Testifying on this piece of legislation was eye-opening.
As California lawmakers debated a bill that would require publicly traded companies to include women on their boards, Amii Barnard-Bahn says she was struck by how little they knew about the selection process for corporate governance.
“Every committee meeting I went to, we had to re-educate the legislative committees because most of them have not worked in large corporations,” says Barnard-Bahn, managing principal of the eponymous Barnard-Bahn Coaching & Consulting, who testified several times in support of SB 826.
Some state lawmakers appeared surprised to learn there’s no transparency around who is nominated for board seats at public companies, she says. Some asked if people could just submit a resume for an open board seat. She doesn’t fault them for their ignorance, though. “It is a very closed process,” Barnard-Bahn acknowledges.
Going on a year since then-Gov. Jerry Brown signed the bill into law, Barnard-Bahn says she’s still combating misinformation and resistance to the idea of bringing women into the boardroom in Silicon Valley and beyond.
Conservative activist group Judicial Watch, for one, is challenging the legislation in court, saying it creates “an unconstitutional gender-based quota.”
State Sen. Hannah Beth Jackson (D-Santa Barbara), one of the bill’s sponsors, batted away the notion that demanding equity is unconstitutional. In fact, she says, it’s good for business, as evidenced by studies commissioned by Credit Suisse and Morgan Stanley Capital International, which found correlations between higher performance and gender diversity on company boards.
Regardless of how the lawsuit plays out, public companies in Silicon Valley—and across the country—are already adding women to their boards to better reflect the voices that make up 51 percent of the US population and 58 percent of the labor force.
In July, the last company on the S&P 500 with an all-male board finally added a woman. Having women represented on 100 percent of the boards of S&P 500 companies is progress compared to seven years ago, when just one in eight of those companies had any women at all on their boards. But there’s still plenty of progress to be made: Women remain underrepresented in that group at large, holding about 27 percent of the total board seats, according to recent reports.
It’s clear now that there is momentum toward closing the gender gap in public company’s boardrooms. Debate that the California’s legislation sparked played a significant role in that movement, and it’s spreading to other states.
Paired with ongoing pushes by the institutional investor community, including agencies like CalPERS, there’s hope that boardrooms will achieve gender parity much sooner than past progress would have predicted.
Behind the Times
While California was the first state to require gender diversity on boards, it was nothing groundbreaking in the international context. At least 10 countries already have similar requirements. Norway’s law requiring listed companies to have women in at least 40 percent of board seats has been on the books for more than a decade.
“We are not extreme by any stretch when you look at Europe,” Barnard-Bahn says.
Some of the longstanding bias in the process might not even be intentional. Since boards have historically been dominated by men, whose networks often include mostly men, nominations for board seats have tended to go to other men. With increased attention in recent years to the gender gap issue at all levels in the tech sector and beyond, more companies have been taking action to be intentional about diversity.
San Mateo-based SurveyMonkey, founded in 1999 as a maker of online polls, reached 50 percent women on its board in August 2018 with the appointment of Erika James, dean of the Emory University Goizueta Business School. James had connected several times with SurveyMonkey CEO Zander Lurie during previous years and appreciated what she saw as his genuine commitment to diversity at the company.
“He recognized women and other underrepresented minorities have an important voice when it comes to business, and he wanted that reflected at the highest level,” James says.
James is also the first black woman to lead a top 25 business school. SurveyMonkey was looking to grow its offerings for the academic sector but, before James’ appointment to its board, lacked someone with access to that network or an understanding of the academic environment. “That happened to be a form of diversity contributing directly to the growth of SurveyMonkey,” she says.
Even with such examples of women who are leaders in their fields being added to boards to spur company growth, “tokenism” was one of the arguments lobbed against the California legislation. TheBoardlist CEO Shannon Gordon finds herself bristling at arguments around tokenism when it comes to adding women to boards. TheBoardlist is a site that connects companies with qualified women candidates for board positions. Of more than 3,000 board candidates on theBoardlist site, some 75 percent are in the C-suite or already serve on a board.
It’s hard to imagine someone of that caliber being a mere token, Gordon says. There are so few seats on boards, and every seat is such an important role, that it’s hard to believe a company would add anyone lacking the qualifications, she adds. “They’re brought on because they bring something really important to the table,” Gordon says.
The suggestion that boards would have to add unqualified women as a result of California’s legislation are steeped in gender bias. “Women have to prove they’ve done it before they can go on a board. Men are invited because of their potential,” says Julie Castro Abrams, founder and CEO of How Women Lead. The San Rafael-based group promotes women’s voices and helps advance their leadership. “This is the bottom line: Change is hard. A lot of people don’t like change,” Castro Abrams says.
Other states are following California’s lead in pushing for progress. Similar legislation has been discussed or introduced in states including Massachusetts, New Jersey, New York and Illinois. In Illinois, the legislation as introduced would have also taken on the underrepresentation of minorities on boards, but after threats of lawsuits, the bill was reduced to a reporting requirement on the gender and race of board members.
And Barnard-Bahn says legislation was one of the options discussed this summer when she was in Washington, advising the state’s Women’s Commission during talks about ways to increase the number of women on boards.
The institutional investor community has also ramped up its activism in recent years around boosting diversity and closing the boardroom gender gap. CalPERS voted against more than 400 directors at some 141 companies last fall after those companies didn’t improve the diversity on their boards. BlackRock, the world’s largest asset manager, said last year that it “expects to see at least two women directors on every board” of companies it backs.
Institutional investors hold some 78 percent of the market value in the US broad market Russell 3000 index, according to Bloomberg data. That large stake means their activism could have greater impact than state legislation, observers note, but every effort drawing attention to the gender gap helps support the others. Studies previously predicted it could take 40 to 50 years to reach gender parity on public company boards absent any action to address the issue, as noted in California’s legislation.
That finally seems to be changing.
“People are excited we’re not going to have to wait two generations to have more profitable and better-governed companies,” Barnard-Bahn says.
There’s no state report yet on how much progress has been made in California as a result of the law. The first deadline is coming soon, with all publicly traded companies based in California required to have at least one woman on its board of directors by the end of the calendar year. Under that requirement, 184—or nearly one-third—of California’s publicly traded companies will be required to add a woman to their board this year, according to a report by Board Governance Research.
Many who helped bring about California’s law say the policy’s success is in the discussion it prompted about why the gender gap remains and what can be done to close it faster. That discussion gets at bigger themes, too, they say.
“At the end of the day, technically the women on boards bill is not about gender. It is really about people and having the best-qualified people governing our corporations,” Barnard-Bahn says.
No company has only men as employees, investors and customers, she points out. “If you believe people making decisions should look like the people being affected by those decisions, it is really hard to argue with the fact that things need to change,” Barnard-Bahn says. “It just makes good business sense.”