BILL ANALYSIS
AB 1491
Page 1
Date of Hearing: January 5, 2010
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
V. Manuel Perez, Chair
AB 1491 (V. Manuel Perez) - As Amended: January 4, 2010
SUBJECT : California Registry of Corporate Board Candidates
SUMMARY : Updates the requirements and content of the existing
registry of potential candidates for corporate boards by, among
other items, specifying that the authority and duty to maintain
the California Registry of Corporate Board Candidates (Registry)
was transferred from the Secretary of State (SOS) to the
California State University at Fullerton (CSU Fullerton) in
January of 1999.
EXISTING LAW establishes the Corporate Governance Parity Act of
1993. Major provisions of the bill include, but are not limited
to:
1)Findings and declarations that women and minorities have not
achieved equal educational and economic opportunities relative
to others in the state.
2)Requires the SOS to, by January 1, 1995, develop and maintain
a fee-supported registry of distinguished women and minorities
who are available to serve on corporate boards of directors,
as specified.
3)States that the SOS may grant access to the Registry to
corporate representatives or other persons who intend to use
the information in connection with an actual search for
candidates for an open position on a corporate board of
directors. The SOS may also restrict access, as necessary.
4)Requires the SOS to charge fees--which shall be fixed by
regulation--for registering with and gaining access to
information in the Registry, as specified.
5)Requires the SOS to report to the Legislature at least once
each three-year period, during which the Registry is
available, about the extent to which the registry has helped
women and minorities achieve parity on corporate boards.
FISCAL EFFECT : Fees are authorized to cover administrative
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costs of the Registry.
COMMENTS :
1)Author's purpose : According to the author, the purpose of AB
1491 is to update the statute relative to the Registry. While
initially mandated in statute in 1991, later legislation in
1998 authorized the SOS to transfer the Registry to any
California State University (CSU) or University of California
(UC) campus which was willing to maintain the Registry
consistent with state law.
Information obtained from the SOS confirms that the Registry
and related materials were transferred to CSU Fullerton in
January of 1999. Communications with CSU Fullerton indicate
that the university is no longer maintaining the Registry and
CSU Fullerton states that it sent a notification letter to
that effect to the SOS sometime after 2002. The SOS, however,
has no such letter of communication and is working with the
author, who also serves as the Chair to the Assembly Committee
on Jobs, Economic Development and the Economy (JEDE), to
determine the current legal status of the Registry.
2)SOS Office : The SOS has a number of important statutory
responsibilities, including serving as the chief elections
officer of the state and being responsible for administering
and enforcing laws pertaining to filing documents associated
with corporations, limited liability companies, partnerships
and limited partnerships, among other business entities. The
SOS also provides the physical home for the California Museum
for History, Women and the Arts and operates several
registries, including the:
a) Advance Health Care Directive Registry: The Advance
Health Care Directive Registry allows a person who has
executed an advance health care directive to register
information regarding the directive with the Secretary of
State. This information is made available upon request to
the registrant's health care provider, public guardian, or
legal representative.
b) Safe at Home Program: The Safe Home Program offers
victims of domestic violence, stalking and sexual assault
anonymity when undertaking specified activities which might
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otherwise disclose their identity and put them at risk.
The program offers participants a free post office box
where they can receive mail (rather than their home
address) to help them maintain their privacy when
undertaking such activities as receiving first-class mail,
opening a bank account, completing a confidential name
change, filling out government documents, registering to
vote, getting a driver's license, and/or enrolling a child
in school. Since its inception in 1999, the program has
helped protect the identities of nearly 3,800 victims.
c) Domestic Partner Registry: The SOS registers same-sex
couples regardless of the age of the partners, and
opposite-sex couples in which one partner is at least 62
years old, as domestic partners in California when they
file a "Declaration of Domestic Partnership."
3)Registry History : In 1993, legislation was enacted [SB 545
(Killea), Chapter 508, Statutes of 1993], which required the
SOS to establish a registry of distinguished women and
minorities who were interested in being selected for corporate
board membership. No appropriation was made to establish the
Registry; however, fees were authorized to self-fund the
registry. Even with the fee authority, the SOS failed to
establish the Registry by its statutory deadline of January 1,
1995.
In 1998, the SOS received statutory permission [SB 1652
(Kopp), Chapter 829, Statutes of 1998] to transfer the
registry to a campus of the CSU or UC. In January of 1999,
CSU Fullerton officially became responsible for Registry.
According to a letter from CSU Fullerton, it had been in
communication with the SOS since 1995 regarding its interest
in housing the Registry at its campus.
News clippings and a 2002 activity report from CSU Fullerton
indicate that the university made a substantial attempt to
maintain and expand the Registry from 1999 through 2002,
including approving a $50,000 initial operating budget,
establishing an esteemed advisory board, seeking high-level
corporate and nonprofit Registry membership and participating
in promotional and networking activities.
