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Why Overturning SB826 Sends the Wrong Message and Interferes with Women’s Voices Being Heard

"From the Boardroom" with Hannah-Beth Jackson

As a retired California state senator and the author of Senate Bill 826, the court ruling enjoining implementation of the legislation requiring women on corporate boards was disappointing because the law provided an opportunity to create important public policy. SB 826 confirms that boards of publicly traded companies in California have effectively discriminated against women for years, and that such behavior is unlawful. In spite of the trial court’s ruling, I believe we successfully met the burden of demonstrating that the law is constitutional and that the appeals court will agree. Nonetheless, challenging the status quo is always an uphill battle, particularly when it’s supported by the patriarchy. And, while I’m optimistic that on appeal, the law will win to be reinstated, its rejection reinforces the wrong behavior. It confirms to those who want to continue discriminating against women that they can do so without consequence.

Rejecting the law also discounts the numerous previous attempts to increase the number of women on corporate boards over the last 20 to 25 years. It began with California’s SB 545 in the 1990s, which called for the creation of an official state registry of qualified women and minority candidates for corporate board membership, aimed at debunking the excuse that there weren’t qualified candidates. In the early 2000s, efforts were made to persuade companies headquartered in California to voluntarily add qualified women to their boards. We even passed a bipartisan resolution in 2013 urging companies to place more women on boards. None of these measures were able to move the needle towards an equitable playing field.

In addition, the data is on our side, making a strong positive business case for diverse corporate boards. The 2019 Gender 3000 report by Credit Suisse Research Institute, in addition to its earlier reports and a recent 2020 McKinsey report, confirmed years of research that companies with women on their boards are more profitable, more productive and have a more engaged workforce. These reports, in addition to those dating back as far as 2006, found that public companies in the top quartile for gender diversity were 25% more likely to outperform industry-median growth than fourth quartile companies. The numbers don’t lie, and it’s convinced the corporate world itself to recognize the importance and benefits of gender and racially diverse boards. Big name investment companies like Blackrock, Vanguard and State Street are just a few examples of industry leaders who are requiring more diverse boards. With this level of support, the good news is that many believe “the train has left the station” regardless of laws to enforce diverse board membership.

Among my concerns in turning back the clock, is the loss of the “critical mass” concept for women on corporate boards. In crafting the bill, we were careful not to require that California-based companies meet a specific quota of women on their boards. We did not call for equal representation; we required at least three women to be included on boards of six or more members. Studies show that three is considered critical mass, including 2006 research that found three board seats as the “tipping point” needed for female directors to participate equally and exert influence. Anecdotally, I explain it like this: when there is one woman on a board, the other board members expect her to get the coffee. When there are two women on a board, the other board members expect the women to argue over who is going to get the coffee. When there are three women on a board, the women tell the other board members to get their own damn coffee! Three is the magic number for ensuring women have a chance at making their voices heard in the boardroom, whether there are three or twenty other people in the room.

The bottom line is that now is not the time to despair. As we pursue the appeals process, we must keep our foot on the gas pedal. Women in particular must come together and demand greater opportunity. We need to shine a light on companies as they bring on board members; I hope to see more shareholder suits demanding women be added to their boards because not only is it the right thing to do, it’s simply more profitable for the company. That is the fiduciary duty of corporate leaders - to make companies as profitable as possible and to ensure sound board governance, two goals that women board directors have delivered. Change will not occur overnight and it will not happen by being polite. As women, we need to be more assertive with our purchasing and intellectual power, and work collaboratively and collectively to focus on the goal of becoming equal partners in all aspects of life.

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