05 Mar Women on Board- Gender disparity in the US
On September 30, 2018, California established Senate Bill 826, which states that every corporation headquartered in California should include a minimum of one female in their board of directors by the year-end of 2019. Also, it got updated with the minimum increases to two women by the year-end of 2021. In the year 2016, women held 20.2% of board positions in Fortune 500 companies which indicates a rise of 10.2 % in 1996.
The diversification enacted by government left many newer and innovative companies with the struggle. Although at the same time, leaders say that it matters to have diversity in American boardrooms. The “boys clubs” philosophy of the past is no longer a sustainable model for growth. The mere act of hiring women into management positions isn’t enough to reduce stereotypes. Exposure to female leadership is a relevant measure in better serving customers and the workforce, but companies must take other proactive steps to dismiss stereotypes and prejudices in the workplace.
Let’s talk about some key highlights which depict why women are a good fit for board hiring. The ability to have gravitas and authority without being over-bearing is often seen as another female strength. Research last year by executive search firm Fidelio partners found that this was one of the attributes shared by successful directors. Before plunging into the study, it’s essential to regard that encouraging corporations to join more women to their boards is a worthy goal. According to a report published last week by research firm, Catalyst, only 19.9% of board seats at S&P 500 companies are owned by women. Women still have a long way to go to reach equality with men in the boardroom and should surely be given every possibility to attempt directorships.
There are mainly two analytical problems. First, there is no control for the course of causality. Instead of more female board members leading to enhanced profits, enhanced profits could be pointing to the hiring of more female board members. The second and more plausible dilemma is that there could be a third variable that determines both profits and female-hiring. What’s a third variable?
“With women constituting over half the population and making over 70% of buying decisions, their insight is crucial to discussions and choices that affect corporate culture, activities, and profitability,” Jackson said in a statement about the bill. “The time has come for California to bring gender diversity to our corporate boards.”
More than 30 business groups, including the California Chamber of Commerce, protest the law. Detractors point out it might not pass legal muster if summoned in the courts. There are questions about how many corporations in California it would apply to at all. The alliance argues that the new law promotes gender diversity over other forms of diversity and that it’s unconstitutional.
“This means that if there are two qualified candidates for a director position, one male and one female, SB 826 would require the company to take the female candidate and deny the male candidate the rank, based on gender,” the coalition wrote to the state Senate.
Data implies that having more gender and racial variety in the boardroom is reliable for business. A Peterson Institute research found that the presence of women on corporate boards and in the C-suite may add to firm’s performance and that among profitable companies, a move from no women leaders to 30 percent representation was correlated with a 15 percent jump in profit.
Because so many organizations are headquartered in California — 377 of the extensive 3,000 publicly held companies in the US are located there — the bill could make a difference if companies comply. But it could also face legal hurdles.
More than 30 business groups, including the California Chamber of Commerce, argue the law, according to the LA Times. The businesses argue that the bill will “displace an existing member of the board of directors solely by gender” and that it centers too narrowly only on gender instead of other perspectives of diversity, including race and sexual orientation.