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What's giving gender parity a leg up at US corporations

Why We Wrote This

Companies with high numbers of women leaders tend to do better financially than those without, studies show. A new law in California underscores the global effort to include women in business leadership.

Rich Pedroncelli/AP
California state Sen. Hannah-Beth Jackson, who wrote California’s corporate gender parity law, speaks at the State Capitol in Sacramento in June 2016.

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California Democratic Gov. Jerry Brown signed a bill this fall requiring publicly owned companies to have female representation on their boards. Written by Democratic state Sen. Hannah-Beth Jackson, the new law makes California the first state in the nation to mandate a female quota on corporate boards and underscores an ongoing movement toward bringing more women into corner offices. The growth has been slow but steady: The percentage of women holding Fortune 500 board seats increased from 15.7 percent to 20.2 percent between 2010 and 2016, according to a report from the consulting firm Deloitte. Achieving gender parity on boards and in upper management is also linked to the success of businesses, studies have found. Martha Crawford, independent director of Altran Technologies, says government action is necessary. “As someone who studied engineering and went to top schools, I felt it was important to make it on my merit, not because I was a woman,” she says. “But ... we looked at how long it was going to take [to reach parity] at present rates of change and realized, well, no, this is something which is too important.”

When California Democratic Gov. Jerry Brown signed a bill this fall requiring publicly-owned companies to have female representation on their boards, he also wrote a letter. “There have been numerous objections to this bill and serious legal concerns have been raised,” he wrote. “Nevertheless, recent events in Washington, D.C. – and beyond – make it crystal clear that many are not getting the message.”

Governor Brown had made his opinion known: Women’s rights needed to advance faster. 

Written by Democratic state Sen. Hannah-Beth Jackson, the new law makes California the first state in the nation to mandate a female quota on corporate boards and underscores a global movement toward bringing more women into corner offices. In parts of Europe, such as Norway, Iceland, and France, gender quotas of 30 to 40 percent were signed into law years ago, resulting in a spike of female representation – in some countries, to near parity. 

In the United States, the growth has been slower but steady: The percentage of women holding Fortune 500 board seats increased from 15.7 percent to 20.2 percent between 2010 and 2016, according to a report from the consulting firm Deloitte. And women accounted for a record 38.8 percent of newly hired directors at Fortune 500 companies in 2017. 

Achieving gender parity on boards and in upper management is also linked to the success of businesses, studies have found. Companies with a higher representation of women in senior management positions financially outperform companies with proportionally fewer women at the top, according to a study from Catalyst, a nonprofit group focused on advancing women in business. 

“Women are 60 percent of global university graduates today [and] they are 80 percent of decisionmakers in an ever-expanding range of sectors. It’s a business issue because they are today’s talent and they are today’s customers,” says Avivah Wittenberg-Cox, the chief executive officer of a consulting company, 20-first, that helps companies achieve gender balance by changing workplace culture and leadership.

Outside boardrooms, investment companies are also pushing for more female representation. Asset management firm Blackrock announced in February 2018 it expects the companies in its portfolio to have at least two women directors on every board. Several months later State Street Global Advisors made a similar announcement. The chief executive officer of Canada Pension Plan Investment Board, Mark Machin, also recently wrote a newspaper commentary supporting the effort.

Martha Crawford, independent director of Altran Technologies, an engineering firm, says this push from investment companies is an “extremely effective one” because “those folks are the ones making the decisions about who is getting nominated and how [the portfolio company] is recruiting.”

As head of the nomination committee for Altran, she has personally felt the pressure coming from investors. “If we don’t have our 40 percent women ... I know at the next general assembly, I’m going to be the one targeted by everyone else,” she says. 

But government-mandated quotas may not find such wide acceptance. Some states – Massachusetts, Illinois, Pennsylvania, and Colorado – have already passed nonbinding resolutions without notable effect. When California’s bill passed, it received backlash from law professors and business groups who said the law invited discrimination against qualified men, violating the state’s civil rights statute. 

University of Delaware Prof. Charles Elson, who specializes in corporate governance, is one such critic.  

“It’s like saying ‘Gee, you can only elect to your Congress someone of a particular gender one way or another.’ In a democracy, we pick the best candidate,” he says. 

But Ms. Crawford says government action is now necessary. “As someone who studied engineering and went to top schools, I felt it was important to make it on my merit, not because I was a woman,” she says. 

“But ... we looked at how long it was going to take [to reach parity] at present rates of change and realized, well, no, this is something which is too important.”

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