Women joining boards of directors in record numbers after the legislative push

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Hannah-Beth Jackson with a friend

Amid growing demands for women on boards of directors and headlines on corporate malpractices like Google’s sexual harassment scandals, California’s 662 publicly traded companies have added 669 women to their boards over the past two years.

While this is an impressive leap in women on board of directors, companies haven’t done it because it suddenly seemed like a great idea to them.

This sea change is driven by California Senate Law 826, which came into effect in 2019 and requires many of the West Coast’s most powerful boardrooms to assign seats to women.

And now, under state law, those companies must add another 600 women to their boards by the end of 2021.

But instead of repelling, SB 826 made a powerful impact. Washington state has copied California law, and 10 other states are considering a mix of California-like diversity quotas, solar laws revealing the number of women on board of directors, and in one state a resolution that encourages companies. to diversify their advice, according to Harvard Law School Forum on Corporate Governance.

“It’s a good story,” says SB 826 author Hannah-Beth Jackson, recently retired from her seat in the California Senate. After his bill was passed in 2018, remember, then Gov. Jerry Brown wrote a “signature” letter – which he rarely did. He called SB 826 a shot through the male-dominated world arc. And under his signature was his wife’s signature. “

SB 826 still faces a challenge from the conservative activist group Judicial supervision which could be decided by a court this year. Another dress of Pacific Legal Foundation on behalf of a shareholder of the company, who was rejected by a court, he is on appeal to the Ninth Circuit Court of Appeal. The groups argue that the law is unconstitutional by requiring companies to discriminate in their choice of board members based on gender.

But even if one or both prevail in court, leading experts say there is no going back.

In early December, the Nasdaq announced that, with the approval of the Securities and Exchange Commission, it will require more than 3,000 companies listed on its stock exchange to have at least one woman or a member of an underrepresented minority on their boards, within two years – or explains Why not. Days later, BlackRock Inc., the huge multinational investment management firm, announced it would vote against directors who fail to increase gender and ethnic diversity on their boards.

“Other ecosystems are doing it now, with BlackRock saying, ‘We will vote against board members who don’t understand diversity,’ says Coco Brown, founder and CEO of Athena alliance, which teaches senior women to level up in companies and boards of directors. Brown says: “What happened is a movement not only led by women, but that has taken hold within the power system.”

In 2013, women held only 15.5% of seats on the boards of directors of publicly traded companies in California.

That year, Jackson wrote a non-binding resolution urging councils to add women. Its resolution was passed but ignored. The persistent Jackson kept an eye on and recalls being “disgusted five years later, when data showed that by 2018 those same councils had only 16% women. Men choose men because they are more comfortable with. they brothers. “

Fast forward to the end of 2020, with the SB 826 now two years old. Olivia Morgan, co-founder and executive director of the nonprofit California Partner Project, which is conducting in-depth studies of SB 826, says the number of publicly traded companies with zero female board members has plummeted from nearly 30 percent before SB 826 to 2.3 percent by the end of 2020.

The California Partners Project found that 669 women have been added to the boards of directors of publicly traded Californian companies after SB 826. By the end of this year, those companies are to add about 665 more women to their boards.

Morgan notes that a statement by naysayers – that SB 826 created “the occupation of council seats by a select few” – turned out to be incorrect. “There are 1,275 seats in California now occupied by women, and only about 150 are occupied by women in multiple councils,” Morgan says.

Only 10 companies in California have not added a woman to their boards. Morgan declined to name them, but attorney Leigha Weinberg, program consultant for the California Partners Project, described them as “you’ve never heard of” companies, special-purpose acquisition companies set up solely to raise capital for buy an existing company.

Attorney Ann Ravel, former member of the Federal Election Commission and lecturer at the University of California, Berkeley, School of Law, calls the changes imposed by SB 826 “a great victory” over old-school attitudes, including those in world technology. and Silicon Valley.

Ravel was part of a team from the Renne Public Law Group that led part of the 2020 negotiations in which Google’s parent company, Alphabet, agreed to spend $ 310 million in diversity, equity and inclusion efforts. Resolving allegations of sexual harassment and misconduct by some Google officers and directors. Ravel says some tech executives thought “they didn’t have to behave like normal people should behave.”

In this context, says Ravel, “SB 826 will have a real impact,” across the state and beyond.

In 2020, Washington became the second state to grant mandate more women on board. The The Harvard Law School Forum on Corporate Governance states that in addition to California and Washington, at least 10 other states have enacted, or are considering, board diversity laws. Hawaii, Massachusetts, Michigan and New Jersey are considering mandates like California, while Maryland, Illinois and New York now require companies to disclose the number of women holding seats. Colorado passed a resolution encouraging companies to add women to boards.

Add to this the impact of AB 979, a 2020 state law that requires California public companies to appoint, by the end of this year, at least one director of an underrepresented group defined as black, Latino, Asian, Native American, Pacific Islander, Native Hawaiian, Native of Alaska, gay or transgender.

Different companies and organizations, ranging from National Association of Female Entrepreneurs to Athena Alliance a the council list, are helping pave the way for qualified women and members of underrepresented groups.

But many wonder, why did it take a law?

Shannon Gordon, CEO of theBoardlist, which matches qualified women with boards of public and private companies, thinks that, despite the momentum of the past decade, “the seats on the board are often filled through referrals from investors and members. of the council “, often resulting in” getting the same exact names over and over again. “

Gordon says, “We still hear, ‘Gee, I really wanted to add a woman or a person of color to the board,'” perpetuating the myth that there is no talent.A lot of people really mean it, because they’ve made 20 calls to their network. “

“They play golf together, literally,” says the blunt Jackson.

Conservative activist group Judicial Watch argues that companies with homogeneous boards are within their rights. Judicial Watch president Tom Fitton sees SB 826 as “blatantly unconstitutional”. He says his gender quotas go against the California constitution, which states that the state cannot discriminate “or grant preferential treatment” based on gender or race, while other critics say the law violates similar provisions of the equality protection of the United States Constitution.

Fitton says Judicial Watch also filed a letter opposing the Nasdaq’s attempt to impose a similar quota on the exchange. “So what happened in California is spreading,” Fitton said.

Half-jokingly, Athena Alliance’s Coco Brown claims that there is another powerful force at work sweeping the boardrooms of California: “A lot of people don’t want to be jerks.”

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