On October 1, 2018, Governor Jerry Brown signed into law Senate Bill No. 826, requiring all publicly traded companies to have a minimum amount of women on their board of directors. By the end of 2019, publicly traded companies whose principal executive offices are located in California will be mandated to have at least one female director. By 2021, companies with five directors on their board must have two female directors and companies with seven or more members must have three female executives. The point of this law was to achieve greater gender parity in a vastly male-dominated arena. One-fourth of California’s public companies in the Russell 3000 index have no women on their board of directors; and for the rest of the companies, women hold only 15.5 percent of the board seats.
This new move by California is a win for the state, both for women’s rights and for the economy. It has been shown in numerous studies that having women serve on a company’s board of directors improves the company’s profitability. This is likely because having a more diverse group of people making key decisions about a company can allow for greater innovation and new ideas. It can also allow companies to better serve the needs of diverse customers. A 2017 study by MSCI found that United States’ companies that began the five-year period from 2011 to 2016 with three or more female directors reported earnings per share that were 45 percent higher than those companies with no female directors at the beginning of the period.
It also lessens the possibility of diversity related scandals, such as Bic Pen’s infamous “Pens for Her” product that features pink, bedazzled ballpoint pens that cost up to 70 percent more than Bic’s standard pens. It does not seem too hard to believe that if a single woman had been on the board at the time of this idea, it would not have gone through. Similarly, Doritos’ embarrassing “lady-friendly Doritos” product claimed to be “low-crunch” and produce less dust powder on your fingers, as well as be specially designed to go in a woman’s purse. This simply further plays into stereotypes and societal expectations that women should be quiet, dainty and embarrassed about eating. The internet roasted the product so much that it is now not going to be made, but again, having women on the board would likely have prevented the entire public relations nightmare.
Besides the economic gains, having more women on corporate boards allows for more women to move up, and opens the doors for more female CEOs. It is 2018, and it is time that we push for greater gender equality in the business world. With the recent nomination of Brett Kavanaugh to the Supreme Court despite allegations of sexual assault, it became clear that more needs to be done to reduce sexual harassment and increase the safety of women in the workplace. Having more female board members would improve the overall workplace environment, potentially making women feel safer and more comfortable speaking up about sexual harassment. It would also make it less likely that women in the company would be paid less than men, and allow more women to feel comfortable asking for a raise. According the the Pew Research Center, Asian women make 87 percent as much as white men, white women 82 percent, Black women 65 percent and Latina women only 58 percent. By removing the option of only men being in power, it changes the overall culture of the workplace and makes it more likely that these kinds of changes will be implemented.
SB-826 does face some legal concerns regarding whether or not it is actually constitutional. Technically, the law discriminates based on gender, which means it is subject to intermediate scrutiny by the courts. This places the burden of proof on the CA government to prove that the law serves an “important” state interest and that the legislative classification is “substantially related” to the goal of placing more women on corporate boards. This is typically difficult to prove, though not as difficult as strict scrutiny, which is applied to cases of race discrimination. However, regardless of if the law remains or is deemed unconstitutional, the message it sends is clear. More women need to be put on corporate boards. This bill has and will continue to increase awareness about the problem and why it’s important to have more women on corporate boards. The more visibility this issue gets, the more customers will put pressure on companies to make changes. Companies that claim they are liberal and supportive of women’s rights will need to actually act on those claims in order to keep customers. Even if SB-826 does not last, the message it sends is clear and will remain until corporations finally start making equality on their boards a priority.