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Increasing The Size Of The Board And Rounding Out The Hours

Yesterday, I noted that California's proposed board gender quota bill, SB 826, includes the following provision: "A corporation may increase the number of directors on its board to comply with this section".  I'm not sure what to make of this provision.  Is it intended to be simply a statement of what a corporation might do or is it intended to empower corporations to take action not heretofore authorized in applicable corporate law?  If it is the former, it is essentially meaningless.  If it is the latter, it is unprecedented.

Generally, the number of directors is set in a corporation's articles and/or its bylaws.  As a result, action on the part of the shareholders and/or the board of directors is usually required to effect an amendment changing the size of the board.  In other words, the corporation has no inherent power to change the authorized number of its own directors.  Thus, it would be unprecedented for the California legislature to allow a corporation to change the authorized number of its directors without shareholder and/or director approval.  The change wouldn't be to just the California General Corporation Law.  Remember, SB 826 purports to apply to publicly held domestic corporations and foreign corporations whose principal executive offices, according to the corporation’s annual report on Form 10-K, are located in California.  

In this case, rounding was no problem . . .

Several of this week's posts have been dedicated to the topic of rounding numbers.  The context has been reports that the Securities and Exchange Commission is looking at whether companies are rounding earnings per share improperly.  One can't know whether rounding is improper without a rule defining what is proper.

Coincidentally, the California Court of Appeal issued an opinion this week addressing the propriety of rounding in a different context - the rounding of employee hours.  AHMC Healthcare v. Superior Court, 2018 Cal. App. LEXIS 581.  
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30172DBAB0084D3A8F39D7AF0A8E79BC.ashx Keith Paul Bishop
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