Publicly traded companies headquartered in California will soon have to include women on their board of directors – or face hundreds of thousands of dollars in fines.
Gov. Jerry Brown, a Democrat, signed a legislation Sunday that forces changes at California-based corporations by the end of 2019, making California the first state to take that step.
The law would mandate at least two female directors by the end of 2021 if the company has five directors, and three women if the company has six or more directors.
A new law requires publicly traded companies headquartered in California, including Facebook and Google, to include women on their board of directors. Pictured: Facebook COO Sheryl Sandberg, center, and Eric Schmidt, chairman of Google
A new law requires publicly traded companies headquartered in California, including Facebook and Google, to include women on their board of directors. Pictured: Facebook COO Sheryl Sandberg, right, and Facebook Chief Product Officer Chris Cox
Under the new legislation, Google parent company Alphabet will have to add at least one more woman to its board by 2021
Violators face fines of at least $100,000 and up to $300,000 for multiple violations of the statute.
‘Given all the special privileges that corporations have enjoyed for so long, it’s high time corporate boards include the people who constitute more than half the “persons” in America,’ Brown said in a statement.
Silicon Valley tech companies started disclosing workforce diversity figures in 2014, but progress at the top has been slow, underscoring the challenge of transforming cultures that critics say are too homogenous, white and male dominated.
A fourth of publicly held corporations with headquarters in California currently do not have any women on their boards of directors.
Companies including Apple, Google parent Alphabet and Facebook are based in California and will each need to add at least one more woman to their boards by 2021 to meet the new law’s requirement.
Gov Jerry Brown, a Democrat, said it is about time that corporate boards include the people who constitute more than half of the American population
Companies have faced scrutiny in recent years on the composition of board directors and workforce diversity, with investors pushing to get more women onto boards.
‘There have been numerous objections to this bill and serious legal concerns have been raised … nevertheless, recent events in Washington, DC – and beyond – make it crystal clear that many are not getting the message,’ Brown said.
State Sen. Hannah-Beth Jackson, the Santa Barbara Democrat who authored the bill, says having more women on boards will make companies more successful because they are better at teamwork and multitasking compared to their male counterparts.
The bill signed by Brown highlighted a six-year study conducted by Credit Suisse of more than 2,000 companies worldwide that showed having women on boards was linked to improved business performance for key metrics, including stock performance.
The California Chamber of Commerce has argued that the composition of corporate boards should be determined internally, not mandated by government.
The chamber says the new law will prioritize gender over other aspects of diversity.
Some European countries, among them France and Norway, already require corporate boards to include female members.