California pushes for women board directors - Activate World

California pushes for women board directors

Storyline:

Investors have pressured companies for years to increase the numbers of women serving on corporate boards. State legislators have pushed to make companies share statistics on their boards’ gender composition and passed resolutions urging companies to add more female directors voluntarily. Now California is trying a new strategy by passing legislation that forces boards to hire women and levy monetary fines if they don’t comply. 

Governor Brown recently signed a bill requiring every publicly traded company with principal offices in California to have at least one woman on its board by the end of 2019. From there, women’s representation will have to increase: By the end of July 2021, companies have to have at least two women on boards of five members and at least three women on boards with six or more. Apple currently has two women on its eight-member board.

women corporate boards

The legislation is opposed by more than 30 business groups, including the California Chamber of Commerce, and may not pass legal muster if challenged in the courts. According to Annalisa Barrett, a clinical professor of finance at the University of San Diego’s School of Business, “The law would mean 684 women would be needed for just the boards of the publicly traded companies that rank among the nation’s 3,000 largest—plus many more for smaller companies.”

“If nothing else, what this law is doing is increasing the visibility and awareness on the issue itself and the importance, and that is a win in and of itself,” said Serena Fong, the vice president of strategic engagement at Catalyst, a nonprofit focused on promoting women in business.

Nationally, women on boards are dramatically underrepresented: According to Catalyst, women make up about 20 percent of S&P 500 board seats. There are 12 Fortune 500 companies with no women on their boards whatsoever, and the number of Fortune 500 CEOs dropped by 25 percent this year, from 32 to 24.

Noteworthy:

  • One-quarter of the publicly traded companies headquartered in California don’t have any women on their boards, according to the bill’s authors, California state Sen. Hannah Beth Jackson and Senate President Toni Atkins.
  • Some European countries such as Germany, Sweden, Iceland, Finland, and France, have quotas and fines requiring women be added to their boards. 
  • Publicly-traded companies with gender diverse boards—defined as women occupying at least 40 percent of board seats—see an average 12 percent higher return on equity compared to the Russell 3000 overall, according to another FactSet analysis released in March.

Quests and Actions (Q&A):

  • The Government Accountability Office in 2016 estimated that women in S&P 1500 companies will reach parity with men in 40 years. Could the benefits to corporations realized through diversity enforcement speed this up?
  • Given the documented value, why don’t corporations joyfully add diversity to their boards and organization?
  • What should business leaders do to help women achieve more equal representation on corporate boards?

Sources:  Los Angeles TimesThe Washington PostTriple PunditVox

Photo by Tim Gouw on Unsplash