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Last fall, California Governor Jerry Brown signed Senate Bill 826 into law, which will require all publicly traded companies whose “principal executive offices are located in California” to have at least one woman on their board of directors by the end of 2019. By the end of 2021, the law states that boards with five directors must have at least two women, and boards comprised of six or more people must include a minimum of three women. Non-compliance with this new law will be expensive, with the first violation costing $100,000 and a second or subsequent violation costing $300,000.
Though Governor Brown noted that this new law may face “fatal” legal challenges, it will still undoubtedly have an impact on the way companies think going forward. California’s Chamber of Commerce and other business groups are already arguing that this new law is unconstitutional, and it will likely face legal challenges.
New Jersey has followed California’s lead and introduced legislation that would also require that women be represented on the boards of companies based in state. Other states have passed non-binding resolutions encouraging board diversity, highlighting that this issue is top of mind for many legislators.
Last fall, a record number of women legislators were elected across the country. For the first time ever, there are over 100 women in the U.S. Congress. Nevada made history last fall by electing the first-ever state legislature where a majority of the lawmakers are women. In the U.S. House of Representatives, Congresswoman Maxine Waters (D-CA) is now the first woman and African American to chair the powerful Financial Services Committee. Chairman Waters has publicly stated that increasing the number of women and minorities on corporate boards will be a priority for the Committee going forward. In fact, Chairman Waters has created a new Subcommittee on Diversity and Inclusion to take the lead on this issue. Under the Democrat-led committee, there are already proposals from Rep. Carolyn Maloney (D-NY) and Rep. Gregory Meeks (D-NY) for increased transparency as to the gender, race, and ethnicity of corporate boards.
The increased focus on more diverse corporate boards is building, and even if California’s new law does not hold up in court, the increase in legislative activity on board diversity will likely make companies closely evaluate their own board of directors, with an eye toward more proactively increasing diversity. Though companies may not be forced to comply with diversity standards by law yet, the increase in public scrutiny may push companies to think differently. Diversifying the composition of corporate boards could increase the number of corporate executives who must relocate and shines a light on the role that gender equality plays in a company’s brand, transparency, career options and opportunities. Diversity and inclusion are increasingly woven into workforce considerations as employers build their talent stream – and they are top-of-mind issues for mobility professionals, too.
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