OPINION: California Forces Female Quotas on Corporate Boards


Carl Horowitz Senior Fellow, National Legal & Policy Center
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Mandatory “gender equity” on corporate boards may seem a far-fetched idea, but in one state, it may soon become law.

Several weeks ago, the California legislature passed a bill, SB 826, that would require every public company headquartered in the state to have at least one woman on its board of directors by the end of 2019. Larger companies also would have to place at least two women on their boards by the end of 2021. There would be stiff fines for noncompliance.

The bill awaits the signature of Gov. Jerry Brown. It’s yet another example of how affirmative action is driven by political shaming, not by sensible economics or constitutional law.

Feminists long have set their sights on breaking the “glass ceiling,” that metaphorical barrier established by male employers to discourage women from advancing to top positions. As a corrective, these activists increasingly are calling for requiring female inclusion at the top.

As with race-based affirmative action (“diversity”), sex-based affirmative action operates on the assumption that equalizing social outcomes is a moral imperative. In this view, statistical disparities between races, ethnic groups or sexes must be assumed to have resulted from discrimination and thus must be punished. Such a policy is zero-sum economics made palatable by the rhetoric of moral justice.  

Female representation in corporate boardrooms and executive suites isn’t exactly a novelty. Currently, 84 percent of all Fortune 500 companies have at least one female director. The current CEOs of Duke Energy, General Motors, IBM, Lockheed Martin, Oracle, Pacific Gas & Electric and PepsiCo, to name several companies, are women.

Some people, however, aren’t impressed. One of them is California State Sen. Hannah-Beth Jackson. Back in 2013, she authored a non-binding resolution calling for California-based corporations to increase female representation on their boards. By 2017, 16 percent of all corporate board members in the state were women, a slight uptick from 15.5 percent four years earlier. Nationwide, the figure for second quarter 2018 was 17.7 percent.

A dismayed Sen. Jackson, with the California chapter of the National Association of Women Business Owners (NAWBO) laying the groundwork, introduced SB 826. Aside from forcing all public companies to have at least one female on their board of directors, the measure would require a board with five members to have at least two female directors, and a board with six or more members to have three female directors, by December 31, 2021.

“At this rate, it’s going to take many lifetimes to get…gender parity,” Jackson rued. “When we’ve let market forces work, that glass ceiling can’t be penetrated. Even with all the data that shows adding women to corporate boards is good for business, we haven’t been able to make that case successfully.”

She added a less-than-subtle threat: “We are tired of being polite. We are going to require this because it’s going to benefit the economy…It’s time that we bust that man cave.” These are the words of a fanatic.  

The California legislature dutifully voted to bust the cave. Late this August, the measure passed the Assembly by 41-21 and the Senate by 23-9. All that remains is Governor Brown’s signature. And given his clear egalitarian leanings, any veto would be motivated by a desire for fine-tuning certain details to protect the law from court challenges, not by an objection to the law on principle.

And the bill is coercive. It sets a $100,000 penalty for first-time violations and a $300,000 penalty for subsequent violations.       

Proponents claim such legislation is needed to combat inequality. Lori Nishiura Mackenzie, executive director of Stanford University’s Clayman Institute for Gender Research, calls gender equity “a social good, just like clean air is a social good.” She fears that hiring quotas might not survive politically because of America’s aversion to quotas — as if Congress or the legislatures have shown any interest in overturning quotas already in place.

Kirsten Wolberg, chief technology and operations officer for DocuSign, and a member of three corporate boards, is of a like mind. “Given that the majority of boards are made up of men, and the majority of men have men in their networks, I don’t think an organic solution is delivering results at the pace it needs to,” she noted. “It’s time penalties are introduced. I much prefer the carrot than the stick, but the carrot isn’t working.”   

Backers of the bill proclaim that affirmative action enhances profit. As proof, they are pointing to a multi-year study by Credit Suisse of more than 2,000 companies concluding that firms with at least one female director performed better than all-male boards did. But this should not necessarily imply a cause-and-effect relationship.

“It seems more likely that companies’ success leads to more women on their boards, as opposed to their success occurring because they have women on their boards,” says Hans Bader, former senior attorney for the Washington, D.C.-based Competitive Enterprise Institute. “Successful business strategies attract women and new blood into a business. The fact that such success continues after the well-run business attracts women doesn’t prove that it would have failed if it had hired men instead.”  

Unfazed by such logic, supporters of SB 826 are citing the experiences of France, Germany, Italy, Norway and other European nations with corporate gender quota laws in effect. Norway is their prize exhibit. For a dozen years, this Scandinavian nation has required that at least 40 percent of publicly-traded company board seats must be filled by women.

According to business professors Kenneth Ahern (University of Southern California) and Amy Dittmar (University of Michigan), however, the law has induced many companies to place inexperienced or otherwise unqualified people on their boards, in the process triggering a decline in performance and in the number of registered public companies. California is not the entire United States, let alone Norway.

But if SB 826 becomes law, smaller affected corporations might move to another state rather than pay steep fines.  

For decades, affirmative action has imposed substantial costs on American and other societies. Yet such mandates have proven almost impossible to reverse. No degree of “progress” can be enough for supporters. That is because underneath it all, affirmative action is about the exercise of power, not the protection of individual rights. California businesses may be about to get a first-hand lesson in the consequences of feminist power.

Carl F. Horowitz is senior fellow with the National Legal and Policy Center, a Falls Church, Va.-based nonprofit group dedicated to promoting ethics and accountability in American public life.

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.