California Enacts New Law: All-Male Boards are History

California Enacts New Law: All-Male Boards are History


New York
UJ Business

Companies based in California are now prohibited from having boards that consist solely of men.

This mandate comes from a new law that took effect on Sunday, necessitating that publicly traded companies within the state incorporate at least one woman on their board of directors by the end of 2019, with penalties for non-compliance.

Furthermore, firms with five board members are required to include two women by the conclusion of 2021, while those with six or more directors must add a minimum of three additional women by the same deadline.

This marks the first legislation of its kind in the United States, although similar laws are prevalent in many European nations.

The law was approved by California’s state legislature last month and signed by Governor Jerry Brown on Sunday, alongside a series of other bills aimed at “protecting and supporting women, children, and working families,” as stated in a release from the governor’s office.

While a majority of companies in the S&P 500 have at least one female board member, only about 25% boast more than two, according to research conducted by PwC.

California state Senator Hannah-Beth Jackson mentioned to The Wall Street Journal last month upon the legislation’s passage that “nearly one-fourth of California’s publicly traded companies still lack a single woman on their board, despite numerous independent studies demonstrating that companies with female board members tend to be more profitable and productive.”

“Women account for over half of the population and influence over 70% of purchasing decisions, making their perspectives invaluable in shaping corporate culture, strategic decisions, and overall profitability,” she elaborated.

Many view California’s law as a vital advancement towards achieving greater gender balance in corporate leadership.

However, establishing quotas may spark controversy, as noted by Vicki W. Kramer, the lead author of the significant 2006 study titled “Critical Mass on Corporate Boards.” Critics contend that imposing quotas could lead to unqualified female appointments and may inadvertently discriminate against male candidates.

Without established quotas, companies might neglect the push for diversification within their leadership ranks. She highlights other “aspirational” legislative efforts in different states, such as Pennsylvania, which in 2017 passed a resolution urging both public and private entities to ensure a minimum of 30% women represented on their boards by 2020. Yet, without enforceable mandates, Kramer argues, this goal will likely remain unachieved.

According to Kramer, California’s legislation falls short compared to initiatives in Norway and other European nations, where specific percentages of women on boards are mandated. In Norway, larger companies must ensure that women comprise as much as 40% of the board.