BILL ANALYSIS
AB 1491
Page 1
Date of Hearing: January 12, 2010
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
AB 1491 (V. Manuel Perez) - As Amended: January 4, 2010
As Proposed to be Amended
SUBJECT : Corporations: Boards of Directors: Diversity
KEY ISSUES :
1)Should the statute pertaining to the registry of distinguished
women and minority candidates who are available to serve oN
boards of corporate directors be updated to reflect the
current status of the board?
2)Should the Secretary of State be required to clarify the
current status of the registry and report back to the relevant
legislative committees by July 1, 2011?
FISCAL EFFECT : As currently in print the bill is keyed fiscal.
SYNOPSIS
As proposed to be amended, this bill will make legislative
declarations relating to - and requiring the Secretary to State
to conduct an investigation of - a statutorily mandated registry
of distinguished women and minorities who are eligible to serve
on corporate directors. In 1993, the California Legislature
required the Secretary of State to establish and maintain a
registry of qualified candidates so that corporations that
wished to diversify their boards would have access to a database
of qualified candidates. In 1998, the Legislature authorized
the Secretary of State to transfer responsibility for
maintaining the registry to a campus of the University of
California or California State University, and in 1999 the
registry was transferred to CSU Fullerton pursuant to that
statutory authority. However, CSU Fullerton apparently ceased
maintaining the registry in 2002 and claims that it transferred
the Registry back to the Secretary of State. The Secretary of
State, however, has no record of this transfer and is uncertain
as to the present status and whereabouts of the registry. This
bill would make legislative findings and declarations relating
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to the history of the registry, including its current uncertain
status, and require the Secretary of State to investigate the
current status of the registry and report back to the Assembly
and Senate Committees on Judiciary and the Assembly Committee on
Jobs, Economic Development, and the Economy (the sponsor of this
bill). There is no known opposition to this measure.
SUMMARY : Makes certain findings and declaration pertaining to
the legislative and operational history of the California
Registry of Corporate Board Candidates (Registry) and requires
the Secretary of State to investigate the current status of the
registry.
EXISTING LAW :
1)Requires the California Secretary of State (SOS) to develop
and maintain a registry of distinguished women and minorities,
as defined, who are available to serve on corporate boards of
directors. Provides that the Registry shall be self-funding
and, to this end, permits the SOS to charge fees to applicants
who wish to have their name and relevant information added to
the Registry and to individuals or entities who wish to access
the Registry as part of a search for qualified candidates for
openings on a board of directors. The SOS may also restrict
access to the registry, as specified. (Corporations Code
Section 318 (a)-(q).)
2)Requires the SOS, at least once in each three-year period, and
in consultation with the Senate Commission on Corporate
Governance, to report to the Legislature on the extent to
which the Registry has helped women and minorities progress
toward achieving parity in corporate board appointments or
elections. (Corporations Code Section 318(s).)
3)Authorizes the SOS, after a competitive selection process, to
transfer responsibility for maintaining the Registry to a
campus of the University of California (UC) or the California
State University (CSU). Specifies that a campus to which the
Registry is transferred shall maintain the Registry in the
manner specified by the statute. Provides that the SOS shall
maintain the Registry until a UC or CSU campus agrees to
accept responsibility for the Registry. (Corporations Code
Section 318(t).)
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COMMENTS : According to the author, the purpose of AB 1491, is
to update the existing law relative to the state registry of
women and minority candidates ("Registry") that are available
for appointment or election to corporate boards of directors.
Initially created by SB 545 (Chapter 508, Stats. of 1993), the
original statute required the Secretary of State (SOS) to have
the Registry operative by January 1, 1995, and vested
responsibility for subsequently maintaining the Registry with
the SOS. However, in 1998, SB 1652 (Chapter 829, Stats. of
1998) authorized the SOS to offer to each UC and CSU campus the
opportunity to maintain the Registry. After a competitive
selection process, the SOS would then transfer all information
contained in the Registry, free of cost, to the selected campus
for administration of the Registry. Upon transfer, the selected
campus was to maintain the Registry in the manner prescribed by
the statute. Pursuant to the process set out in the 1998
amendment, the SOS subsequently reportedly transferred
responsibility for maintaining the Registry to CSU Fullerton in
1999. According to the author, this bill would merely update
the existing statute to codify the fact responsibility for the
Registry was formally transferred to CSU Fullerton.
This bill would also update the statutory requirement that the
SOS, every three years, make a report to the Legislature
documenting the extent to which the Registry had succeeded in
helping women and minorities obtain positions on corporate
boards. As originally enacted, the statute required the SOS to
prepare this report in consultation with the Senate Commission
on Corporate Governance, a commission that no longer exists.
This bill, therefore, would require the SOS to prepare the
report in consultation with the relevant Senate and Assembly
committees (albeit without expressly identifying the "relevant"
committees.)
