The secret to getting more women on boards

Feb 25, 2022

Happy Friday, rulers! We're doing something a bit different for the newsletter today, featuring a new story we published this morning. But before we get to that ...

BREAKING NEWS — President Joe Biden has selected D.C. Circuit Court of Appeals Judge Ketanji Brown Jackson as his nominee to replace Supreme Court Justice Stephen Breyer. She is the first Black woman to be nominated. Read this profile of Jackson, or read a history piece about Constance Baker Motley, the first Black woman appointed to the federal bench. The National Women's Political Caucus called Motley "an obvious choice" for a Supreme Court nomination, but she never got the nod, and her career was thwarted by racist and sexist assumptions as well as concerns that her appointment to the bench would be seen as "too political."

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What will it take to build a new, more equitable workplace? POLITICO Focus connected with members of Women Rule: The Exchange to get their perspectives on some of the critical topics — diversity and inclusion, equal pay, mental health and family-friendly policies — that are driving this debate and will make or break the future of work for women. Read More

MARK YOUR CALENDARS — Join Morning Money author Kate Davidson on Monday Feb. 28 at 12 noon ET for a Women Rule interview with Cecilia Rouse, chair of the Council of Economic Advisers. The conversation, which is part of Women Rule: The Exchange , will cover President Biden's economic agenda as he prepares to deliver hist first State of the Union, and what it will take to elevate more women to leadership ranks in the U.S. economy. Register here to watch live.

Now onto that article ...

This morning, POLITICO is out with a brand new report by Bryce Covert examining the impact and lessons of California's SB 826, a 2018 law that mandated more women on corporate boards in the state. There were two phases of the law. The first phase required every public company with principal headquarters in the state to have at least one woman on its board by the end of 2019; the second phase required firms with six or more board members to have at least three women and those with five to have at least two by the end of 2021.

California had already passed a law that encouraged companies to add more women to their boards. The difference here was the $100,000 fine that companies would incur if they missed the deadline, plus a $300,000 fine for subsequent offenses.

Did it work? And what does California's experience show other states hoping to replicate the law or companies just hoping to get more women on their boards and into executive ranks? Here are the top four takeaways.

Illustrations by Michelle Pereira

ONE

Women Rule Takeaway 1 — forcing companies to act works

Source: Daniel Greene, Vincent Intintoli and Kathleen M. Kahle

In terms of ending all-male boards at California-headquartered companies, the legislation has been immensely successful.The above graph shows new director appointments each quarter at California firms compared to a similar-sized sample of non-California firms.

You can see that the end of 2018 and beginning of 2019, right after the California law was passed, saw huge surges in female appointments to corporate boards in the state. New female director appointments at California firms peaked at 100 in the second quarter of 2019, while a matched sample of non-California firms added only 20-40 female board directors each quarter of 2019. Ninety-nine point three percent of companies in California complied with the 2019 deadline.

The second phase, however, has been less successful: Only 70 percent of California companies met that deadline.

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TWO

Women Rule Takeaway 2 - companies did not suffer in adding more women

Some executives expressed concern that the law, by forcing companies to add new and — at least according to some executives — potentially less qualified people to their boards, would shock the markets. At first, the market reaction appeared to back up those fears: When the law passed, California companies experienced a cumulative1.2 percent dip in their stock values.

But when it came time to actually add more women, companies did not suffer. The team of researchers found that the stock market reaction was the same after companies announced female and male directors — meaning that the market didn't see the women in particular as a negative.

The researchers also found that the women added after the law went into effect were just as qualified as existing board members.

THREE

Women Rule Takeaway 3 - more gender diversity leads to more gender diversity

Women who were added to boards in the wake of the California law saw how it worked firsthand, and are confident that in the long run, the mandate will make it much easier to find more women for corporate boards. Kelli Bernard, for instance, became the sole woman on the board of OSI Systems Inc., the electronic systems manufacturer, in late 2019. In the couple of years she's been on the board, she's already helped the company identify other potential female board candidates. "Most people's networks are pretty monolithic," she told Covert. "I have a different network. That builds OSI's network."

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COVID-19 has upended the American workplace — and it continues to shine a light on what isn't working — particularly for women. But within every crisis, there is opportunity. Women Rule: The Exchange brings together leading women in business each quarter to confront these challenges and help find solutions to today's most pressing issues at the intersection of gender, industry and policy.

Most recently, this included an examination of the future of America's working women. In this inaugural edition of 'view from The Exchange,' we sat down with a few of these leaders to continue the conversation and get their perspectives on some of the critical topics — diversity and inclusion, equal pay, mental health and family-friendly policies — that are driving this debate and will make or break the future of work for women.

FOUR

Women Rule Takeaway 4 - Gender parity makes good business sense, too

While it's still too early to show how the California law has affected businesses headquartered there, there are studies from other countries with similar laws that have shown that more gender parity on boards is correlated with positive business effects. Companies with more women on their boards have been shown to have less volatile stocks, make better mergers and acquisitions and be more socially responsible.

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