Advertisement

Should California force corporations to add women to their boards?

Should California force corporations to add women to their boards?
Some boardrooms could be reshaped by a proposed California law. (Sheraton)

By a whole bunch of different metrics, too few women occupy leadership positions in U.S. businesses. Just look at corporate boards of directors: At the 3,000 companies tracked on the Russell 3000 index, fewer than 1 in 6 board seats is filled by a woman. More than a quarter of the California companies in that group had no female directors at all. The representation of women is far higher on corporate boards in Western European countries, several of which mandate that women hold 30% to 40% of the board seats.

To California state Sen. Hannah-Beth Jackson (D-Santa Barbara), this is a problem that cries out for a government mandate. So, joined by Senate President Pro Tem Toni Atkins (D-San Diego), she has steered a bill (SB 826) through her chamber this week that would require any California-based corporation that sold stock on a major U.S. exchange to have at least one woman on its board of directors by the end of next year. The vote was 22 to 11.

Advertisement

The bill drew sharply different reactions from the various members of The Times editorial board during an informal discussion over email. We haven’t decided whether to weigh in with an editorial, let alone what it would say. But here’s some of the back-and-forth.

Jon Healey: This is social engineering at its worst, but so what else is new in Sacramento? Jackson doesn’t seem to understand that selling shares of stock is just a way to finance a company, not to create a host of public-interest obligations. Plus, the bill’s quota of at least one female board member will become a ceiling at a lot of firms, not a floor.

Advertisement

Kerry Cavanaugh: How can the government set quotas for a corporate board, even if it is a publicly traded company? I would probably support tying incentives or tax breaks or other government assistance programs to requirements for diversity. But if there is no government involvement, I don’t see how California can dictate this.

We can’t require companies to be woke. They eventually suffer the consequences of failing to do it on their own. Uber is a good example of this.

Carla Hall: But the number of women directors is so low, this is the only way to get even a respectable number of women on boards in a reasonable amount of time. And I would guess that companies that reach the quota, breathe a sigh of relief and stop looking for women to add to their boards are the ones that weren’t looking very hard, if at all, for women directors before the bill came into being.

Nick Goldberg: I understand the problem here. But what legal right does the government have to tell the private sector whom to hire or whom to put in management or whom to put on its boards? Would we support a law that said 30% of McDonald’s burger flippers should be women? Or 30% of L.A. Times reporters?

Advertisement

Scott Martelle: But if we think that categories of people have been historically adversely affected by such-and-such system, why would we not support forcing the people who make the decisions to be more representative of the populace? For the moment, I think starting with boards of directors is fine; if broader quotas become necessary, we’ll deal with that then. But I believe corporate America would be more responsive to the needs of America if it wasn't dominated by a small cadre of rich folks looking out for their own. The status quo has led to near-historic income inequality and massive corporate profits. Nice for capitalism; bad for a society. Getting non-1%-ers on boards of directors is a start to unwinding this.

Goldberg: Putting women on boards won’t solve your 1% problem. Now you’re talking about putting on people based on how rich they are or aren’t. And if you also support putting people on boards based on their race, in order to solve that historic discrimination issue, you’re beginning to talk about an awful lot of quota requirements on private companies.

Martelle: True about adding women, but it can't hurt. And I don't have a big problem with government forcing quotas on boards of directors, given the abject disconnect between the boards and the general public. I also think more inclusive labor laws and labor representatives on boards would be good steps.

Mike McGough: I think this is probably unconstitutional under court decisions about the 14th Amendment.

According to the Supreme Court, gender-based distinctions in a law must have an "exceedingly persuasive justification" for treating men and women differently. Requiring companies to reserve certain number of board seats for women, in the absence of a lawsuit demonstrating that the company had engaged in gender discrimination in the past, wouldn’t pass that test in my opinion.

Whether board members are covered by civil rights laws is an interesting question. They aren’t employees. But the Supreme Court has extended Title VII of the Civil Rights Act to partnerships. Meanwhile, the court has frowned on quotas in other settings, such as higher education. See the affirmative action cases beginning with Bakke.

Healey: I think we can all agree that having an all-male board is a bug, not a feature. But it also is a symptom of a bigger issue, which is the comparatively thin ranks of female executives and funders — the lineup from which board members are drawn. The latest global board diversity survey by Egon Zehnder, an executive search firm, makes this point clearly: Worldwide, just under 4% of the companies surveyed had female chief executives and 10.5% had female chief financial officers, two posts that produce a preponderance of board members.

Improving those numbers will take a concerted effort to remove the barriers deterring women from attaining the same posts as men, whether it be issues with education, work schedules or some other factors. But as is so often the case in the Legislature, this bill ignores root causes in favor of simply dictating an outcome. Instead of encouraging more women to launch and lead businesses in the state, it would give corporations yet another reason not to plant their flag here.

Advertisement

Mariel Garza: Yeah, years of wishing and hoping and encouraging has worked out so well to diversify corporate boards and executive leadership. We’ve been wringing our hands for decades over the lack of women in positions of power, from the boardroom to the White House. And in all that time, while women have made incredible strides in so many professions, they are still so woefully underrepresented in the halls of power.

So, sorry, I don’t think anyone’s going to hand over power without being forced to do so. Although I’m not sure I support this particular bill, I’m open to the idea of government coercion in the service of correcting persistent injustice. The scale has been unfairly tipped in favor of men for so long, why are we so afraid of purposely tipping toward women for once? I’d like to research more about how such quotas have worked in Europe. I am not persuaded by the argument that it’s not a good idea because other states don’t do it. Other states are not California.

What I do support is bold proposals from the state Legislature. Maybe it’s too nutty even for California, maybe not. But good for Jackson and Atkins, the first female leader of the California Senate, for making us confront this gross disparity.

Advertisement
Advertisement