This week, the legislature of the state of California passed a bill which would require companies based within the state to have at least one female member of the company’s board of directors. The bill, which is waiting to be signed by the State’s Democrat Governor, Jerry Brown, would apply to publicly traded companies based in the state of California and would impose the following requirements:
- By the end of 2019, all California-based publicly traded companies must have one female board member;
- By the close of 2021, all California-based public companies must
comply with the following framework:
- For companies with six or more directors, the company must have a minimum of three female directors;
- For companies with five directors, the company must have a minimum of two female directors;
- For companies with four or fewer directors, the company must have at least one female director.
Violations for non-compliance span from $100,000 for a first violation to $300,000 for each subsequent violation. In addition to the requirement, the bill would require the California Secretary of State to publish a report which includes the number of corporations in compliance with the director quotas as well the number of corporations which moved both in and out of the state. The bill was opposed by the California Chamber of Commerce and other business groups, arguing that the bill violates the Federal and State constitutions
Board diversity has received considerable attention in recent years and board and C-Suite gender representation have become important and major issues among companies, shareholders, and other stakeholder groups. Although other countries, like Germany and France have already implemented mandates for women on corporate boards, large U.S. investors have been reluctant to impose quotas. According to San Jose Mercury News, a handful of states have had nonbinding resolutions on board gender representation, but this would be the first quota. The move in California, which is home to many influential corporations that already have female board representation such as Apple, Chevron, and Google, would have the biggest impact on Silicon Valley companies. It could also potentially foster a larger movement especially among traditionally Democratic states.