The New Law Requiring More Women on Corporate Boards: Thumb Up or Thumb Down?

Lori MackenzieSince Senate Bill 826 recently became law, a lot has been said about the new mandate that companies headquartered in California must include one to three women on their board of directors, depending on their board size: It’s good for women. It’ll ultimately hurt women. It’ll never withstand legal challenge. It doesn’t go far enough. We asked Lori Nishiura Mackenzie, executive director of the Clayman Institute of Gender Research at Stanford University and co-founder of the Stanford VMware Women’s Leadership Lab, for her take on the controversial law.

Thumbs up or thumbs down?

“Thumbs up!”

Why?

“California is often ahead of the curve, and so this law is another chance for us to lead the way bringing much-needed diversity to corporate boards.”

Do you think it will be effective?

“It certainly has the chance of being effective. It depends on how companies implement the law. Boards have fiduciary oversight of their companies, and if they implement the new requirement within the realm of their fiduciary responsibility and add women thoughtfully, the law will result in stronger boards that perform better, make better decisions and provide better oversight. But if they simply comply, boards and companies may or may not be the better for the law.”

What about the legality of a requirement that is based on sex (as opposed to being blind to it)?

“I don’t know enough about the legal side to comment on it. But I will say that companies that wait to see if the bill is overturned are just postponing the inevitable. Pressure is mounting for companies to increase the diversity on their boards and in the C-suite. CalPERS and CalSTERS have been actively trying to increase the number of women and people of color on their boards for a while. State Street Global Advisors also understands the value of diversity and has been using its position as the third largest asset manager to push for more diversity. The intent of this law is to make companies better.”

What do you say to criticism that there aren’t enough qualified women to fill all the board spots?

“I hear this a lot: ‘But where are the women?’ It’s important to flip how you look at readiness and define a ‘template of success.’ By narrowly defining what experience and skills make for qualified board directors, we are replicating the status quo. For example, CEO experience is a common fallback standard for filling a board seat. But how many women have been CEOs? We need to expand the definition of what is going to help a company to navigate emerging and new technologies and different market segments. I would challenge search committees to consider expertise in new markets, alternative fields, emerging trends, small businesses or global consumers. In other words, consider what someone with a different template of experience can add.” 

Last words?

“In California, we don’t strive to do the minimum to be great. We go to extreme measures to be ahead of the curve. To companies, I say, why not be ahead of the curve and actively promote diversity on boards? The end goal here is a strong board reflecting and leveraging a diversity of talent—that this is what good leadership and management look like.”

What’s your take on the new law? Thumbs up or down? Please share your thoughts in the comment section below.

Lori Nishiura Mackenzie will be speaking at our first ever Workplace Summit on February 21, 2019.


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