Women are still underrepresented in the room where it happens.
In California, at least, that is starting to change. Beginning Jan. 1, every public company in the state must have at least one female director.
While the new law has come under scrutiny for discriminating against men or being condescending toward women, it’s an important, if modest, step toward parity.
It is also smart business. Here’s why: Diverse teams outperform homogeneous ones. When diverse views come together, studies consistently show, team members generate more creative solutions and improve decision-making because they are more likely to challenge their own assumptions and each other. A more diverse team isn’t just the right thing to do. It’s a tangible business advantage.
Some argue that companies, not regulators, should be responsible for achieving gender parity at the board level. That hasn’t worked well so far. Too often, executives fall back on blaming a scant pipeline of diverse talent. “It’s not that we don’t want to bring on a woman,” a public company chair of nominating and governance once said to me. “It’s just that there aren’t any women who are qualified.”
This argument might have held some water in 1960 or perhaps even 1970. But everyone knows it is positively false in 2020. There’s no lack of qualified female candidates for board work; they just haven’t been advocated for or given equal exposure.
What is true is that most board seats are filled by relying on existing board members’ close networks or other CEOs — most of whom are disproportionately male. If their circles aren’t diverse, how can we expect their boardrooms to be?
The board candidates I’ve placed over the past five years were typically not chief executives — they were women in marketing, operations, sales, digital and other roles. Sadly, even they are the exception and not the rule, which is why the new California law is important. Especially since the goal can’t simply be to have only one woman on every public company board.
Under the current legislation, adding one woman to an average-size all-male board brings the level of representation to 11 percent. By the end of 2021, the California law introduces even higher requirements: that boards of five members have at least two female directors, and boards of six or more have at least three female directors. Within a few years, several thousand additional women will be serving on boards — a huge change in the makeup and governance of American capitalism.
The penalties for missing the goal are stiff. Companies that don’t add at least one female board member and notify the state in time could risk fines of $100,000 for a first violation and $300,000 for repeat violations.
So, in this new reality, will it be awkward for some women to find themselves appointed to board seats, thanks to a state-imposed quota? Yes, perhaps it will. Soon, however, it will become so normal that the origins of their presence will not matter. Those first responders will mentor others, and still other women will follow those. It will take time. But the boardroom revolution cannot be reversed.
Nor is this revolution unprecedented. In Europe, countries have been experimenting with similar laws for more than a decade. Norway took the lead in 2008 by introducing a 40 percent female representation requirement on corporate boards — increasing representation from 6 percent in 2002 to 42 percent in 2016. Belgium, Italy, Iceland and France, among others, introduced their own representation requirements, ranging from 30 to 40 percent, which has resulted in some of the highest proportions of women on boards in Europe.
The deeper impact on performance in Europe is still being debated and analyzed, which is why it’s prudent not to view the legislation as a cure-all. Diversity doesn’t matter much without an inclusive culture to go with it. For women to have a genuine voice at the table, not just a seat, boards will also have to adopt new habits and smarter ways of working long after recruitment.
The real work won’t stop with hitting a quota. That’s where it begins.