Our reaction to California’s legislation requiring female board members

Fiona Hathorn, October 2018

California has passed legislation, being hailed as ‘landmark’, which moves having a women on company boards from a ‘should do’ to a ‘must do’. The new law requires all publicly trading companies with headquarters in California to have one woman on their board by the end of 2019, and two by the end of 2021. Read the full report in USA Today.

I don’t like quotas, but I like what they achieve. Persuasion is better than the quota route to achieving more diverse boards. But it only works when someone with power is measuring and managing the persuasion. It is this central co-ordination that has been lacking in the United States so I am not surprised that the Californian legislators have voted for board quotas.

Progress has all but stalled on diversity in the boardroom in the USA, as one of the legislation’s authors, State Senator Jackson, points out to USA Today. Because of the various differences in corporate law between states and a lack of interest, or at least involvement, from Washington, there has been no coordinated group pushing for more female representation on boards. Whilst many states have non-binding guidance calling for more diversity in corporate governance, no progress has been made without this concerted effort. This inertia has led to this introduction of quotas, which are far from ideal as they bring a high risk of tokenism and are potentially open to legal challenge.

30% board representation

In contrast, quotas have been seen as unnecessary so far in the UK as we have had a number of board diversity initiatives combining efforts from the business world with government involvement for several years. We have just achieved 30% board representation (September 2018) for the FTSE 100 via persuasion. This has involved the influential 30% Club engaging leading business people to push FTSE Chairs diversify their boards, backed by pressure and monitoring from central government. Women on Boards have made our contribution over the last 6 years by supporting the pipeline of board-ready female candidates and helping women put themselves forward for consideration. We have also called for more diversity-friendly recruitment practices, including advertising of vacancies to allow diverse candidates to break into what have often been closed networks.

Whilst, I don’t like quotas, I would get over it fast were they to be introduced in the UK. And they may yet be needed. Despite the good news in the FTSE 100, little progress is happening as regards to women, or diversity in general, on boards across the FTSE 350 and beyond…

For another excellent article on this subject, read the views from Women on Boards member, Shafaly Yogendra.