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CNN Business
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Companies headquartered in California can no longer have all-male boards of directors.
That’s according to a new law, promulgated Sunday, which requires companies listed on the state stock exchange to place at least one woman on their board of directors by the end of 2019, or face penalties.
It also requires companies with five directors to add two women by the end of 2021, and companies with six or more directors to add at least three additional women by the end of the same year.
This is the first such law to be passed in the United States, although similar measures are common in European countries.
The measure passed the California state legislature last month. It was signed into law by Gov. Jerry Brown on Sunday, along with a series of other bills aimed at “protecting and supporting working women, children and families,” the governor’s office said in a statement.
The majority of S&P 500 companies have at least one woman on their board, but only a quarter have more than two, according to a PwC study.
California Sen. Hannah-Beth Jackson told the Wall Street Journal last month, when the law was passed, that “a quarter of California’s publicly traded companies still don’t have a single woman on their board, despite numerous independent studies showing that companies with women on their boards are more profitable and more productive.”
“With women making up more than half the population and making more than 70% of purchasing decisions, their perspective is critical to discussions and decisions that affect corporate culture, actions and profitability,” she told the outlet.
Some see the California law as a crucial step toward establishing greater parity in corporate leadership.
But implementing quotas can be controversial, Vicki W. Kramer, lead author of the 2006 study “Critical Mass on Corporate Boards,” told CNN last month. Opponents say the pressure from quotas will lead to appointments of unqualified women and potential discrimination against male candidates.
On the other hand, if quotas aren’t set, companies risk failing to diversify their workforces. She cites more “ambitious” laws in other states, such as Pennsylvania, where a 2017 resolution urged public and private companies to have a minimum of 30% women on their boards by 2020. But without stronger legislation, Kramer said, better numbers won’t follow.
According to Kramer, California’s legislation is weak compared to Norway and other European countries, which require a certain percentage of women on boards. For large Norwegian companies, the law requires women to make up 40 percent of the board.
Cnn
