Some great news out of the Golden State this week: On Sunday, California became the first state to require publicly traded companies to include women on their boards of directors. Senate Bill 826 , which was signed into law by Gov. Jerry Brown, requires at least one female director on the board of each California-based public corporation by the end of next year. Companies need up to three female directors by the end of 2021, depending on the number of board seats. Companies that don’t meet these requirements could be fined $100,000 for a first violation and $300,000 for subsequent violations. The law also requires companies to report their board composition to the California Secretary of State, and imposes a $100,000 fine if a company fails to do so.
This is an important bill for California, where a quarter of publicly held corporations with headquarters in the state don’t have any women on their boards of directors.
Why did California take this action? The text of the bill suggests that promoting gender equality on corporate boards will not only improve opportunities for women and girls, but also improve productivity, citing a 2014 study from Credit Suisse that found that companies with all-male boards had an average return on equity of 10.1 percent while companies with at least one woman director had an average return on equity of 12.2 percent.
Furthermore, according to the Associated Press, the bill’s author, Sen. Hannah-Beth Jackson, said she believes having more women in power will make companies more successful, as women tend to be more collaborative and are better at multitasking (wouldn’t you agree?). Having more women on corporate boards also would figure to reduce sexual assault and harassment in the workplace, said Jackson.
There are critics of the bill, however. Some believe that the composition of corporate boards should be determined internally, not mandated by government. Others say the new law will prioritize gender over other aspects of diversity, such as race and ethnicity. And still others say the policy will be difficult for companies to implement and violates constitutional prohibitions against discrimination.
Gov. Brown, however, is steadfast in his support of the bill. In his signing message, he wrote: “[t]here have been numerous objections to this bill and serious legal concerns have been raised” that might “prove fatal to its ultimate implementation.” Still, Brown emphasized, “it’s high time corporate boards include the people who constitute more than half of the ‘persons’ in America … ”
I agree! I believe the bill is a necessary start to ultimately achieving better representation for women on corporate boards across the country. And I hope other states follow California’s lead. After all, women today hold just 18 percent of positions on the boards of the 3,000 largest publicly traded corporations in the U.S. In 2017, 624 public companies had no women on their boards at all.
What do you think about California’s decision to mandate that women must be represented on the boards of directors of publicly traded companies? I would love to get your feedback on this timely and relevant topic, especially if you work for a company headquartered in California! Please send your comments to me at email@example.com.