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California Court Rules the Obvious: Diversity Quotas are Unconstitutional

Los Angeles Superior Court, where Judge Terry Green struck down AB 979. Photo: Carol M. Highsmith/Library of Congress

Is the future state mandated? So long as the courts continue to maintain their independence, liberty may have a chance after all, even in California, where a Superior Court judge has struck down the state’s controversial corporate diversity law. The law, which came into effect at the beginning of 2022, fined corporations up to $300,000 for refusing to comply with diversity quotas. 

The controversial bill, signed into law by Governor Newsom in September of 2020, required publicly-held corporations to hire at least three directors from “underrepresented communit[ies]” by 2022, and followed the heels of a similar bill signed by former Governor Jerry Brown in 2018 requiring female representation amongst directors. Both were the first of their kind in the United States, creating a (terrifying) new precedent for progressive policymakers and leaders across the country. 

Unsurprisingly, the constitutionality of each law was immediately challenged, with D.C. based conserative activist group Judicial Watch taking the lead in bringing these challenges to trial. In response, one New York Times article both praised the  bill for being on the infamous “right side of history” and lamented the unfortunate existence of the Constitution as “lawsuits challenging the rule” could prevent future avenues of “progress.” 

These laws have even encouraged Securities and Exchange Commission (SEC) to approve a rule by the Nasdaq stock exchange requiring companies to disclose the ethnic and gender demographics of their boards, have at least two “diverse” members, or otherwise “explain” why they do not; companies failing to provide justification for their lack of “diversity” on their boards would face delisting from the exchange. Seventeen states are currently signed on to a lawsuit challenging the rule, which is currently under review by Fifth Circuit federal judges. 

While California’s diversity quota law was struck down on the basis of the state lacking the power to create diversity quotas compelling private companies to act, the Nasdaq case is different in that the SEC, a government institution, is allowing Nasdaq, a private corporation, to create new rules for its voluntary members, which means that the Nasdaq rule’s constitutionality has a stronger case than the two California laws. 

But regardless of constitutionality, diversity mandates face a whole host of moral and procedural issues. Legally, it is impossible to argue “racial” categorization without some degree of corruption in interpretation. Such rules attempts to identify groups which are not “White” in order to bolster their representation, yet it is hard to say what factors make someone “White” in the first place. The alternative groups specified, as such “Latino” or “Asian,” include individuals fair in skin color, of partial to full European lineage, of various cultures, and of a vast array of socioeconomic statuses. And that’s even without addressing the topic of gender — with such rules allowing anyone who does not identity as a heterosexual male as “diverse” enough, straight, white directors could avoid being replaced simply by declaring a new identity.  Do we really expect states like California, or the Nasdaq to clearly define just how Asian, or how nonbinary someone must be to quality as such? Of course not. 

Unfortunately, the letter of the law for rules like these is leading to the reinforcement of tentative racial and other categories constructed by law. In the United States, these categories have historically been used for racist policymaking like exclusion from citizenship  and racial immigration quotas, and could one day be used to limit job, education, and contracting opportunities on the mere basis of gender identity or race. While progressives believe their control of culture and popular sentiment is unidirectional, that “the arc of history bends towards justice,” the reality is that, if upheld as constitutional, quota-based laws could easily one day be turned on the groups they’re meant to promote, leaving “oppressed” groups even worse off than before. Given the vast threats posed by the creation and interpretation of the categories enshrined by diversity laws, the only way to win the game of identity politics and quotas is to not play at all.