California can accept first US gender quotas

Governor Jerry Brown is considering the possibility of signing a bill that would make California the first state in the country to require more women to be present among the board of directors of state-owned companies. Brown is now weighing the potential advantages and disadvantages of such a solution.

Фото: Depositphotos

The governor should also take into account the concerns and direct opposition of some to gender quotas - among them, oddly enough, are women leaders, writes USA Today.

The bill already on Brown's desk, also known as SB 826, would direct public companies headquartered in California to place at least one woman on their board of directors by the end of 2019 and, depending on the size of the company's board, a minimum of two or three - by the end of 2021.

Penalties for non-compliance with the law will start from 100 000 dollars for the first violation and increase to 300 000 dollars for subsequent cases.

At first glance, the legislation may seem worthy of unanimous support from women, who make up 47% of the state's workforce but only 17,7% of board members nationwide. However, concerns about government interference in companies' affairs and possible accusations of tokenism - formally acquiescing to a demand without actually agreeing to it - have those seeking gender equality in boardrooms wondering about the bill's potential.

“It’s hard to imagine how the government makes decisions for our businesses. “I personally would rather deal with it without regulations—so that the right things happen anyway,” says Patty McCord, a former Netflix executive who now sits on the Lending Club board of directors. “I’m kind of against the law, but I’m also in favor of it passing, because it brings the necessary changes to life.”

Фото: Depositphotos

The California Chamber of Commerce is much more categorical in its standoff, making a statement saying that the bill "puts California in a legally difficult position."

The House argues that SB 826 addresses only one factor—gender—and may violate the U.S. and state constitutions.

“At the policy level, this is an intervention in the governance of the corporate board, and shareholders need to really determine what's best for the corporation,” said Jennifer Barrera, senior vice president of policy at the Chamber. “And the law faces a number of legal obstacles and challenges.”

Supporters believe that the law will be able to change the ingrained culture of the dominant male power, which hardly changes over the years. They also point to the successful inclusion of women in councils in European countries that set minimum quotas to 40%. Among them are Germany, France, Spain and Italy.

Some independent studies show that companies with at least one female director work better than those who have only men on the board.

A global analysis of Credit Suisse's more than 2000 companies, conducted from 2006 to 2012 year, showed that firms with a female presence on the board coped better with key indicators, including equity performance. Shares of companies with female directors and a market capitalization of more than 10 billions of US dollars by 26% bypassed shares of similar companies with male leadership.

The bill cites statistics from 2017 that show one-quarter of the 446 publicly traded California companies in the Russell 3000 — an index that serves as a benchmark for the entire U.S. stock market — do not have a single female director. Women occupied just 566 of these companies' 3 total onboard seats, or 655%.

At the national level, almost half of the 75 largest IPOs (initial public offerings) from 2014 to 2016 were launched by companies that do not have women on councils. Of the companies in Fortune 500, only 24 has female executives.

California State Senator Hanna-Beth Jackson, a Democrat from Santa Barbara, created a resolution in 2013, according to which corporations are invited to diversify their advice. In the five years since then, the proportion of council seats held by women in the state has increased from 15,5 to 16%.

Фото: Depositphotos

Other states could follow California's lead, which is one reason the law is needed, supporters say. Several states, including Massachusetts and Illinois, have passed unrelated resolutions similar to California's bill.

Observers believe that progressive leadership states will inevitably follow this example if Brown signs the bill. The governor must make a decision before 30 September and has not yet specified which version he is leaning towards.

And a certain movement has already begun. The Equilar Gender Diversity Index says the share of women on Russell 3000 boards increased from 16,9% to 17,7% from the first quarter to the second quarter of 2018. 80,5% of Russell 3000 companies have at least one female director, although often only one. The vast majority of seats - more than 82% - are occupied by men.

McCord said that if 3 years ago she did not receive any proposals to join the boards of directors, then in 2017 there were four such proposals, and in the current year - which has not yet ended - there are already five.

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