December 17, 2019; New York Times
California’s publicly traded companies are hurrying to comply with a 2018 law requiring them to have at least one female board member by the end of 2019 or face a fine of $100,000. By the end of 2021, companies with five board members must have at least two women on the board. The fine rises to $300,000 for each continued violation.
The New York Times reports that between 30 and 60 California companies covered by the law are still without a woman on their board. A number of companies have added female directors in recent weeks. Kathleen Kahle, a finance professor at the University of Arizona who has been tracking California’s progress, told the Times that the companies without female board members tend to be younger businesses in high-tech or biotech fields. When the law was passed, about one-third of the more than 600 companies it addressed didn’t have any female directors.
California is the first state in the US to require gender diversity on corporate boards. (The San Jose Mercury News reports that Massachusetts and New Jersey are considering similar legislation.) A number of countries have similar rules, including Norway, France, Germany, Spain, and Italy. The California law references studies showing that companies with women on their boards perform better.
The Times notes two problems some companies have faced in complying with the law: the cost of adding a new board member and the perceived lack of qualified candidates. Unlike nonprofit board members, who are typically volunteers and only receive reimbursement for expenses related to board service, for-profit board members are often paid for their efforts in addition to being reimbursed for travel and other board service-related expenses. The Times reports that the average director pay for California companies is $181,000.
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The perceived lack of qualified women candidates travels hand in hand with high reimbursement rates in a self-reinforcing loop. Publicly traded companies often select current or former CEOs as board members. Because CEOs are typically men—for example, only five percent of Standard & Poor’s 500 companies are led by women—this leaves a smaller pool of potential women candidates.
“We’re trying to teach boards to let us introduce ‘board-ready’ women,” said Jeanne Branthover, a managing partner at the executive-level recruiting firm DHR International, referring to women with senior, C-Suite level experience who might have served on nonprofit boards or school boards or presented to their own boards. However, that doesn’t mean the quality of the female candidates dips, Branthover was quick to emphasize.
“They’re qualified and they’re ready,” Branthover said.
Nonprofits, of course, are not immune from gender disparities at the highest levels. According to the 2019 GuideStar Nonprofit Compensation Report, of nonprofits with operating budgets of $50 million or more, only 23 percent were led by women. Similarly, a recent Chronicle of Philanthropy study found that “America’s biggest charities continue to be overwhelmingly led by white men.”—Catherine Jones