California AB 979 took effect Wednesday, September 30, and requires public companies domiciled or headquartered in California to have at least one director from an underrepresented community by the end of 2021. Such companies must report to the California Secretary of State after the end of their 2021 fiscal year the number of directors who are members of underrepresented communities. These new Board membership and reporting requirements are similar to and in addition to the requirement to have and report the number of women directors at such companies by the end of their 2019 fiscal year.

The new requirements apply to publicly held domestic or foreign corporations whose principal executive offices, according to the corporation’s Securities and Exchange Commission (SEC) Form 10-K, are located in California, and the statute indicates that there are more than 650 such companies. Directors from underrepresented communities are individuals who self-identify as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian or Alaska Native, or who self-identify as gay, lesbian, bisexual or transgender.

Although the requirement is to have at least one such director during 2021, starting in 2022:

1. Boards with nine or more directors must have at least three directors from underrepresented communities;

2. Boards with more than four but fewer than nine directors must have at least two such directors; and

3. Boards with four or fewer directors must have at least one such director.

The penalty for the first violation is $100,000, and the penalty for subsequent violations is $300,000.