rise in whistleblower tips in 2018. The Securities and Exchange Commission (SEC) Whistleblower Program had its largest annual payout in history, $168 million. It also reported its largest single payout, $84 million. Many of those receiving rewards in 2018 were company outsiders and non-U.S. residents.

Since its inception, the Program has awarded $326 million and has recovered $1.7 billion for the U.S. Treasury. Investors also have gained an estimated $432 million.

In 2018, the SEC proposed amendments to the Program rules. Significantly, the proposed amendments, which are currently in the comment phase, are designed to provide the SEC greater discretion with respect to awards at extremes of the Program. Under the amendments:

  • The SEC will have enhanced ability to limit the very large awards and increase the modest awards on collected monetary sanctions over $100 million and awards under $2 million.
  • The interpretive guidance will provide the meaning of “original information” and clarify the types of government actions that can qualify for whistleblower awards.

 Internal Investigations

In the wake of the #MeToo movement and with the continuing rise in whistleblower claims, companies performed more internal investigations in 2018 than they had in many years. Sexual harassment complaints, much like whistleblower complaints, often are reported internally first, thus triggering a company’s obligation to investigate and take remedial action, if necessary.

Data on sexual harassment enforcement from the Equal Employment Opportunity Commission (EEOC) backs this up. In 2018, charges filed with the EEOC alleging sexual harassment increased by more than 12 percent from fiscal year 2017.

Also in 2018, the Department of Justice (DOJ) announced a significant policy shift to its enforcement strategy. According to the DOJ, going forward, companies must reveal all relevant facts about responsible individuals in order to trigger the False Claims Act’s reduced damages provision. Identifying and disclosing information about individuals who were involved in potential fraud necessarily will involve effective internal investigations.

 The Emerging Role of the Board of Directors

The number of lawsuits brought against boards and individual board members for breach of fiduciary duty, among other things, has increased sharply in recent years. Government enforcement and prosecution of violations from perceived board dereliction is also on the rise. As a result, in 2018, board governance and scrutiny emerged as a key compliance component. More and more boards are taking an active role in establishing:

  • Compliance programs
  • Cybersecurity and privacy safeguards
  • Whistleblower protection measures

Some states are even tackling issues of diversity in board composition. In 2018, California passed a law mandating that publicly traded companies incorporated in California, as well as foreign corporations headquartered in California, have at least one female director by the end of 2019. Depending on board size, the California law will mandate additional representation by 2021.

 Corporate Social Responsibility

Another trend in 2018 has been the growing importance of corporate social responsibility (CSR) initiatives to investors, shareholders, and consumers. Investors are increasingly interested in CSR performance of target firms as a way to identify economic performance potential and to flag potential risks.

Entities are proactively identifying and addressing their legal, financial, operational, and reputation risks, and they are particularly focused on CSR risks through proactive initiatives or reactive responses to specific incidents. Companies and boards are investing in CSR programing as an integral element of company risk assessment and compliance programs and advocating public reporting of CSR initiatives. This is serving as both a differentiating and value-enhancing factor.

Please contact the authors of this post or your Jackson Lewis attorney with any questions about these developments.

Tenth Circuit Rules that False Claims Act (FCA) Does Not Cover Post-Employment Retaliation

In a win for employers, the Tenth Circuit Court of Appeals recently held that “…the False Claims Act’s anti-retaliation provision unambiguously excludes relief for retaliatory acts occurring after the employee has left employment.” Potts v. Center for Excellence in Higher Education, Inc., No. 17-1143 (10th Cir. Nov. 6, 2018) (emphasis added).


Debbi Potts, a campus director at an educational organization, resigned her employment in July 2012. In September 2012, Potts and the organization entered into an agreement whereby Potts promised not to disparage the organization or “contact[] any governmental or regulatory agency with the purpose of filing any complaint or grievance.”

In February 2013, several months after her resignation and agreement, Potts sent a complaint to the organization’s accreditor regarding “alleged deceptions in maintaining its accreditation.” (After entering into the agreement, Potts also sent a disparaging email.)

The organization sued Potts for breach of contract, citing Potts’s complaint to the accreditor. Potts, in turn, filed a lawsuit in federal court, claiming the organization retaliated against her in violation of the False Claims Act (“FCA”) when it sued her. The organization moved to dismiss Potts’s FCA lawsuit, which the district court granted.


The Tenth Circuit Court of Appeals affirmed the dismissal of Potts’s FCA retaliation claim, engaging in extensive statutory interpretation to support its conclusion that “employees” under the False Claims Act are limited to “persons who were current employees when their employers retaliated against them.” (emphasis added). In contrasting the False Claims Act with Title VII’s anti-retaliation provision, the Tenth Circuit concluded that “…the False Claims Act, by its list of retaliatory acts, temporally limits relief to employees who are subjected to retaliatory acts while they are current employees.” The Tenth Circuit ultimately held that “[b]ecause Potts alleges that the [organization] retaliated against her after she resigned her employment, she cannot have a cognizable claim under the statute.”

California Law Pushes Virtue of Diversity Requiring Females on Boards of Directors

California Governor Jerry Brown recently signed Senate Bill 826 into law which requires publicly-held corporations with principal executive offices in California to have a certain number of females on their boards of directors.

The new law sets forth phased requirements for these corporations. By the end of 2019, each covered company must have at least one female director. By the end of 2021, this number increases to three female directors if the company has six or more directors in total. (For boards with five or fewer directors, the numbers decrease.)

If companies fail to comply with the new law, the California Secretary of State is authorized to impose significant penalties: $100,000 for a first-time violation, and $300,000 for subsequent violations.

The bill highlights the underrepresentation of women on boards of directors, identifying that “[o]ne-fourth of California’s public companies in the Russell 3000 index have NO women on their boards of directors; and for the rest of the companies, women hold only 15.5 percent of the board seats.” The bill lists economic advantages to having female directors and cites a study which “found that companies with more women on their boards are more likely to ‘create a sustainable future’ by, among other things, instituting strong governance structures with a high level of transparency.”

In connection with the new law, Governor Brown recognized objections, but stated that “…recent events in Washington, D.C.–and beyond–make it crystal clear that many are not getting the message” and “[g]iven all the special privileges that corporations have enjoyed for so long, it’s high time corporate boards include the people who constitute more than half the ‘persons’ in America.”