Despite having been met with much criticism, when it comes to SB 826 there is one undeniable fact: It has done more to raise awareness for gender diversity in the boardroom than anything else thus far.
SB 826 was signed into law in September of 2018 and requires every publicly held corporation headquartered in California, regardless of whether or not they’re incorporated, to have at least one woman on its board by Jan. 1, 2020 and as many as three by 2021.
The bill, which is the first of its kind in the U.S. is following in the footsteps of many European countries. For example, Norway who in 2003 was the first country to legislate a mandatory 40 percent quota for female representation on corporate boards. Since then, other European nations that have legislated similar quotas include France, Spain, Iceland, and the Netherlands. The European Commission has even proposed to require minimum 40-percent gender balance for non-executive directors. The specifics of female mandates vary by country. Nevertheless, one thing is certain – countries that have introduced gender diversity targets have seen the number of women on their company boards rise dramatically.
However, some opponents of the bill have stated that it violates the U.S. Constitution, California Constitution, and Civil Rights Law. In response to this Senator Hannah Beth Jackson (D-Santa Barbara) who wrote the legislation, stated “I certainly respect the constitutional right of anyone to challenge the law in our courts. However, I strongly believe that this measure meets constitutional requirements and will be held up in court. Significant research has shown the importance of adding women to boards to improve profitability and add to the economic well-being of the state, as well the interest of the state to advance gender equality.”
To this extent, when signing the bill into law, California Governor Jerry Brown, issued a letter stating that despite potentially “fatal” legal problems, it is time to force action. Brown continued in his letter by stating that, “Nevertheless, recent events in Washington, D.C.—and beyond—make it crystal clear that many are not getting the message.”
However, thanks to SB 826 the message has been received – loud and clear. As of December 2019, women now hold 21.2% of the board seats of California’s 444 largest corporations, according to 2020 Women on Boards, an education and advocacy organization based in Los Angeles. Furthermore, according to a study to be published in the Journal of Corporate Finance in February “prior to the signing of SB 826, there were 650 firms headquartered in California, of which 188 (29%) had zero female directors. The number of firms with all-male boards declined to 21 by December 31, 2019."
It is undeniable that this new legislation will have an ongoing effect on board gender diversity in the Golden State and beyond. In fact, several states including Illinois and Maryland have opted for amendments to state filing requirements in order to collect more data on gender diversity on corporate boards. New York has also joined in to raise awareness with its S. 4728 bill that proposes amending the state’s Business Corporation Law in order to conduct a ‘women on corporate boards study’. While states like Massachusetts and New Jersey are already considering legislation similar to California. SB 826 has also influenced non-mandated corporations causing them to seek out more diverse board candidates and achieve gender parity on their boards.
Still, the idea of a gender quota mandate had me quite conflicted at first. There are the undeniable facts that more women are needed on boards and that gender diversity in our boardrooms are simply not occurring quickly enough. Yet, as strong, independent women, we have excelled and advanced in the workplace, achieving executive level positions based on merit and hard work, resulting in significant contributions to corporate growth and profit. Because of this, we also want to know that we acquired those board seats based on ability and not to check a box.
Up until now the responsibility of gender diversification in the boardroom fell mostly upon private investors. These firms use their influence by placing gender board requirements on the companies, they invest in. Firms such as BlackRock have told companies seeking their investments, they need to see a minimum of two female members on their boards.
Although the ideal scenario would have been for gender parity in the boardroom to have been achieved through a more organic process, rather than legislation, to see more women on corporate boards, where they belong is certainly a win. As stated by then-Governor Jerry Brown upon signing the bill into law “Given all the special privileges that corporations have enjoyed for so long, it’s high time corporate boards include the people who constitute more than half the ‘persons’ in America.”
founder and CEO of Women In The Boardroom – an organization founded with the goal of bridging the gender gap in the boardroom – is a recognized expert on boardroom diversity and leadership. Follow her on Twitter (Twitter @RonningSheila
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