California Passes New Legislation to Put More Women on Boards: Why This Matters

Patrick McGreevy of the Los Angeles Times writes that in August 2018, the California legislature passed a bill, approved on a 23–9 vote, requiring firms based in the state to include women on their boards. This bill mandates publicly held corporations in California to have at least one woman by 2019. By 2021, at least two women will be required for boards with five or fewer directors, while at least three will be required for boards of six or more.

The coauthors of this bill, state senator Hannah-Beth Jackson and senate leader Toni Atkins, explained that because only 15 percent of the directors of public corporations in California are women, while women make up 52 percent of the state’s population, women’s interests are not adequately represented on boards. In an earlier post, I wrote about the benefits of diversifying boards:

  • Boards set long-term direction and policies, including those that create family-friendly workplaces.
  • Boards are in charge of hiring and firing CEOs. Research shows that people tend to hire others like them. With few women and minorities on boards, talented women and minorities may be overlooked for CEO roles, keeping the glass ceiling in place.
  • Companies with more diverse boards pay higher dividends and enjoy more stable stock prices.

McGreevy notes that Senators Jackson and Atkins agree that having more women on boards will benefit the economy. The senators also stated, “We are not going to ask anymore. We are tired of being nice. We are tired of being polite. We are going to require this [change].”

Vanessa Fuhrmans and Alejandro Lazo of the Wall Street Journal explain that “the U.S. has no federal requirement for female representation on company boards and no other U.S. state has successfully pushed such a mandate.” In contrast, the Guardian reports that the European Union has proposed that boards increase female directors to as high as 40 percent, following similar mandates in several other European countries. This follows a trend in the EU, where the number of women on the boards of the largest companies more than doubled between 2005 and 2015.

Once again, California leads the way for the United States. Change doesn’t happen without pressure and legislation. Those with a vested interest in maintaining the status quo will do so — unless they have no choice. Electing women to public office will keep moving us forward. What other legislative goals might improve representation for women in the corporate workplace?

Anne Litwin, Ph.D. is an Organizational Development and Human Resources Consultant, Keynote Speaker, and Author of ‘New Rules for Women: Revolutionizing the Way Women Work Together.’

Originally published at www.annelitwin.com on October 22, 2018.

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