In the last week, I have been called a tokenist, a communist, a socialist, and a moron. I have been told I’m contributing to the destruction of male opportunity and to the exodus of business from California.
Clearly my views on California SB 826 are not shared by 100 percent of the population, male or female.
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SB 826 passed this week and requires that public companies headquartered in California must include at least one woman on their boards of directors by 2019, and two-three women by 2021 if the board exceeds five people. This means that nearly 700 new board roles will be created in California for women.
Europe passed laws like this years ago and what has happened is a normalization of the experience. It is no longer rare or a novelty to see female board members in Europe. More importantly, women have been recognized for their strong contributions to the companies they help govern. There is a wealth of research from McKinsey, the Peterson Institute, Catalyst, Credit Suisse and others demonstrating that when companies increase gender diversity, good things happen: profits rise, return on equity goes up, shareholders benefit.
And since the purpose of a board is to look after the interest of shareholders, it’s downright negligent that companies, especially public companies, have been able to get away with the boys’ club mentality for so long. Only 36 percent of the companies in the Russell 3000 have gender parity or boards with female majority boards; in fact, 98 percent have male majority boards.
More than 10 percent of the largest publicly held companies are located in California and most directly affected by SB 826. And I hope the law sticks.
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Here’s why:
- Many argue that establishing a quota demeans women, reducing them to an unappreciated member or worse: a token. I say, let the tokenism begin. Because I believe that when the men who have so long resisted sharing a table with women actually experience the excellent skills, knowledge, work ethic and contributions of these tokens, they will realize they were wrong. Nothing changes minds like being confronted with reality, unless one is incapable of learning. I have confidence that the women thrust upon these so-called beleaguered men will prove to be valuable colleagues in no time. This seems to be the story of the European countries where this same phenomenon has occurred. It is also the story of many gender-diversified-by-force institutions from the eating clubs of Princeton to the ranks of medical schools.
- Nothing else has worked broadly and shareholders deserve better. When lawmakers have tried voluntary compliance approaches, they have failed. When large shareholders have banded together and threatened mutiny, it has worked in some cases and, as a result, most of the largest Fortune 500 firms now have diverse boards. But mid-size public companies tend to have less powerful shareholders and no amount of explaining, cajoling, or demanding has made a difference. Ironically, according to Barclays and Fidelity Investments, women outperform men at stock picking. So they should really have a seat at the table, especially if they are better risk managers, as studies suggest.
- And yes, most people dislike regulation, especially in an “allegedly” free-market economy. But regulation is sometimes the largest driver of innovation. This is certainly true in healthcare. And one more regulation isn’t so bad if it gives shareholders a better outcome. I’m thinking they will say “thank you” when EPS rises, not “boo!”
A last thought. Ladies, when you go to the boardroom, please fix a few things they guys seem not to have noticed. For instance, women’s salaries in life sciences dropped in 2018 creating a 33 percent salary gender gap. And women holding CEO roles in the Fortune 500 dropped by 25 percent in 2018; there are only 24 women in those roles — less than 5 percent of overall CEOs — down from a high of 32 female Fortune 500 CEOs in 2017.
The gender disparity is even more stark in healthcare. In our industry, 80 percent of jobs are held by women but only 3 percent of U.S.healthcare CEOs are women. If diversity at the board and C-suite level improves financial results, as an abundance of research has shown, this is a true failure of governance. So, I say this guys: Come for the financial rewards to shareholders, stay for the social justice.
I, for one, am tired of hoping it gets better by luck, accident or long after I’m dead. So many qualified and accomplished women so little time for the iron ceiling to melt. It’s time for action and SB 826 is a great start.
Photo: Ridofranz, Getty Images
