California has become the first state in the US to pass a law stating that every public company must have at least one female director on its board.
Some of its best-known companies, like Walt Disney, already have women on their boards, but, right now, 26% of Californian companies on the Russell 3000 index do not include women.
This new legislation means they will have to take action to hire a female director by the end of next year, and, by the end of 2021, will need to have up to three women on their board, depending on the number of seats.
“I think it’s great news,” says Fiona Hathorn, managing director of Women On Boards UK, an organisation campaigning for gender equality and diversity in the corporate world. “Here in the UK, we’ve just achieved 30% on the FTSE 100, and that’s by persuasion – it was centrally controlled with government initiatives.
“But that’s not happening in the States. There’s very little will from the White House so some of the more liberal states have said, enough’s enough, and taken things into their hands.”
Not everyone believes that companies should be forced into positive discrimination, and quotas can mean that women are promoted or hired just for optics
California is the first US state to pass a law like this, but similar laws already exist in European countries like Norway, France and Germany.
These countries now have some of the highest shares of female directors in Europe – for example, a decade after Norway introduced a 40% female representation requirement in 2006, 42% of board seats belonged to women.
But quotas are controversial for a reason. Not everyone believes that companies should be forced into positive discrimination, and it can mean that women are promoted or hired just for optics.
It can also mean that the same women are asked to join a number of boards. In France, the 40% gender quota introduced in 2011 meant that a number of firms all began competing over the same women, like Clara Gaymard. In 2016, 28 of 44 board appointments in the CAC 40 index were female, but three of them belonged to Gaymard.
The other big issue is that, while legal quotas force companies to promote women to corporate board seats, the equality doesn’t always trickle down to lower levels. In France, Germany and the Netherlands, which all legally say women must take 30-40% of corporate board seats, just 10-20% of jobs one level down from this are held by women.
There has been positive data as well – like a Credit Suisse report that found companies where women made up at least 15% of senior management were 50% more profitable than those where fewer than 10% of senior managers were female.
But should the UK be following in the footsteps of California and enforcing quotas?
“If something is being measured and managed, I prefer the persuasion route,” says Hathorn. “Which is what we’ve done with the FTSE 100.
“But the truth is that outside of that, we’re not making much progress at all. We’ve had the gender pay gap legislation, which is good news. The issue for the UK now is executive boards.
“I don't like quotas but I like what they achieve. If they were ever introduced in the UK I would get over my disappointment fast and they may be needed as not much is happening as regards to having women on boards, or worse, diversity in general outside the FTSE 350.”