‘Women On Boards’ Law Helps Calif. Taxpayers, Judge Told

A former state senator who authored a law requiring publicly held corporations to place a minimum number of women on their boards retook the witness stand Tuesday at a California bench trial over the law's constitutionality and insisted corporate gender diversity helps taxpayers.

Former Sen. Hannah-Beth Jackson underwent more cross-examination by Robert Patrick Sticht of Judicial Watch Inc., who represents three taxpayers who argue that Senate Bill 826 is an illegal use of taxpayers' money under the state constitution because enforcing it "employs express gender classifications."

Sticht asked Jackson to explain her assertion that the bill helps taxpayers.

"Are you suggesting to me, as a California taxpayer for many years, that I was paying more taxes because there were not enough women on the boards of publicly held corporations headquartered in California?" Sticht asked.

Jackson said that "was not what I have said at all," but that "there are many advantages to having this kind of gender diversity on corporate boards, because of the benefits associated with greater profitability and productivity, better governance and accountability, etc. Companies are more likely to thrive, and that benefits the California taxpayer."

The trial, which began Dec. 1 but took a significant break over the holidays, is focused on S.B. 826, which was signed by former Gov. Jerry Brown in September 2018 and mandated that public companies based in the state have at least one woman on their boards of directors by the end of 2019.

The law also sets higher minimum benchmarks for businesses to meet in the following years. By the end of 2021, public businesses in California were required to have at least two female directors if they have five total directors, or three female directors if they have six or more. Businesses could be liable for fines of at least $100,000 for violating those requirements.

The complaint was filed on behalf of three California taxpayers in 2019.

"The legislation's quota system for female representation on corporate boards employs express gender classifications," the taxpayers argued in the complaint. "As a result, S.B. 826 is immediately suspect and presumptively invalid and triggers strict scrutiny review."

Because the law requires such classifications, S.B. 826 can only be justified by a compelling governmental interest, and the classifications have to be narrowly constructed to serve that interest, the taxpayers said.

Jackson testified in December that when speaking to her Senate colleagues about the bill, she told them that her 2013 resolution urging companies to add women informed the companies that studies showed profitability went up when women are included on boards and that companies have "better governance, are more productive, that they benefit the shareholders [and] public employees and that they help end gender discrimination by adding women to their boards."

Under Tuesday's cross-examination, Sticht asked Jackson to read various passages from many of the studies she relied on where they stated no precise "causal link" was ever established between board gender diversity and profitability, although she noted they found a correlation between the two factors.

Sticht asked if she could recall any legislator who voted on the bill expressing any concern over the lack of causality found in the studies, and Jackson responded, "Did they use the actual word 'causality'? I don't believe. But 'causality' deals with something that I am not an expert in. 'Correlation' I can understand."

She added, "'Causality,' I believe, is a technical term and I don't believe any of my colleagues used that term 'causality' in their discussion about the legislation."