Reflections on California’s plan to add more women to its boardrooms

Posted on Friday, October 5, 2018 by User Not Found

Adding women to your team, whether that means serving on a corporate board or in some other capacity, is important. You will never hear otherwise from me, or from the Ohio Society of CPAs.

But, as noted in this NY Times piece by Andrew Ross Sorkin, California’s approach to forcibly add more women to corporate boards  in an effort to diversify the state’s corporate makeup may be a bit misguided. California Gov. Jerry Brown signed the law on Sept. 30, making it the first state to require corporate boards of directors to include women.

In Sorkin’s words:

While California’s impulse is clearly on the right side of history, the way the rule was enacted is so misguided that it might do more harm than good.

Worst of all, an onslaught of lawsuits challenging the rule could set back the meaningful progress that has been made — and hopefully will be made — in bringing more diversity to boardrooms.

Still, others insist even if the lawsuit fails, it could prove a powerful stepping stone in the path to a more diverse future for America’s public companies. That is the viewpoint Emily Stewart took up in this piece for Vox.

Stewart spoke with Serena Frog, the vice president of strategic engagement at Catalyst, a nonprofit focused on promoting women in business about the potential implications of even introducing such legislation. Frog said, “If nothing else, what this law is doing is increasing the visibility and awareness on the issue itself, and that is a win in and of itself.”

She also pointed out that women and people of color have different life experiences and perspectives than “white men who typically comprise boards,” so it’s important to find diverse candidates to aid their decision-making processes.

Indeed, a survey by theBoardlist and Qualtrics found 80% of the women in their sample group of 285 business leaders and board members around the country support California’s SB 826, whereas only 40% of the men surveyed did.

Supports cited the following reasons for their approval:

  • Diverse companies are more profitable (42%)
  • Women have proven they are equal and should be given positions they deserve (38%)
  • Quotas are the only way to ensure diversity (12%)

California cited three studies in the case for SB 826 which do establish a relationship between diverse boardrooms and productive, profitable companies, but, Sorkin points out that it may be easy for opponents to the law to poke holes in this research.

He spoke with Alice Eagly, a professor at Northwestern University, who said, “Despite advocates’ insistence that women on boards enhance corporate performance and that diversity of task groups enhances their performance, research findings are mixed, and repeated metanalyses have yielded average correlational findings that are null or extremely small.”

Our take? As Stewart writes, one-quarter of the publicly traded companies headquartered in California don’t have any women on their boards, and nationally, women make up about 20% of S&P 500 board seats. So, even if California’s efforts end up backfiring, it’s obvious something needs to be done to ensure women and other people with diverse backgrounds are elevated to more prominent positions. As 38% of the supporters in theBoardlist and Qualtric’s survey noted, women have proven they’re equal and deserve these types of opportunities.

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