Why The Mandated Report On Female Directors Fails To Provide Meaningful Information

As noted yesterday, the California Secretary of State published a report on its website concerning publicly domestic or foreign corporations with principal executive offices are located in California.  This report was required to document the number of these corporations "who [sic] have at least one female director".  Cal. Corp. Code § 301.3(c).  The report, which is in the form of Excel spreadsheets, includes two tables.  The first, entitled "SB 826 Corporations By SEC Data", lists some 537 corporations.  The second, entitled "Reporting in Compliance", lists 184 corporations.  

It is hard to know what these tables actually represent.  For example, the second table identifies Ball Corporation among the 184 corporations "reporting in compliance".  However, Ball Corporation doesn't appear on the first list of "SB 826 Corporations By SEC Data".  That isn't too surprising if one looks at the cover sheet of Ball Corporation's most recently filed Form 10-K which identifies it as an Indiana corporation with its principal executive offices located in Colorado.  As such, it would not be subject to SB 826.  That of course begs the question of why it is listed among the compliant and the more philosophical question of whether a corporation that is not subject to the law can be considered compliant.

My guess is that the explanation lies with the fact that the Secretary of State's office based the second list on the disclosure statements required to be filed by "publicly traded corporations".  This reporting requirement predates SB 826 and applies to every "publicly traded corporation" a term that is defined in Corporations Code Section 2117.1(b)(1) differently than "publicly held corporation" in Section 2115.5(b). 

If the "reporting in compliance" table was based on publicly traded corporation disclosure statements filed with the Secretary of State, it seems likely to me that some companies were not accounted for in the tabulation.  As noted in the Secretary of State's discussion of methodology, the disclosure statement is due 150 days from a corporation's fiscal year end.  As a result, some corporations may have filed their disclosure statements before the Secretary of State modified the form to ask whether they had at least one female directors.  Other corporations may not yet have filed their disclosure statements.

Nonetheless, at least two conclusions can be drawn from the Secretary of State's report.  First, the report does not disclose the number of subject corporations that have at least one female director for the reasons explained above.  Second, it does not identify any corporation that is in violation of the law.  The reason is that the law requires that subject corporations have a minimum of one female director no later than December 31, 2019.  Cal. Corp. Code § 301.3(a).  The statute further provides that a female director having a seat for at least a portion of the year will not be a violation.  Cal. Corp. Code § 301.3(e)(3).