California has become the first state to require publicly traded companies to have at least one woman on their board by the end of 2019. Boards with five directors will need two females and boards with six directors will need three female members by the end of 2021. Companies that fail to comply may be issued financial penalties.
The new legislation allows for boards to fulfill this requirement by creating an extra seat on the board, as opposed to removing a man already sitting on the board.
Senate Bill 826 (SB-826) was signed into law by Governor Jerry Brown as part of his effort to “protect and support women, children and working families” (CNN). SB-826 cites several independent studies showing companies perform better when women serve on their boards of directors. At the time the bill passed through the Senate, 1 in 4 publicly traded companies in the state of California did not have a woman on their board.
Though many European countries already use similar gender diversity quotas, California is leading the United States’ effort in reducing gender disparity in corporate leadership.