Break the Glass Ceiling (or Break the Law)
Last fall, California became the first state to pass a law requiring publicly traded companies headquartered in California to appoint at least one woman to boards by the end of this year. By the end of 2021, a minimum of two women must sit on boards with five members. There must be at least three women on boards with six or more members. Companies that fail to comply face fines between $100,000 and $300,000.
“People would prefer that you wouldn’t have to mandate,” Tierney Remick, vice chairman and co-leader of Korn Ferry’s Board and CEO Services practice said at the time the law passed. “But in reality, [progress is] not moving fast.”
Just before the law passed, 377 California companies tracked by the Russell 3000 Index (the largest U.S. stock-traded companies) must add at least one woman to boards to comply, according to Board Governance Research LLC. In total, nearly 700 women must be seated in the next three years.
These figures don’t reflect the scarcity of women on boards of smaller public companies headquartered in the state, many of which are likely to have all-male boards, Board of Governance Research CEO Annalisa Barrett told The Associated Press. “Smaller companies haven’t had as much pressure on them to take advantage of the benefits of having a diversified board,” she noted.
Scores of studies have shown the business benefits of greater representation of women at the most senior levels. Gender diversity and inclusion bring better decision-making, higher returns on investment, improved efficiency and lower turnover.
One report, by Lehigh University’s Corinne Post and Georgia State University’s Kris Byron, found that women tend to think more broadly and holistically. When that type of thinking is brought to the boardroom, decision-making implications for employees. Women’s preparedness — fueled by feelings that their qualifications may be questioned — has an effect on male board members, Post told Forbes.com. “When women participate on boards, the attendance of male directors goes up too,” she said.
At the current rate of progress, true equality at the senior level is decades away. The glacial pace is caused, in part, by the many men and women who are satisfied with so little progress. Nearly half the men and a third of women surveyed for McKinsey’s Women in the Workplace 2018 study believe women are well-represented at the senior level when they fill just one in 10 roles.
The California law comes when public, shareholder and institutional investor pressure to increase gender diversity at the top is on the rise. Other states — including Illinois, Massachusetts, Pennsylvania, Ohio and Colorado — have issued resolutions encouraging gender diversity on corporate boards. More than 80% of institutional investors surveyed by the EY Center for Board Matters say board composition, with a focus on diversity, would be a top priority last year. California’s law has been opposed by nearly three dozen business groups and will likely be challenged in court. But if it takes a state mandate and fine to break down barriers and move toward gender equality, then, “One down, 49 to go.”