Last week California Governor Jerry Brown signed California Senate Bill 826, which will help to increase the number of women on boards of directors. According to a Catalyst study, women hold 643 of the 6,081 board seats at Fortune 500 companies.
Currently, about 94 California-based companies have no women on their boards. Senate Bill 826 would require publicly held companies based in California to have one woman on their boards by the end of 2019. With the requirements, the number of women on boards should increase each year. By the end of July 2021, companies will have to have at least one woman on boards that have four members or less, two women on boards of five people and three women on boards of six or more. Companies that fail to comply will be fined $100,000 for the first violation and $300,000 for the second or subsequent violations.
Studies have shown that having gender and racial diversity on boards is good for business. According to a Peterson Institute study, the presence of women on boards contribute positively to a company’s performance. The study also cited that companies that move from no women leaders to 30 percent of women were associated with a 15 percent jump in profit. Women board members contribute better reflection of the consumer decision-making since women take responsibility for household decisions; improving corporate governance; and a better mix of leadership skills as women are better at defining responsibilities, mentoring, and coaching. By bringing women onto boards and listening to them companies can exceed expectations.
When it comes to women of color on boards Harts questions, “whether or not we will see an immediate increase, or will it be a gradual effect.”
There are also concerns about how the bill will apply and whether it violates the Equal Protection Clause. Questions have come up regarding whether the bill will apply to companies that are headquartered in California but incorporated somewhere else. The California Chamber of Commerce opposes the bill, citing the “law elevates women over other underrepresented segments of the population, requires companies to discriminate against qualified men and violates the independent voting rights of corporate boards.” They continued by saying “it focuses too narrowly only on gender instead of other aspects of diversity, including race and sexual orientation.”
While legalities are being debated about the bill, one thing everyone can agree on is that waiting for something to happen is not an option. According to a 2016 Government Accountability Office report, it would take an estimate of 40 years for women in corporate companies to reach parity with men.
Regardless of what side you are on about SB 826, there is no denying the benefits of being on a board. Sitting on a board expands your network, improves your decision-making skills, and can help you gain a promotion. For anyone interested in serving on a board read about the 10 Strategies To Prepare Yourself for Board Membership.
As California paves the way for gender equality on boards, Harts has the best advice for millennial women. “Don’t be afraid to go after those seats, level up and prepare yourself to benefit,” she says.