11/16/18

California Mandates Inclusion of Women On Boards of Directors

California Governor Jerry Brown signed a bill into law on September 30th that “requires a publicly held corporation, whose principal executive offices are located in California, to have a representative number of women on its board of directors” by 2021.

According to the primary author of the law, California State Senator Hannah-Beth Jackson, the law is a way to increase representation of women in leading California corporations. Senator Jackson believes that “gender diversity on corporate boards is associated with increased profitability, performance, governance, innovation, and opportunity.”

This law will affect a number of prominent large companies whose executive offices reside in California. Apple, Alphabet, Facebook, and Tesla, to name a few, may have to make some changes to their boards by 2021 to remain compliant.

The legislation states that “26% of the Russell 3000 companies based in California have NO women directors serving on their boards.” Clearly, there are representation issues at play here. According to an Equilar study, if the new legal requirements went into effect today, “79% of [stock exchange traded and headquartered in California] public companies would fail, while only 21% would pass.”

While most agree that women are underrepresented in company leadership, some feel, however, that this bill is an overreach of government power.

“Once the government decides it has the right to intercede in this arena, it is difficult to know where and when the government interference will end,” Jessica Levinson explains in an NBC think piece. “What, for instance, is to prevent the government from requiring that each year, private employers hire employees from any number of classifications based on age, race, sexual orientation, or gender identity? Diversity is a vitally important goal, but one that the government should not mandate.”

Proponents of the bill cite that a similar gender-equalizing policy in Norway seems to be working so far—Norwegian corporate boards doubled the number of women on boards after Norway passed a law requiring female board representation.

But, as Alice Lee of the New Republic noted, “it also caused what’s been dubbed the ‘golden skirt’ phenomenon: certain women hold multiple board positions, meaning that while more board positions are held by women, not as many new women are entering the boardroom as hoped. And, even now, Norway has fewer women CEOs than the United States.”

Whether or not this legislation is constitutional or even helpful is yet to be determined. But, one fact remains—we need women in boardrooms. We need to do what we can to remove barriers so we can always put the best and smartest people in the leadership positions they deserve.

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About the author

Andrew Mosteller
Andrew Mosteller
Andrew Mosteller is a freelance writer and regular contributor to Lendio News. His upbringing in an entrepreneurial family nurtured a passion for small business at a young age. Andrew's father, an equity fund manager, taught him the ins and outs of investment financing. Now, Andrew spends his time writing copy for business owners, helping them expand and advertise their unique brands. He's also studying Strategic Communications at the University of Utah. When Andrew's fingers aren't glued to the keyboard, he spends his time reading, podcasting, composing music, and bombing down the ski slopes.

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