There has been a significant amount of media coverage of a landmark California bill recently signed into law by Governor Jerry Brown mandating female representation on corporate boards of directors of public companies located in California. SB 826 was written broadly, encompassing a wide array of public companies whose principal offices are located in California, including those incorporated elsewhere, such as Delaware. While the law has faced scrutiny from legal commentators, it is imperative that publicly traded companies located in California start taking steps now to ensure compliance with this law, before its requirements go into effect in just over one year.

No later than the close of the 2019 calendar year, publicly held companies (listed on a major US stock exchange) whose principal executive offices, according to the company’s SEC Form 10-K , are located in California, must have at least one woman on its board of directors during at least a portion of the calendar year. A public company may increase the number of directors on its board to comply with this requirement, which means that a company is not required to remove a male director and replace him with a female director to comply with the new law.

In addition, by the end of the 2021 calendar year, such California public companies must have:

• At least 3 female directors if the size of the board of directors is then 6 or more members.
• At least 2 female directors if the size of the board of directors is then 5 members.
• At least 1 female director if the size of the board of directors is then 4 or fewer members.

With the first requirement going into effect in just over one year, and proxy season approaching even sooner, many public companies not currently in compliance with SB 826 do not have a lot of time to adjust.  Failure to comply with this new law has consequences – the state can issue penalties of $100,000 for a first-time violation and $300,000 for a second and each subsequent violation.

Corporate boards should take the opportunity now to begin a comprehensive search for qualified female board candidates to meet the board representation requirements. A diligent, orderly director recruitment process is always advisable for public companies, and, with the new law in place, this process is as important as ever.

While the possibility does exist that SB 826 will face legal changes on constitutional grounds, mandatory female representation on corporate boards is the existing law for the foreseeable future.  It is best that California-based public companies move promptly to comply with the new law.