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“Include Women on Your Boards or Face Penalties”: California Mandates Corporations

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Nkechi Onwuameze
October 12, 2018

On Sunday, September 30, Governor Jerry Brown signed Senate Bill No. 826 into law making California the first state in the country to mandate publicly held corporations to include women on their board of directors. The bill requires any publicly traded corporation to appoint at least one woman to their board of directors by the end of 2019 or face penalties. By 2021, the bill increases the minimum requirement to two female directors for companies with five directors and three female directors for companies with six or more directors. This unprecedented legislation has sparked a firestorm of criticism, including from high profile advocacy groups in the State such as the California Chamber of Commerce, the California Restaurant Association and the California Ambulance Association. The California Chamber of Commerce argue that the government should not interfere in corporate bodies’ board composition and criticized the bill for being exclusive of gender while ignoring other aspects of diversity. The California Ambulance Association also issued a statement claiming “Gender is an important aspect of board diversity, but the state should not elevate this element over all other aspects of diversity.” Proponent of this legislation praise it as the starting point for addressing larger issues of gender disparity in the workplace, while opponents contend it is unnecessary government interference and unconstitutional implementation of quota system that fails to address diversity from a broader perspective. Whether or not the legislation will stand is unclear as the governor himself has acknowledged that he expects the bill to be legally challenged. Governor Brown said, “There have been numerous objections to this bill and serious legal concerns have been raised.” While critics are right that this legislation targets only one aspect of diversity—gender—it may serve as a leverage to spur serious conversations on how to tackle the lack of diversity that has historically plagued the workplace.

One clear message California may have unintentionally sent to the nation is enough talk, it’s time for action. The lack of diversity in employment is a challenge in both the public and private sectors and while many organizations have taken several actions to address it, the gap remains largely unchanged. The California SB826 cites that from 2014 to 2016, nearly 50 percent of the largest IPOs that went public had no women on their boards. Notwithstanding, the 21st century workplace has greatly transformed in terms of the increase in the participation of women and racial minorities in the workforce, but the inequality in pay and position has been the elephant in the room which remains unshaken. Women and racial minorities’ representation in the workplace remain segmented, as they occupy lower occupational positions with lesser pay and prestige. According to the Institute for Women’s Policy Research, women represent almost half of the workforce and have more college education than men, yet on the average, women working full-time earn 80.5 cents for every dollar earned by men, representing a gender gap of about 20 percent. The gap is larger for women of color. African American women earn 63 cents for every dollar their White male counterparts make. Native American women earn 57 cents and Latinas make 54 cents for every dollar made by their White male counterparts. The gap is smallest for Asian American women who make 87 cents for every dollar made by their White male counterparts. With the slow progress in achieving parity, the Institute for Women’s Policy Research estimates it may take up to four decades for the nation to achieve gender wage parity.

In another study, using 2000 Demographic Profile of the Federal Workforce based on 2000 Census Bureau data, the authors found that there exists “segmented representation” in federal employment by race and gender. While women are represented in federal employment, there is “extreme imbalance” in gender representation among different racial groups in low-level and high-level positions. About 44 percent of federal jobs that are held by White workers are held by White women, while 69.4 percent of Black jobs are held by Black female workers. However, while the representation statistics suggest a strong-hold by both White and Black female workers, as grade level increases and pay rises, the representation decreases significantly for both White and Black women. In senior federal pay levels, only 23 percent and 38.4 percent of White and Black workers are White and Black female workers respectively. These findings suggest more actions are needed to change the trajectory of inequality in the workplace.

While participation have increased especially for women, the path to equality is still elusive as women and minorities continue to hold less-paying, lower level positions compared to White men. Using agency-level employment data from the U.S. Equal Employment Opportunity Commission from 1990 to 2009, Fidan Ana Kurtulus (2013) found that ending state-level affirmative action programs significantly reduced the level of diversity in the workplace. These findings suggest that rather than channeling efforts to attack affirmative action programs meant to ensure progress in workplace diversity, employers—private and public sectors—should invest energy in tackling the problem from the root, including ensuring that there is representation in all aspects of their organization, from top level to bottom level. Perhaps, that is the level of engagement California SB826 challenges.

Author: Nkechi Onwuameze works for the Illinois Board of Higher Education and an adjunct professor at the University of Illinois Springfield. She earned a Ph.D. in sociology of education at the University of Iowa. Her research interest include educational inequality, gender discrimination in the workplace, workplace diversity. [email protected] or Twitter: @Nkobis

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