Closing The Gap

California just became the first state to require women on corporate boards

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Today, women hold just 18 percent of positions on the boards of the 3,000 largest publicly traded corporations in the U.S. In 2017, 624 public companies had no women on their boards at all.

This week, California became the first state to require publicly held corporations headquartered in the state to include women on their boards.

On Sunday, California Governor Jerry Brown signed 79 bills into law, 19 of which were part of a package aimed at supporting women, children and working families. Among them was Senate Bill 826, which requires any publicly held corporation headquartered in California to have a "representative number of women on its board of directors." This would require hundreds of Californian companies to make changes to their current boards.

In a signing message, Brown wrote that "[t]here have been numerous objections to this bill and serious legal concerns have been raised" that might "prove fatal to its ultimate implementation." Still, he emphasized, "it's high time corporate boards include the people who constitute more than half of the 'persons' in America."

California Gov. Jerry Brown
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California Gov. Jerry Brown

The bill requires that every publicly traded corporation headquartered in California have at least one women on their board of directors by the end of 2019, according to the Los Angeles Times. Companies with six or more members on their board of directors will be required to have at least three women by the end of 2021.

According to the Associated Press, companies will be fined $100,000 the first year they fail to meet these requirements and $300,000 for each additional year they do not comply. They will also be fined $100,000 if they do not report the gender ratio of their board of directors to the California secretary of state.

The text of the bill suggests that promoting gender equality on corporate boards will not only improve opportunities for women and girls but will also improve productivity, citing a 2014 study from Credit Suisse that found that companies with all-male boards had an average return on equity of 10.1 percent while companies with at least one woman director had an average return on equity of 12.2 percent.

Critics of the bill, however, say that it will make it more difficult for companies to improve racial and ethnic diversity. Jennifer Barrera, senior vice president of the California Chamber of Commerce, tells the AP, the bill "creates a challenge for a board on achieving broader diversity goals."

Still others question the bill's legality. "I'm not at all convinced it would pass legal muster," Jessica Levinson, a professor at Loyola Law School, tells the Los Angeles Times. "It's a clear gender preference in that you are saying you need to single out women and get them on boards. The question is, can you make that preference and will it hurt men."

Still, the authors of the bill maintain that the measure is necessary to achieve better representation for women. "We know that when boards are diverse and women's voices are heard, it's better for the whole workforce," State Senator Connie Leyva tells the San Francisco Chronicle. She says that Senate Bill 826 sends "a big message to women that we value them, we respect them here in California."

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