The DEI boardroom battle isn't over

California's defense of its law requiring a certain number of women directors on the boards of public companies is finally making its way to the 2nd District Court of Appeal, but recent court rulings leave legal observers doubtful it will go far.

The statute was one of two laws - the other mandated that boards include representatives of "underrepresented communities" such as Black, Asian, Latino, Native American, gay or transgender people - designed to push companies in the state to diversify their directors and executive leadership.

The larger question is whether a recent, small pullback in the percentage of women and minorities on public company boards is a minor setback for advocates of diversity or an early sign of a much larger backlash.

"I think it's too early to know whether it's having that impact on public company boards," said JoAnna L. Brooks, a partner with Pillsbury Winthrop Shaw Pittman LLP. The percentage of women who serve as directors of Russell 3000 companies nationwide dropped from 30.3% in the first quarter of 2025 to 29.9% in the first quarter of this year, according to a report compiled by Equilar.

"It's not a huge drop, but it's a drop," she said.

The percentage of women is higher in California, where more than 32% of board members are female, and those percentages are higher at large Silicon Valley technology companies despite their increasing reputation as a bastion of "tech bros."

"This has largely been done without being forced to do it," Brooks said, adding that this hasn't changed even during the more hostile atmosphere toward anything viewed as Diversity, Equity or Inclusion, known as DEI.

"We're still lagging behind with respect to Black, Latino [and] LGBTQ+ representation on these boards," she added.

Pullback or backlash?

"Despite the litigation, despite what's going on nationally with the Trump administration, they feel like they have taken great strides ... and are not reversing course," Brooks said. "That's what has been communicated to me by my clients."

But a report from 50/50 Women on Boards, which advocates for more female directors, expressed concern in its most recent report on the first quarter of the year, especially the percentage of women on corporate boards fell below 30%.

"While women continued to gain seats, men accounted for 77.2% of the change in board composition, underscoring that progress remains uneven," the report stated, adding that 86% of the women added to boards were in newly created positions instead of replacing male directors.

"This reinforces a consistent trend: women's gains continue to rely more heavily on expansion than on intentional board refreshment," the 50/50 Women on Boards report concluded.

Anastasia P. Boden, constitutional scholarship director and senior legal analyst with the Pacific Legal Foundation in Sacramento, which has challenged the state laws in federal court, took a different view. Through a spokesperson, she argued that the small decline in the number of female directors is a clear signal that legislative requirements are not needed.

"Women never needed government quotas in the first place and were steadily earning their way without a mandate," Boden said.

Legal defeats

California's statutes - the first signed by Gov. Jerry Brown, the second by Gov. Gavin Newsom - were passed at a time when DEI was at its peak in political acceptance and viewed as a way to ensure equal opportunity for people who had faced discrimination.

But even then, lawsuits by conservative legal groups against SB 826 and SB 979 found favor with two different Los Angeles County Superior Court judges, both of whom struck down the statutes as violations of the state Constitution's Equal Protection Clause.

The problem, for Judge Maureen Duffy-Lewis and now-retired Judge Terry A. Green, is that the state failed to prove that a mandated quota, even if not described as such, was necessary.

"Only in very particular cases should discrimination be remedied by more discrimination," wrote Green, an appointee of Gov. Pete Wilson, in granting summary judgment for the taxpayer plaintiffs who sued to block AB 979 in April 2022.

The state has appealed both rulings. The first case, involving underrepresented communities, has been fully briefed. The state attorney general's office is due to file a reply brief next week in the women directors case. Padilla v. Crest et al., B322276 (2nd District Court of Appeal, filed July 25, 2022); Crest et al. v. Padilla, B321726 (2nd District Court of Appeal, filed July 20, 2022).

Appeals pending in the 9th U.S. Circuit Court of Appeals have been stayed pending the outcome of the state litigation. National Center for Public Policy Research v. Weber, 22-15822 (9th Circ., filed June 6, 2022).

While the cases have been on appeal, neither California law has been in effect.

Corporations get cautious

State appellate courts, and the liberal California Supreme Court, may look more favorably on the laws, but legal observers said the atmosphere surrounding anything resembling a quota has turned hostile both in the courts and with the federal government.

If the taxpayer plaintiffs lose on appeal in state court, it is expected that they would seek review by the U.S. Supreme Court, which is dominated by Republican appointees who have ruled against a variety of laws designed to protect the rights of women and minorities at the workplace and in college admissions. Students for Fair Admissions Inc. v. President and Fellows of Harvard College, 20-1199 (S. Ct., filed Feb. 25, 2021).

"The trend is definitely not in favor of the legislation that was passed in California," Brooks said.

Robert P. Sticht, an attorney with Judicial Watch Inc. who represents the taxpayer plaintiffs, asked the state appellate court to affirm Duffy-Lewis's ruling barring SB 826. Among other arguments, he said other states without California's laws were doing as well or better.

"From 2018 to 2021, states without legislation like SB 826 experienced growth in the number of female directors," he wrote. "Growth in some states was near, if not equal to or greater than, the growth in California, suggesting a natural progression over time."

While the litigation moves along, the facts on the ground illustrate that the rapid gains of women and minorities on corporate boards in the 2010s have slowed dramatically even if they have not reversed.

"Everyone is being a little more cautious right now," Brooks said. "It doesn't mean they are pulling back from DEI efforts. ... But they're going about it a different way. You may see the same thing when it comes to company board positions."

She looked on the bright side, saying a different approach may be more effective.

"I think the way those quotas work actually can be to the detriment of women and other underrepresented groups because then the other individuals don't have buy-in to really promote that level of diversity on their board and within their organization," Brooks said.