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Gender Quotas for Company Boards is Law Now in California
Governor Brown recently signed Senate Bill 826, which required that publicly-traded companies headquartered in California must have women as members of their corporate board of directors. See USA Today report here.
The final version of SB 826 requires that all such corporations have at least one female director by the end of 2019. Two years later, by the end of 2021, there are certain quotas depending on the size of the board. For example, if the board has five directors, then two must be female, if six directors, then three must be female, etc. SB 826 also mandates certain reporting to the California Secretary of State and publication of statistics and reports by the Secretary of State. Failure to comply with the quotas will subject a corporation to monetary fines of up to $100,000 for the first violation and $300,000 for subsequent violations. Of note, the new law defines “female” as “an individual who self-identifies her gender as a woman, without regard to the individual’s designated sex at birth.”
For small and medium-sized businesses here in San Diego, the new law will have little impact. As noted above, the law only applies to large, publicly-held corporations.
Supporters of the law have cited studies indicating a positive impact of adding women to corporate boards. Supporters have heralded the legislation as a victory for diversity and for efforts by women to shatter the so-called “glass ceiling.” The argument is that women bring a unique perspective to business decisions – a voice that is not being heard and not being accounted for. The new gender quotas will help provide a platform for those perspectives. Feminists argue that these perspectives will result in enhanced profits for the companies.
Opponents have argued that the law has potential constitutional challenges since it is reverse-gender discrimination. Governor Brown said as much in his signing letter, noting that “… serious legal concerns have been raised” about SB 826. Further, as this article from Forbes argues, the new law might not help women. Studies from Norway — the first country to enact gender quotas — show that the quotas did not produce “… significant change in the wage gap or women’s representation in management [below the board level], nor did they find an impact on the decision-making of younger women making career choices.” A University of Michigan study showed there was a correlation between gender quotas and a statistically significant loss of market value. This correlation was attributed to the added women being younger and less experienced. Finally, opponents argue that the gender quotas will hinder the “organic” growth of women joining corporate boards. It is argued that it will be assumed that the females joining the boards now will be there because of the quotas, not become of merit. This sort of assumption can hurt the progress of women generally.
It is reasonable to expect a legal challenge to the validity of the law. In the meantime, it is also likely that corporate boards will add women as a proactive measure.
Contact San Diego Corporate Law Today
For more information, contact attorney Michael Leonard, Esq., of San Diego Corporate Law. Mr. Leonard provides a full panoply of legal services for businesses and corporations including corporate formation, annual maintenance, custom-drafting of articles and bylaws, and all related corporation legal needs. Mr. Leonard can be reached at (858) 483-9200 or via email.
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