Originally published in The Mercury News and East Bay Times.
California Senate Bill 826 provides a golden opportunity to achieve gender parity in the boardroom.
The bill, awaiting the signature of Gov. Jerry Brown, would require every publicly held corporation in California to appoint a minimum of one woman to its board of directors by the end of 2019.
Beginning July 2021, that number would increase to two female directors on boards with five independent directors and a minimum of three female directors on boards with six or more independent directors. California would be first in the nation to pass such a law.
Sponsored by the National Association of Women Business Leaders, this bill would bring equal opportunity and balance to the corporate boardroom. We need a legal mandate to change the status quo.
Research suggests that companies with women in leadership positions exhibit stronger governance qualities, often performing better financially. A Credit Suisse study found that businesses with women directors outperformed those without in terms of return on equity and average growth over six years. Other studies have found that companies with diverse boards of directors show increased revenues from innovation.
The body of research covering the importance of diverse governance is only growing. Companies with female board members financially outperform their counterparts. Companies with women in leadership carry less debt. Adding diverse perspectives improves boardroom decision-making and benefits companies and shareholders.
As an investor and portfolio manager, I know this firsthand. My firm only invests in companies that include women in leadership roles. We understand the benefits of women in the boardroom, and that has translated into strong results for our investors.
Despite empirical evidence, and leadership in this area coming from Europe, U.S. companies have made abysmal progress appointing women to their boards.
Women are 51 percent of the population, yet participation in corporate leadership has been slow to reach parity. Only 5 percent of Fortune 500 CEOs – 24 in total – are women. That’s down 25 percent from 2017, when there were 32.
Only 15.5 percent of board seats at California’s Fortune 1000 companies are held by women. California lags behind global Fortune 1000 companies, whose boards are comprised of 19.8 percent female directors.
SB 826 will also be beneficial because more women in decision-making seats can translate into progress on important social issues.
To achieve some larger goals of gender equity in the workplace, changes need to occur at the top of the corporate structure, starting in the boardroom. We know women hire more women, and when they do, social progress occurs that benefits both women and men.
The bill’s opponents argue against it because they do not want government mandating how businesses are run. Some say that qualified women for boards are a scarce commodity and others have expressed concern that seats will be taken from men.
As for whether there are enough qualified women to serve at the board level, the answer is absolutely yes. Companies need to look harder. They need to reach outside of their current networks and think more creatively about identifying female leaders who can make valuable contributions.
Research from 2020 Women On Boards has found that more often than not, when a woman is added to the board, a new seat is created. Existing male board members need not fear replacement.
Some old habits die hard in corporate America. The lack of gender parity at the board level is one of them. Hopefully, California will be the first of many states to adopt this sensible legislation.