In September 2018, California's Governor Jerry Brown signed the country's first bill mandating public companies in the state include women board members.
By 2019, all public corporations based in California will require one woman board member. That number will then rise to a minimum of two to three women board members, depending on board size, by mid-2021.
Companies that fail to comply face fines.
"…It's high time corporate boards include the people who constitute more than half the 'persons' in America," Gov. Brown wrote in a letter to the members of the California Senate.
"The conversation of diversifying boards with more women is a very old debate, and I think the California law reflects a degree of frustration that there has been insufficient progress on this issue," says Faye Wattleton, co-head of governance practice at the search firm Buffkin Baker.
"The bill," Wattleton continues, "is a way of moving the dial so that boards more accurately reflect the marketplace of the companies that serve shareholders' interests."
The way Stormy Simon sees it, the bill shines a spotlight on gender inequality issues making news in recent months. (Simon is former president of Overstock.com. She left the corporate world to become an advocate for the cannabis industry.)
"Gender inequality at the executive level has always existed, but the conversation surrounding it has finally reached a boiling point," says Simon. "It's no longer acceptable to look at the statistics regarding the issue and simply say it isn't happening. It's unfortunate that the inclusion needed to be enforced by law, but it's a win."
Benefits of Increasing Women Board Members
Senate Bill No. 826 lists a variety of compelling reasons for more women board members, including more opportunities for women in the workplace and boosting the California economy.
The bill also refers to various studies that show that company boards with women fare better, including experiencing improved stock performance.
A study released in October 2016 by European Corporate Governance Institute (ECGI), an international scientific nonprofit, examined corporate boards of 1,691 firms from 1997 to 2011. The study found "evidence that firms with a larger fraction of female directors on their board have greater dividend payouts."
Studies consistently show that diverse groups outperform homogeneous groups, adds Kameka Dempsey, founder of KD Leadership Strategies, an HR consultancy.
"Diverse groups…are proven to arrive at better decisions," she says. “A board is at times tasked with making tough calls. A diverse group will time and again put more options on the table."
A gender-diverse board can bring a broad spectrum of thoughts, perspective and ideas to the boardroom table that might not be considered otherwise, believes Tere Blanca, founder, chairman and CEO of commercial real estate firm Blanca.
"Many studies confirm that companies with the highest representation of women board members have attained significantly higher financial performance, on average, than those with the lowest representation of women board directors," says Blanca.
Employee morale is also likely to improve when there are women board members, believes Ximena Hartsock, president of Phone2Action, a digital advocacy company.
"Employees like to see in power people who represent them and look like them," says Hartsock. "Female board members also serve as role models for younger women, opening the door for their leadership and advancement—including into the boardroom."
The Inevitable Rise of Women Board Members
Some believe that the ruling in California has opened a door for more states to follow suit.
"I think the push for more women board members will become a trend throughout the country and serve as a guideline for publicly traded companies. The trend will also slowly but surely impact private companies," says William W. Eigner, a partner at the law firm, Procopio, Cory, Hargreaves & Savitch LLP, and a member of several boards.
"As has been the case in Europe, where governments have mandated a proportion of boards to include women, it is likely that the U.S. will experience a similar wave of legislation," she says.
Simon believes that many companies will begin to include women board members if for nothing else than good public relations.
"One of the reasons this should become a trend is it's a much better message for employers to say, 'I'd like to announce Ms. XX to our board of directors,' rather than admitting that they were mandated to do so," says Simon.
Tips for Increasing Gender Diversity on Your Board
If you wish to increase gender diversity on your board of directors and encourage the addition of women board members, it helps to have a definite plan.
A board is at times tasked with making tough calls. A diverse group will time and again put more options on the table.
—Kameka Dempsey, founder, KD Leadership Strategies
"Diversity for its own sake serves little to no purpose," says Raméz A. Baassiri, author of Interrupted Entrepreneurship. He is a board member of a multinational, multigenerational family business.
"Every action taken by a business needs to serve a purpose and add to the bottom line of the organization," says Baassiri. "Adding women board members needs to be approached in the same way."
"Nobody benefits from having a woman on the board only because she is female. She needs to be the right fit for the organization," she says. "It's important to engage your stakeholders of both genders to create the kind of environment that attracts women who will add immense value to your company's board."
Interested in adding women to your board of directors? Consider the following additional tips:
● Expand the required criteria for board positions. Rather than requiring prior board experience, make having an expertise in the company's area of business a prerequisite.
● Consider a healthy number of candidates while filling in available board positions.
● Groom your employees for leadership positions. Doing this can help improve their chances of becoming a part of management and eventually the board of directors.
● Focus on corporate responsibility and display strong corporate values that attract high-caliber potential board members of all genders.
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