California could soon become the first state in the nation to require public companies based within the state to have at least one woman on their boards.
SB 826 headed to Gov. Jerry Brown’s desk Thursday after the state Senate passed it in a 23-9 vote. The Assembly had approved the bill Wednesday in a 41-26 vote.
If Brown signs the bill, the one-woman mandate will take effect by the end of 2019. By the end of 2021, the bill calls for at least two women on the board if a company has five directors, and at least three women if it has six directors. Companies would be fined for non-compliance.
“One-fourth of California’s publicly traded companies still do not have a single woman on their board, despite numerous independent studies that show companies with women on their board are more profitable and productive,” said the bill’s author, state Sen. Hannah-Beth Jackson, D-Santa Barbara, in a statement Thursday. “The time has come for California to bring gender equity to our corporate boards.”
The bill was opposed by business groups and the California Chamber of Commerce. They say it violates the state and federal constitutions and is discriminatory against men, and warned that it could lead to legal battles.
In a Senate committee analysis of the bill, the business groups said, “Gender is an important aspect of diversity, as are the other protected classifications recognized under our laws. We are concerned that the mandate under SB 826 that focuses only on gender potentially elevates it as a priority over other aspects of diversity.”
Jackson introduced a similar resolution five years ago — also the first in the nation — but it was non-binding and expired in 2016. A few other states have since adopted similar non-binding measures. There is no such federal requirement.
Seventeen percent of companies in the Russell 3000 Index, which includes most public companies on major U.S. stock exchanges, had all-male boards in the second quarter, according to Equilar research cited by the Wall Street Journal. California, home to some of the country’s biggest companies, had 86 companies in the Russell Index that don’t have women on their boards, including Silicon Valley-based TiVo. The San Jose-based DVR maker told the Journal that because it is seeking strategic alternatives that include a potential sale, it is not looking for new board members.
The fact sheet for Jackson’s bill cites European countries’ example. Germany mandates that companies’ boards must be 30 percent female, while Norway, France and others require company boards to be 40 percent female.
Under the California bill, a first violation would draw a $100,000 fine, and subsequent violations would be $300,000. Companies that fail to file information about their board directors with the Secretary of State in a timely manner would also be fined $100,000.
