California legislators and large companies take the lead to add female directors
By Kathy Gurchiek
October 17, 2018 - SHRM
A new California law requiring publicly traded companies to increase the
number of female board directors is the latest example of efforts to improve
gender diversity in business leadership. Some large companies are leading the
way, but progress has been slow.
Among Fortune 500 companies in 2017, women filled 38.3 percent of newly appointed independent board seats, according to Heidrick & Struggles' Board Monitor. The annual study, released in July, found the largest percentage of women among new directors since the data was first tracked in 2009, up from 27.8 percent in 2016.
However, there has been only slight improvement in gender composition on boards overall, with the percentage of women on Fortune 500 boards rising only to 22.2 percent in 2017, up 1.2 percentage points from the previous year—indicating that most new female director appointees were replacing other women who had left their board roles.
Moving the Needle
California's new law requires that publicly traded companies with headquarters in the state have at least one woman on their board by the end of 2019 or face financial penalties. Boards with five members must increase the number of female directors to two; there must be three female directors on boards of six or more members.
"Given all the special privileges corporations have enjoyed for so long," said Gov. Jerry Brown when he signed the bill into law, "it's high time corporate boards include the people who constitute more than half the persons in America."
Fifty-four Fortune 500 companies are based in California, the most of any state. Four out of five publicly traded companies with executive offices in California already have at least one woman on their board, according to Stewart Landefeld, corporate partner at Perkins Coie law firm in Seattle.
The good news for those that don't, he said, is there is "a very deep pool"
of women to fill those positions.
Landefeld co-chairs onBoarding Women, which was founded in 2014 by Seattle business owners to foster the development of female board directors in Washington state. At that time, women made up 14 percent of the directors on the boards of the state's companies. Representation "lagged significantly behind the rest of the country," according to the group. Its goal is to increase the number of women on public company boards there to 30 percent by 2020; as of March, women occupied 22.9 percent of Washington's board seats.
How to Get There
"If you want to diversify your board, you can diversify it very easily," Landefeld said. He suggested:
Is Mandatory Inclusion Right?
Not everyone favors the concept of mandating female board representation.
A coalition of 30 businesses and groups led by the California Chamber of Commerce opposed the state's new law. Critics said a quota based solely on gender considers only one element of diversity and would violate the U.S. and California constitutions because it could conceivably put companies in the position of turning down a male board candidate or displacing a male board member based on his sex, according to the Wall Street Journal.
Consultant and gender strategist Jeffery Tobias Halter said he doesn't favor government intervention in corporate America. However, the author of Why Women: The Leadership Imperative to Advancing Women and Engaging Men (Fushian, 2015) said that putting women in board seats is "one of the most powerful steps a company can take to drive gender equity."
Companies with three or more female board members, he said, "typically have better benefits for women and all employees, create a more inclusive culture to drive engagement, retention and advancement … and are more likely to tie executive compensation to the implementation of strategic diversity initiatives."
Women also must advocate on their own behalf, Landefeld pointed out. That includes telling appropriate people—including their mentors—about their interest in serving. He recommended that women take a self-assessment to gauge their board readiness. The Public Company Handbook: A Corporate Governance and Disclosure Guide for Directors and Executives (Bowne, 2003) by Landefeld describes board requirements. Some organizations, such as local chapters of Women Corporate Directors, offer opportunities for women to test their skills.
Also, volunteer work such as serving on a local United Way or Girl Scouts board helps build experience and knowledge of the basics of board governance.
"These skills will translate to a public company and may also introduce you to sophisticated fellow board members," Landefeld said.