A new California law requires women on the boards of corporations as of January 1, a mandate that’s likely to have an economic effect: U.S. companies with at least three female directors reported earnings 45 percent higher than companies with no female directors, according to a study by American finance company MSCI from 2011-2016.
The new law, Senate Bill 826, introduced by State Senator Hannah-Beth Jackson, affects all publicly held California corporations, which are required to have a minimum of one woman on their board of directors. Boards with five members must add at least two women, and boards of six or more must add at least three women by the end of July 2021.
Of the 400 California-based businesses in the Russell Index, as of September 30, one-quarter had no female directors. For instance, Skechers U.S.A., the third-largest shoemaker in the U.S., had only men on its board prior to the appointment of Katherine Blair last May, and must now name two or more women in the next year and a half. Apple and Facebook must add one more woman to their board of directors as well.
With women among the directors, companies with more than $10 billion in market shareholder stock outperformed comparable businesses by 26 percent, according to a Credit Suisse study of 2,000 global companies from 2006 to 2012. The study found women on boards improved stock performance, among other key measures.
Another study on workplace satisfaction — this one by Harris Poll, Berlin Cameron, and The Female Quotient — showed that 50 percent of the Americans polled said they would prefer to work at a female-led company over a male-led company because they are more purpose-driven, more likely to have access to childcare, and more likely to offer equal pay, Forbes reported. Women-led companies seem to be better at inspiring belief in their products or services, leading to more overall employee engagement, when compared to male-led companies. Forbes quoted Kevin O’Leary, who hosts the high-testosterone business program Shark Tank, saying he preferred to invest in companies run by women because they produce superior returns.
Sen. Jackson said female insight is “critical to discussions and decisions” for businesses, with “women comprising over half the population and making over 70 percent of purchasing decisions.”
A conservative activist group disagreed. Judicial Watch filed a lawsuit against the implementation of SB 826 on August 9, 2019, arguing it violated the California Constitution, which prevents gender discrimination, and that it is illegal under California law to spend taxpayer resources to enforce SB 826, calling it a “gender quota.”
While then-governor Jerry Brown publicly acknowledged that the legislation has “potential flaws,” he signed it into law late in 2018 in light of today’s “political climate.”
The bill has also faced criticism on the liberal front as insufficient. California Assemblymember Lorena Gonzalez (D-SD) saw additional legislation as essential to address the lack of racial and ethnic diversity at the top of the corporate ladder.
“We have historical barriers not only to women but to folks who are African American and Latino, Asian American, and we need to address that as well,” Gonzalez said in a Roll Call interview. “We’re not done.”