October 11, 2019
A recent study found that 14% of publicly-traded companies in California that published a proxy statement in the first half of this year still need a female director in order to comply with California's new board representation mandate.
Companies that were tracked in the study increased their number of female directors by 23% over the last year. By comparison, public companies in a control group increased their number of female directors by 14.6%.
The 70 companies out of 488 measured that are not yet compliant tend to be smaller. None, according to the report’s authors, are “household names.”
SB826 requires publicly-traded companies headquartered in California to have at least one female board member by the close of the 2019 calendar year. By the end of 2021, these companies must have at least two board members who identify as women on five-person boards and three on boards of six or more.
For a failure to comply and “timely file board member information with the Secretary of State,” a $100,000 fine for the first violation and a $300,000 fine for all subsequent violations may be levied.
California’s board diversity mandate is the first such law in the nation, with Illinois’ legislature having adjusted their new law to require enhanced reporting rather than mandated representation before sending it to the governor’s desk. Congress is also considering various board representation proposals, but those too mandate disclosure and not representation.
Why it matters: The early success of California’s law in increasing board diversity with a representation mandate may inspire additional efforts at the state and federal levels.