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California Mandates Female Representation on Public Company Boards

Posted By Jen Rubin, Wednesday, November 7, 2018

On September 30, 2018, Governor Jerry Brown signed into law the nation’s first gender mandate for female representation on public company boards. The law requires public companies headquartered in California (as reported in the company’s 10k) to attain certain minimal gender thresholds by the end of 2019.

In his signing statement, Governor Brown noted, “given all the special privileges that corporations have enjoyed for so long, it is high time that corporate boards include the people who constitute half the persons in America.” He also copied the Senate Judiciary Committee on his signing statement, noting that recent events in Washington DC and beyond made clear that “many were not getting the message.”

Of course, the message is that given the important role women play in society, they should naturally occupy some of the highest positions available in corporate America – seats literally at the tables of public company boards.

The new law is not without challenges. Categorizing individuals based on protected characteristics, such as gender, must withstand the “strict scrutiny” constitutional test which requires the government to demonstrate that no other method is readily available to address a social harm and the law is as narrowly tailored as possible to remedy that harm. Whether this law will pass constitutional muster remains to be seen.

The quotas inherent in the new law have also triggered debate regarding whether legislation is the best (or only) solution to the board representation problem that appears to plague corporate America. But the reality is that women may not be considered for board positions because the recruiters for those positions may not look in places that produce female candidates. The law requires public company boards to look harder for qualified candidates.

Another debatable aspect of the new law is its impact on shareholders’ decisions concerning who runs their companies. But, that argument underscores the existence of de facto institutionalized prejudice. Candidates for board seats on public companies are expected to possess operational experience (in business and finance), real-world company leadership experience at an elevated level, and a special or unique industry expertise that will enhance the business’ value. With so many opportunities to obtain that kind of experience historically foreclosed to women, someone had to make the first move because the problem wasn’t solving itself.

Here, again, #MeToo may have tipped the scales. It is common knowledge that gender-diverse boards (and management teams) have a salutary impact on professional and civil behavior in workplaces, which in turn result in lower incidents of harassment and other sexually-based workplace behaviors. Other data suggests that boards with gender diversity make companies both more productive and profitable.

Whether California’s legislative solution to the lack of gender diversity on public company boards will survive legal challenge remains to be seen. In the meantime, the gender mandate for boards is an important attempt to craft a legislative solution to this issue.


Jen Rubin co-chairs San Diego Lawyers Club’s Sexual Harassment Task Force, she is a partner with Mintz practicing employment law, and she advises boards of directors on a variety of employment and gender-related issues.

 

Tags:  California  corporate boards  gender mandate  Governor Jerry Brown  MeToo  public company boards 

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