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What a Landmark California Law Means for Some of Your Favorite Shoe Brands

California is living up to its reputation as the most progressive state in the U.S.

Gov. Jerry Brown on Sunday signed a landmark legislation that will require all publicly traded companies headquartered in California to have at least one female director on their board by the end of 2019.

By the close of 2021, the law, Senate Bill 826, would increase that required minimum number to two female directors — if the corporation has five directors — or to three female directors, if the corporation has six or more directors.

“There have been numerous objections to this bill and serious legal concerns have been raised,’’ Brown said in a statement. “I don’t minimize the potential flaws that indeed may prove fatal to its ultimate implementation. Nevertheless, recent events in Washington, D.C. — and beyond — make it crystal clear that many are not getting the message.’’

The law — the first of its kind to be passed in the U.S. — comes at a time when corporations are facing new pressures to up their efforts around diversity — a fact widely viewed as an offshoot of the #MeToo movement, which initially drew attention to female sexual harassment in the workplace but broadened to include a push for promoting and hiring more female executives at major corporations. Oregon-based Nike Inc., which shouldered around a dozen executive departures this year after women employees reportedly staged a quiet revolt, is one such example. (The firm has since pledged to place a larger emphasis on promoting women and minorities.)

California, meanwhile, is home to at least two publicly traded shoe companies — Skechers USA Inc. and Deckers Brands (parent to Ugg, Teva, Hoka One One and Sanuk).

Goleta-based Deckers is already in good standing with the law. According to a filing with the U.S. Securities and Exchange Commission, its 10-member board currently has three female directors: former Nike VP Cynthia “Cindy” Davis, former Gap executive Lauri Shanahan and Google executive Bonita Stewart.

Skechers meanwhile, per an SEC filing, has a nine-member board comprised of only men.

For decades, the shoe industry has forged a reputation for targeting female consumers (and other minorities) with its wares but not necessarily placing enough emphasis on hiring these groups for decision-making roles.

More recently, however, there have been strides. Last year, 130-year-old footwear conglomerate Caleres Inc. — owner of Famous Footwear and brands such as Sam Edelman, Via Spiga and Dr. Scholl’s — saw its board reach gender parity by way of two new female appointments. (Caleres is based in St. Louis and is helmed by a female CEO, Diane Sullivan.)

New York-based athletic retailer Foot Locker Inc. boasts a board that is “majority female or ethnically diverse,” according to its 2018 proxy statement. More specifically, four of its 10 directors are women and one is African American and another Hispanic.

New York’s Tapestry Inc., owner of Coach, Kate Spade and Stuart Weitzman, is nearing gender parity with a board consisting of four women among seven male executives, including CEO Victor Luis. Michigan’s Wolverine World Wide Inc. is similarly situated: Its 11-member board has three women directors.

Back in California, it remains to be seen whether other private shoe brands will take inspiration from the new law and boost their female leadership: Allbirds, K-Swiss, Vans, Toms and The North Face are all based throughout California.

In the meantime, experts suggest the new law could face some legal roadblocks.

The legislation is opposed by more than 30 business groups, including the California Chamber of Commerce, which argue that it may violate existing state laws as well as the U.S. constitutions because it will “displace an existing member of the board of directors solely on the basis of gender.” Opponents have also argued that the law places gender as the main criteria of diversity over other protected classifications.

Lastly, the group of businesses opposing the legislation point out that it creates confusion and ambiguity as many firm’s with California-based headquarters, are incorporated elsewhere — mainly in Delaware.

“[Senate Bill 826 aims] to manage the directors of publicly traded corporations that have its principal executive offices in California yet are incorporated in another state,” the group said in a statement. “The internal affairs doctrine appears to dictate that the laws of the state where the company is incorporated apply for these issues, not the law of where the principal executive offices are located, such as California.”

 

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