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Industry Spotlight > Women in Wealth

California Bans All-Male Boards at Its Public Companies

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Now hiring female directors in California. (Photo: Shutterstock)

Some 165 California-based publicly traded companies without any female directors will have to find one or more by the end of 2019 under a bill signed by Governor Jerry Brown.

The push to get more women in the boardroom doesn’t stop there. The law requires a company with five directors to have at least two female members by 2021. If a board has six or more directors, three will have to be women — a threshold many of the state’s giants including Facebook Inc. and Tesla Inc. don’t currently meet.

(Related: State Street to Vote Against More Directors at Male-Only Boards)

Among the all-male boards, though, most are much smaller. Many are in the technology and biotechnology industries.

“We’ve fooled ourselves into thinking we’re making progress by focusing on the biggest companies,” said Coco Brown, chief executive officer of the Athena Alliance, which advocates for gender diversity in the boardroom. “We’ve totally ignored the long tail.”

On average, the boards of the biggest companies — $100 billion and up — are about 25 percent women, Brown said. At firms with a market value under $1 billion, it’s 11 percent. For private companies, which don’t face shareholder pressures, fewer than 9 percent of the board members are female, on average

No Comment

If the California companies with all-male boards are thinking about how they might comply with a new law, most aren’t eager to talk about it publicly. Only two of the 10 biggest companies without women on their boards responded to a request for comment. Of two dozen companies reached for comment in total, only four responded.

Masimo Corp., an Irvine-based company that makes patient-monitoring products, is one of those companies. While it currently doesn’t have a female board member, it has had female directors in the past.

“We consider a number of different factors in assessing potential director candidates, including background, experience and capabilities, in each case based on the then-current needs of the board and its committees and the company generally,” Chief Executive Officer Joe Kiani said in a statement. “We’ve recently been interviewing additional well-qualified board member candidates, including women, and are always looking for the best people to guide Masimo.”

Xencor Inc., a drug development company headquartered in Monrovia, said diversity was essential to the long-term value of its business.

“I have been unsatisfied with our current boardroom and management team diversity, and it is an ongoing agenda item at board meetings, and an issue we are working to remedy with or without a quota,” said Bassil Dahiyat, CEO. Inc., which sells postage online, said it’s reviewing the proposed law, but didn’t have any further comment.

Possible Candidates

Companies with at least one woman on their board showed a higher return on equity than those without, according to 2014 research from Credit Suisse. Even so, studies predict it could take 50 years to achieve gender parity absent any deliberate efforts. European countries like Germany and France have requirements for gender diversity on corporate boards.

Hester Peirce, a member of the Securities and Exchange Commission, questioned whether a law was necessary.

“Counting the number of female directors may tell you something about how well a company is run, or it may simply tell you that the company has more female directors,” Peirce said in a Sept. 21 speech at a legal and financial reporting conference in Irvine. “There are studies going both ways.”

Some executive search firms said more companies have reached out to them looking for qualified women who could sit on their boards. Some may want to broaden the pool of candidates they’re looking at, said Nada Usina, a member of the board and CEO Advisory Group at Russell Reynolds Associates.

“You often hear companies say we’d like a Fortune 500 CEO on our board,” she said. But that certainly limits the number of women who might qualify. “We try to help boards think about their broader strategy, what are the real issues facing the organization and how can the perspective of different individuals help them align around that?”


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