Why This California Boardroom Law Is Really A Game-Changer

If you think California’s new law requiring publicly traded companies headquartered in the state to have at least one women on their board is a superfluous bill in an era when women have no trouble rising up the corporate ladder, then you have not been paying attention.

For all the talk of women’s rising status, in corporate America things are actually getting worse.

The number of women at the helm of the nation’s biggest companies has dropped dramatically in the last year. Female CEOs at Fortune 500 companies fell by 25 percent in 2018, dropping from a pathetically low number of 32 to a paltry 24. Women are at the helm of just 4.8 percent of the 500 most profitable companies in the United States. This exclusive club includes Mary Barra of General Motors, Safra Catz of Oracle, Michelle Gass of Kohl’s, and Michele Buck of Hershey.

In California — one of the bluest states in America — 25 percent of publicly held corporations don’t have women on their boards. It’s against this backdrop that the California board mandate bill must be evaluated. The new law requires at least one female director on the board of each California-based public corporation by the end of next year even if the company is incorporated outside the state. Companies must have up to three female directors by the end of 2021, depending on the number of board seats. If they fail to comply, companies face fines up to $300,000.

Opponents of the law have said it is both unconstitutional and as a practical matter, unenforceable. Groups like the California Chamber of Commerce argue that the bill will force companies to discriminate against other classes of equally qualified board candidates and sacrifices other diversity efforts that focus on the LGBT community, race, and individuals with disabilities.

These arguments are unpersuasive. There is no reason that other diversity goals can’t be pursued in conjunction with gender parity. The recent spate of sexual assault victims that have come forward in the last six months as a part of the #MeToo movement to tell their stories, and the negative response, they have faced demonstrate the entrenched misogyny and patriarchal systems that govern our politics and corporate boardrooms. This system has been proven to be a formidable foe.

Other critics would be right to point out that there is no guarantee that increasing the number of women on corporate boards will reverse the downward trend of women CEOs or that their presence will guarantee that women will face less hostile workplaces. Nor is there any evidence that putting more females on corporate boards will pend the statistic of one in three women who are sexually assaulted.

Sadly the single woman on the board of directors for Snapchat didn’t prevent its executives from hosting an ad for a mobile game called “Would You Rather” which featured photos of Rhianna and Chris Brown and asked whether players would rather slap her or punch Brown. This insensitive and tone-deaf ad, which may light of domestic violence, was only pulled after Rhianna and other celebrities took to Twitter to protest. Finally, Snapchat pulled the ad and issue a full-throated, yet late, apology. We don’t know what role the lone female board member, Joanna Coles, played, if any, in the whole episode, but I would like to think that a corporate board with more women would never have allowed the company to run such an ad and would have intervened before the company lost $800 million dollars from its market value.

But there is talking and there is doing. And if anything this new law offers a ray of hope.

While there can be no dispute over the changing tide for women in politics, business is different. The barriers of entry are different. It’s not a democratic process that takes place in plain sight like running for office. Who gets the top job at a corporation is determined by the board of directors. The products and services that a company places on the market, is determined by the board. Whether the company has a robust diversity program and has a commitment to advancing women and minorities rest with the board.

Research shows that boards with three or more women outperform those without. A Catalyst study of Fortune 500 companies found that the companies with the highest percentage of women on boards had a greater return on equity, higher sales, and return on invested capital. This economic case although well-documented has not been sufficiently compelling to cause big companies to diversify their boards.

Legislation cannot change attitudes, but it can change the composition of boards. In an era where some men have demonstrated open hostility to women, particularly sexual assault victims, Governor Brown’s decision to sign this law could not have been more timely. Men in positions of power have resisted at every turn efforts by women to gain parity. Even when the economics dictate more gender and racial diversity on boards and in corporate America, men bind together and hold firm. They see replacement rather than enhancement and the fear of being vanquished causes them to grasp even more tightly to the pay, power, and prestige of corporate boards. This all ends for California’s biggest businesses, which includes more than 50 of Fortune 500.

Does the bill face legal hurdles? You bet. But my humanity tells me that this bill is a lodestar.

Areva Martin is a civil rights attorney. She's also the author of Make It Rain and cohost of Face The Truth.