The History (and Mystery) of the Registry Since its Transfer :
While this bill seeks to update the existing statute to reflect
the transfer of the Registry to CSU Fullerton ten years ago, the
actual status of the Registry remains something of a mystery --
though there does appear to be consensus by the author's office,
the SOS, and representatives of CSU Fullerton that the Registry
has not been maintained by CSU Fullerton for several years at
least. According to documents provided by the SOS, the Registry
was indeed transferred to CSU Fullerton in 1999 and was
apparently maintained there until sometime in 2002. According
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to communications between CSU Fullerton and the staff of the
Assembly Jobs Committee (which heard and approved of this bill
this past January 5th), CSU Fullerton no longer maintains the
Registry and claims that it sent a notification letter to the
SOS apprising them of this fact back in 2002 -- thereby
transferring responsibility for the Registry back to the SOS.
However, representatives of the SOS state that they have no such
letter in their records, nor does SOS have any other
documentation indicating that the Registry was transferred back
to the SOS.
In the meantime, no one seems to know where the Registry
database actually resides at this point, or what has become of
any fees that may have been collected. In addition, it is not
clear what became of the $50,000 that CSU Fullerton apparently
spent to launch and publicize the Registry.
In short, while this bill as written would accurately amend the
existing statute to reflect the fact that the Registry was
formally and technically transferred to CSU Fullerton, it does
not appear to acknowledge the apparent fact that the Registry is
not being maintained either by the SOS or CSU Fullerton --
contrary to current law. According to testimony at the prior
committee hearing on the bill, it is apparently the author's
laudable goal in pursuing this legislation that the existence of
the legislation will help prompt the SOS and CSU Fullerton to
work together to determine the best way to ensure that the
Registry's operation is appropriately restored to once again
promote the important existing statutory objective of promoting
diversity on corporate boards.
Because the legislation, as currently written, does not yet
acknowledge the fact that the Registry is not being maintained
either by the SOS or CSU Fullerton and it is the author's
laudable objective to restore the operation of the Registry as
required by current law, the author agrees to delete the current
contents of the bill and replace it with the following:
Section 318.1 is added to the Corporations Code:
Section 318.1
(a) The Legislature finds and declares the following:
(1) Corporations Code Section 318, as originally
enacted, required the Secretary of State to develop
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and maintain a fee-based, self-supporting registry of
distinguished women and minorities who are available
to serve on corporate boards of directors. The
Secretary of State was authorized to charge fees to
persons who wished to be included in the Registry and
to persons or entities who sought access to the
Registry for the purpose of identifying qualified
women and minorities as candidates for appointment or
election to corporate boards of directors.
(2) In 1998 the statute providing for the Registry
was amended to authorize the Secretary of State to
notify the campuses of the University of California
and the California State University of the opportunity
to maintain the Registry. If one or more campuses
expressed interest in the maintaining the Registry,
the Secretary of State was required to select a campus
based on a competitive selection process. If a campus
was selected, the Secretary of State was to transfer
the Registry, at no cost, to the campus, and the
campus in turn was required to maintain the Registry
in a manner consistent with the statute.
(3) In 1999, the Secretary of State transferred
the Registry to California State University at
Fullerton, which operated the Registry until 2002.
Neither the university nor the Secretary of State
operates the Registry presently.
(b) The Secretary of State shall conduct a thorough
investigation into the present operational status of the
Registry required by Section 318. The Secretary of State
shall report the findings of the investigation to the
Chairs of the relevant Assembly and Senate Judiciary
Committees and the Assembly Committee on Jobs, Economic
Development, and the Economy. At a minimum, the Secretary
of State investigation should attempt to determine the
following:
(1) How many individuals and entities paid fees to the
Registry for its services while the Registry was in
operation at California State University, Fullerton, from
1999 to 2002.
(2) Why did CSU Fullerton decide to discontinue maintaining
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the Registry in 2002, and what became of the Registry
database and fees that had been collected from registrants
or persons or entities seeking access to the Registry.
(3) How might the Registry most effectively be restored in a
manner that effectuates the Legislature's original intent
in enacting Corporations Code 318.
Prior Legislation: SB 545 (Killea): This bill established the
Corporate Governance Parity Act for the purpose of requiring the
SOS to, by January 1, 1995, develop and maintain a registry of
distinguished women and minorities available to serve on
corporate boards of directors, as specified. Signed by the
Governor, Chapter 508, Statutes of 1993.
SB 1652 (Kopp): This bill authorized the SOS to transfer
information contained in the registry to a campus of the
California State University or the University of California that
was interested in maintaining the Registry. Signed by the
Governor, Chapter 829, Statutes of 1998.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
None on file
Analysis Prepared by : Thomas Clark / JUD. / (916) 319-2334