California Board Diversity Law Succeeding, Report Says
Author: Emily Scace, Brightmine Legal Editor
January 6, 2022
Since California passed a law requiring certain companies to diversify the composition of their boards of directors, the number of board seats held by women at these organizations has more than doubled, according to a report by the California Partners Project.
Passed in 2018, SB 826 imposed a phased-in set of requirements for the number of women on the boards of publicly traded companies with headquarters in California. By the end of 2019, affected companies were required to have at least one woman director, and by the end of 2021, affected companies were required to have a minimum number of women directors based on the size of the board.
According to the California Partners Project, an advocacy organization with a mission of measuring the impact of SB 826, women now hold a record number of California public company board seats. Out of 6,225 total board seats at the 752 publicly traded companies in California, women held 1,844 as of September 2021, up from 766 in 2018. Women now hold nearly 30% of the public company board seats in California, compared to just 15.5% in 2018.
Although board diversity is now required by law in California, "directors increasingly see the benefits of diversifying their boards," according to the report. Citing the results of the 2021 PricewaterhouseCoopers Annual Corporate Directors Survey, the report notes that 85% of board directors believe that board diversity enhances performance.
Other notable findings of the report include:
- More than 50% of California public companies have three or more women directors on their boards, compared to just 11% in 2018, which the report characterizes as a "critical mass" that can allow women to influence board discussions more substantially.
- Among industry sectors, energy and utilities (36%), retail (33%) and technology (31%) had the highest percentages of board seats held by women directors, and agriculture (24%), restaurants (27%) and financial services (28%) had the lowest.
The report notes that despite the progress in gender representation, women of color, particularly Latina women, continue to be underrepresented on boards of directors. Another law, AB 979, may help to address this gap. By the end of 2021, publicly traded companies in California were required to have at least one director from an underrepresented community, and by the end of 2022, such companies must have an additional number of directors from underrepresented communities depending on the size of the board.
A director from an underrepresented community is defined as one who self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian or Alaska Native, or who self-identifies as gay, lesbian, bisexual or transgender.