California becomes first state to require women on corporate boards

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California has become the first state in the US to require publicly traded companies to include women on their board of directors.

Governor Jerry Brown signed the new measure – which necessitates at least one female director on the board of each California-based public operation by the end of 2019 – into law on Sunday.

Firms will need up to three female directors by the end of 2021, depending on the size of their boards.

Hundreds of companies will be affected by the law and those who violate it can be fined $100,000 (£76,600) for a first violation and $300,000 (£229,900) for a second.

A fourth of publicly held corporations with headquarters in California do not have any women on their boards of directors.

Democrat State Senator Hannah-Beth Jackson – who authored the bill – said getting more women on boards will make firms more successful.

Ms Jackson argued women are more inclined to be collaborative and more adept at multitasking. She also thinks having more women in positions of power could have the impact of helping to decrease sexual assault and harassment in workplaces.

She said government intervention was needed because firms have failed to make enough effort to increase the number of women on their boards in spite of encouragement from the legislature.

“This is one of the last bastions of total male domination. We know that the public and business are not being well-served by this level of discrimination,” she said.

Research demonstrates female representation on boards is crucial for women to advance in corporate America. Women on boards are more likely to consider female leaders for the most senior roles in a company and also select more diverse applicants for the actual board.

Opponents to establishing quotas for representation argue the pressure results in unqualified female members and poses the possibility of discrimination against male applicants.

The California Chamber of Commerce argued the makeup of corporate boards should be decided on through internal processes rather than being directed by government. The chamber also argued the new measure will rank gender above other elements of diversity such as race and ethnicity.

Some European countries, including Norway and France, already mandate that corporate boards include women. The laws in Norway require a certain percentage of women on boards, and for larger Norwegian companies, the legislation requires women constitute as much as 40 per cent of the board.

The law which Governor Brown has just signed applies to firms which declare their principal executive offices as being located in California.

 

“I don’t minimise the potential flaws that indeed may prove fatal to its ultimate implementation,” Governor Brown wrote in a signing statement.

“Nevertheless, recent events in Washington, DC – and beyond – make it crystal clear that many are not getting the message.”

 

 

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