UPDATE: Oct. 1, 2018: California Governor Jerry Brown signed Senate Bill 826 into law Sunday, according to a statement. The new law effectively mandates that all publicly traded companies whose "principal executive offices, according to the corporation's SEC 10-K form" are located in the state must have at least one female board director by the end of 2019.
By the end of 2021, the new law raises the requirements for companies with five or more board members: companies with five-member boards will need a minimum of two female directors to be remain compliant, while those with six or more members on their boards will need a minimum of three female directors. Companies with four or fewer board directors will still only need one female director by the end of 2021.
Employers that fail to comply with the law will be fined $100,000 for a first-time violation and $300,000 for a second or subsequent violation. The female director(s) must hold their seat(s) during at least "a portion" of the calendar year in order to avoid a penalty.
"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," Brown wrote in a letter to members of the California State Senate after passing the law.
Dive Brief:
- The California legislature is considering a mandate to require corporations to include women in boardroom positions. SB826, an Act that would be added to the state’s Corporations Code, would require businesses have a minimum amount of women on their Board of Directors, dependent on the size of the Board. For businesses with four or less members, one director must be female; five member boards must have two female members; and for boards with six or more members, three must be female members. The proposed legislation defines female as anyone who identifies as a woman "without regard to the individual's designated sex at birth."
- In 2013, the state passed a non-binding resolution encouraging public companies to increase female representation in Board of Director positions, TechCrunch reported. The result was about a 20% increase in participation, but the resolution expired in 2016.
- The state is hoping to mirror similar legislation abroad, like Norway's law which requires 40% female representation, or Germany's law requiring 30% female representation, TechCrunch reported. Opponents of the legislation question its legality and whether or not it opens business up to discriminating against other protected classes in favor of women.
Dive Insight:
More companies have shifted focus to increase the number of women on their leadership teams in an attempt to improve diversity initiatives, partly in response to the #MeToo movement. Such a move is apparently good for business; women as bosses or for the C-suite or in managerial positions has a positive effect on earnings, according to a report from Bloomberg.
The recent focus on women at work has resulted in an increase of over 40% in the ratio of female to male hires made after October 2017, or around the time the #MeToo movement really took off. But women, especially women of color, still struggle to find their spots at the top. Only 24 CEOs on the Fortune 500 list were women on the 2018 list, and none of them were black women.
Diversity and inclusion continue to be a focus of 2018 — but as opponents to the bill note, hiring for diversity numbers alone is often not enough to create a true environment of inclusion. Finding good leaders requires that an employer expand their reach beyond the traditional talent pools and build a solid talent pipeline that encourages growth for employees of all backgrounds through support groups, mentorships and solid benefits.
