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A California federal court held that a California statute requiring California-based corporations to have a minimum number of directors from designated under-represented groups violates the federal Constitution’s Equal Protection Clause. The decision in Alliance for Fair Board Recruitment v. Weber (E.D. Cal. May 16, 2023) is one of the latest skirmishes in the culture wars raging around diversity and other ESG-related matters. The ruling addresses the same law that a California state court previously invalidated in a decision that is currently on appeal.

Walt Disney Parks and Resorts U.S., Inc. (“Disney”), the owner and operator of the Walt Disney World Resort in Florida, has sued Florida’s Governor and other officials for allegedly launching “a targeted campaign of government retaliation” in response to Disney’s opposition to Florida’s so-called “Don’t Say Gay” law.  The Complaint in Walt Disney Parks and Resorts U.S., Inc. v. DeSantis et al., highlights one of the most hotly debated topics in the era of competing ESG and anti-ESG sentiments:  to what extent should corporations take public positions on political and social issues that might not directly relate to the companies’ core business operations? Corporate boards of directors should be attuned to and exercise appropriate oversight over these questions, as well as the related issue of corporate political contributions.

On February 23, the U.S. Court of Appeals for the Fourth Circuit reversed a mid-trial grant of judgment as a matter of law against the Securities and Exchange Commission in a jury trial for insider trading.  The decision in SEC v. Clark is a reminder that the SEC can meet its burden of proof by presenting merely circumstantial, rather than direct, evidence of insider trading and that a trial court must not weigh evidence, determine witnesses’ credibility, or substitute its judgment for the jury’s in deciding whether to grant a motion for judgment as a matter of law.

A new study has found that diversity on corporate boards of directors leads to statistically significant increases in the representation of under-represented groups at the manager and staff level.  The study – “Do Diverse Directors Influence DEI Outcomes?” by Wei Cai (Columbia Graduate School of Business), Aiyesha Dey (Harvard Business School), Jillian Grennan (Santa Clara University and UC-Berkeley), Joseph Pacelli (Harvard Business School), and Lin Qiu (Purdue University) – adds to the growing literature on board diversity and human capital management, two significant ESG considerations for many corporations and investors.  While proponents of ESG sometimes focus on advancing each of those goals individually, the study links the two considerations and shows that one of them (board diversity) can promote at least some aspects of the other (diversity, equity, and inclusion in the workforce).

A California court invalidated a state law requiring that boards of directors of public companies based in California include members from under-represented groups, including persons of several races and ethnic groups and those who identify as gay, lesbian, bisexual, or transgender.  The April 1, 2022 decision in Crest v. Padilla, No. 20ST-CV-37513, by Judge Terry Green of the Los Angeles Superior Court, was issued in one of several cases attacking California laws designed to increase diversity on corporate boards of directors, a significant goal of the ESG movement.