Media waves are all abuzz about the California bill SB 826 that, if signed into law, would make the state the first in the nation to require that all corporate boards have at least one woman by the end of 2019 with more aggressive goals in subsequent years.
Even the bill’s author, Senator Hannah Beth Jackson, agrees that ideally we would not have needed it, especially given all the data available proving that diversity is a driver of financial performance. But, women hold precisely zero seats on a quarter of the companies publicly traded in California and only one in six board seats in companies in the Russell 3000, making the national numbers no better. At this rate, we won’t reach gender parity until 2055. Opponents are worried about discrimination against men, token-ization of women and promoting gender above other aspects of diversity.
It looks highly likely that this bill will become law. The Senate passed the bill last Thursday, sending it to Governor Jerry Brown to sign into law. So, rather than getting bogged down in a debate about the pros and cons of quotas, let’s take a look at what we have to look forward to.
First, by definition, quotas get more women in the boardroom. France went from 12% of board seats in companies in the SBF 120 index held by women in 2010 to 43.3% in 2018 after implementing a 40% quota in 2011. The same has held true for Germany, France, Belgium, Iceland, and Italy. Even in countries like the UK that has only provided guidelines, the percentage of women in board seats in the FTSE 100 has more than doubled where they were a decade earlier.
Second, for California boards without an open seat, this bill will encourage turnover. Given the pace of change and the ever-evolving challenges such as cyber security, digital disruption, constant innovation, it’s unlikely that one board member will be effective at every stage of a company’s development. It’s in the company’s best interest to refresh its board periodically to ensure it is well-positioned to address its most strategic issues. So, if a company doesn’t already have a board term limits, forcing turnover will very likely help address issues with board composition.
We can also look forward to the “discovery” of qualified women who have not yet had the opportunity to serve on a board. Within theBoardlist community, women who have board experience have served on an average of three boards. Of those who have no board experience, roughly half are CEOs, C-Suite execs, Presidents, or Managing Directors. Rather than knocking on the same doors, this bill offers the opportunity to introduce the thousands of women that make up this pool of qualified talent to boardrooms. And, with those kinds of qualifications, there is no need to anyone to worry about being a token.
Finally, I am hopeful that SB 826 will encourage greater investment in female leaders to ensure a qualified pipeline of talent. No one has ever called theBoardlist and said, “I just want a woman on the board, it doesn’t matter if she’s qualified.” Women only get placed on boards if they are uniquely qualified to serve in that capacity for that specific company. There is already a strong pipeline and lots of choice for those companies who choose to look. But, the fact remains that women are severely underrepresented in senior roles. With the need for qualified board candidates, we can hope that structural issues that have held women back such as the gender pay gap and family leave policies will receive greater focus.
I will say that one criticism of SB 826 that really resonates with me is the promotion of gender above other aspects of diversity. The good news is that the bill has no stipulations about how it is implemented which means we have choice. Let’s use this as an opportunity to ensure that the slates of candidates presented for any board role (or any role for that matter) represent intersectional diversity. There is no reason that the women that are placed on boards as a result of this legislation can’t be Hispanic, African-American, Asian-American, LGBTQ, gender non-binary or representative of any other diverse group. For those who are frustrated by a government mandate on who to hire, let’s show them we can do one better. All it takes is opening our eyes — there is a whole world of incredible, diverse talent just waiting to be discovered.