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Members of the advisory board included, but were not limited
to, Dr. Bill Crist, President of the California Public
Employees Retirement Board; Assemblywoman Marilyn Brewer
(R-Newport Beach); Dr. Jean Lipman-Blument, professor at
Claremont Graduate University; and Bill Jones, SOS.
Promotional events included attendance at several California
Governor's Conferences for Woman, a Bakersfield Business
Conference, the 2002 Women's Empowerment Conference, and
numerous events with the National Association of Women
Business Owners.
Records show that in 2002, CSU Fullerton unsuccessfully sought
funding through the Kaufman Center for Entrepreneurial
Leadership, the Ford Foundation, and the Sloan Foundation.
After 2002, there does not appear to be any further
information on the Registry. Implementation of AB 1491
clarifies existing law and could serve as a vehicle for future
discussions on the Registry.
4)California's changing workforce : As unprecedented numbers of
baby boomers prepare to retire from the market place, many
corporate boards will be seeking new members to help shape
their businesses for the future. This demographic trend
reflects not only a generational shift in the U.S., but it
also marks a shift in the race and ethnicity of the nation's
working age population.
The California Budget Project estimates that by 2020, nearly
60% of the working age population in California will be
comprised of Latinos, African Americans, and Asian-Americans.
Similarly, the composition of the U.S. consumer-base is
changing. Minority purchasing power in the U.S. is expected
to triple from $1.3 trillion in 2000 to over $4 trillion by
2045. This represents over a 70% growth of total U.S.
purchasing power during the same time period. Latino and
African American purchasing power is already so significant in
the U.S. that if it were compared to national GDPs, it would
be greater than all but nine economies in the world.
Companies that want to remain competitive are designing new
and adapting existing products and services to meet this
expanding market. Corporate leadership, however, has not kept
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pace with the changing demographics, and there remains a gap
in the ethnic and gender diversity on corporate boards.
According to a 2008 report by Virtcom Consulting on the
leadership of Fortune 100 companies, while women comprise
slightly more than half the U.S. population, they hold only
17% of the positions on corporate boards of Fortune 100
companies. The same report states that research suggests that
companies with more diverse boards have higher performance and
other financial metrics such as return on equity, return on
sales, and return on investment.
However, even given this type of empirical evidence for
out-performance, there has been very little progress in
bringing diversity to boardrooms. The above-referenced report
states that Caucasian, non-Latinos still hold a
disproportionate share of board seats by occupying 84% of the
1,031 corporate board seats of Fortune 100 companies. African
Americans held 10%, Asians 2%, and Latinos 4%. Another study
conducted by the Alliance for Board Diversity examined growth
in diversity from 2004 to 2006, revealing that only three net
seats were gained by women and minorities.
One of the initial barriers to becoming a candidate for
corporate board membership is being recommended by the
consultant or "Headhunter" who has been hired by the company
to present the board with a slate of prospective candidates.
Often these slates have a limited number, if any, of female
candidates or candidates of color. With corporate boards most
interested in choosing from among the very best prospective
board members, increasing the diversity among the "known" pool
of qualified candidates is essential.
A self-supporting Registry could assist corporate boards and
their consultants to more cost-effectively consider a broader
range of individuals when selecting members of the board of
directors. The state would also benefit from having stronger
corporate boards of directors and the resulting better
performing companies through higher taxes based on higher
corporate revenues and greater job retention and creation.
5)Constitutionality of Registry : In June 1998 Attorney General
Daniel Lungren opinioned, No. 98-304, as to the
constitutionality of having the Secretary of State maintain a
registry of women and minorities who were available to be a
member of a corporate board of directors based on Section 31
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of Article I of the California Constitution (Proposition 209.)
In his opinion, the Attorney General explained that while
Proposition 209 prohibited public institutions from
discriminating against or giving preferential treatment to
certain individuals or groups in public employment, public
education, or public contracting, that these prohibitions did
not apply to having a registry of information that was not
related to public employment, education or contracting.
6)Previous legislation : The list below includes related
legislation.
a) 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. Status:
Signed by the Governor, Chapter 508, Statutes of 1993.
b) 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.
Status: Signed by the Governor, Chapter 829, Statutes of
1998.
7)Double Referral : This bill was referred by the Assembly Rules
Committee to two policy committees for consideration: JEDE
and the Assembly Committee on the Judiciary (Judiciary
Committee.) Should AB 1491 pass this committee it will be
referred to the Judiciary Committee for further action.
REGISTERED SUPPORT / OPPOSITION :
Support
Assembly Committee on Jobs, Economic Development, and the
Economy (Sponsor)
Opposition
None received
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916)
319-2090
AB 1491
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