Time For Change: Why Women Must Demand a Seat at the Table

By:Anne Sheehan, Former Director Corporate Governance, California State Teachers’ Retirement System

With the stroke of a pen, Governor Brown signed the first ever statute mandating that public companies with headquarters in California have at least one woman on their board by the end of 2019, and add more women board members in subsequent years. Many critics are crying foul over the new law’s legality and the precedent it sets in government forcing governance standards. Ultimately, the courts will resolve the legal questions. The real question we should be asking: Why did it take legislation at all?

For over ten years, CalSTRS and CalPERS, along with other large institutional investors, like Blackrock, Vanguard, and State Street have been urging companies to expand their boards’ diversity. Research has clearly demonstrated the wisdom of such a move — showing that boards with greater gender diversity perform better for shareholders. Yet companies have been slow to respond — if they respond at all. Shareholders and others need to step up and do more to create board level change. The governor’s decision to sign the legislation is a wake-up call to shareholders that persuading and cajoling are not a long-term solution. To increase their influence on this issue, shareholders can take steps beyond engagement.

One of the single most powerful tools in any shareholder’s toolkit is proxy voting. Board directors need and want the support of their shareholders so they can continue their board service, and directors can continue to serve. Withholding votes for board members at companies with little or no gender diversity is an imperative step for shareholders to take. While many large shareholders have spoken out about the need for greater board diversity, few have used the power of their vote to achieve this goal. This past year, CalSTRS and CalPERS voted against hundreds of directors at companies with little or no board diversity. Shareholders can also call out those companies with little or no gender diversity on their boards. Naming and shaming can be a powerful incentive for companies to act in this age of social media where news can spread so quickly. And the truth of it is, these companies should be embarrassed by their lack of action.

A quarter of companies in California have no women on their boards, a statistic hard to believe in 2018. Alarmingly, only 18 percent of board seats among Fortune 100 companies are held by women — another statistic that’s hard to swallow in 2018.

Women make up half of the workforce, received half of the undergraduate and graduate degrees from our colleges and universities and yet the ultimate sign of success — a seat in a corporate board room continues to be out of their reach. This must change…

While the legal landscape for this new law remains uncertain as numerous lawsuits against it are expected to be filed, shareholders must step up their efforts for change to happen.

Ms. Sheehan is the former Director of Corporate Governance for the California State Teachers’ Retirement System (CalSTRS), the largest educator-only public pension fund in the world, where she was responsible for overseeing all corporate governance activities for the fund including proxy voting, company engagements and managing over $4 billion placed with activists managers. Prior to that, she served as Chief Deputy Director for Policy at the California Department of Finance. Ms. Sheehan is currently Chair of the SEC’s Investor Advisory Committee, a Member of the Advisory Board of the Weinberg Center for Corporate Governance at the University of Delaware, and a Member of the Board of Directors of the 30 Percent Coalition. Ms. Sheehan was named one of the 100 most influential people on corporate governance by Directorship magazine for the past eight years. The opinions in this article are presented in the spirit of spurring discussion and reflect those of the author and not necessarily the treasurer, his office or the State of California.

California State Treasurer's Office

Written by

Fiona Ma, CPA serves as California’s 34th State Treasurer

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