California’s gender quotas for corporate boards unnecessary

October 16, 2018 — by Leo Cao

Last month, Gov. Jerry Brown signed into law a heavy-handed — and perhaps unconstitutional — bill mandating that every publicly traded company based in California will need at least one woman on the board by the end of 2019, and as many as three by 2021. Failure to do so will result in $100,000 to $200,000 fines.

The Bank of Merrill Lynch reported that women account for 25 percent of board seats of Fortune 1000 companies, a drastic increase compared to the 14 percent from just a decade ago. Although these numbers are low considering that women make up half of the workforce in America, women are still being named to leadership positions at a swift pace.

There are many ways to address the lack of diversity on corporate boards, but this new law isn’t the proper solution. Even though California leaders may have implemented the rule to better balance gender-disparate corporate spaces, the rule is misguided at best.

First of all, quotas undermine the credibility of those they seek to help. A law enforcing a minimum number of slots for women on corporate boards implies that women cannot reach executive positions based on their own merit. This message is unfair and untrue, and is insulting to the qualified women advancing to board positions.

The law asserts that increasing the number of women in executive positions “will boost the California economy, improve opportunities for women in the workplace and protect California taxpayers, shareholders, and retirees.” But as the bill was being debated, state Sen. Hannah-Beth Jackson suggested in a passionate speech that she was motivated by feminist frustrations as much as by economic concerns.

“We are tired of being nice,” she said. “We are tired of being polite. It’s time that we burst that man cave.” This shows that one of the most prominent supporters of this policy isn’t driven so much by  improving the economy as she is by a sense of revenge.

Perhaps most of all, the law is also likely illegal. Federal courts have rejected efforts requiring private entities to implement racial or gender quotas as violations of the Constitution. Moreover, the composition of a company’s board is controlled by the state where the company is incorporated; many large California companies are incorporated in other states such as business-friendly Delaware. If the law is upheld in the court, existing California companies might choose to relocate their headquarters to other states, damaging California’s economy in the process.

There have been studies that show companies perform better with women on their boards, but this does not mean it should be mandated by government. Logically, it doesn’t make sense that companies will suddenly improve once their quotas are artificially met; if anything, this change may even hurt the economic productivity of the companies as a more qualified man may be overlooked in favor of satisfying arbitrary gender quotas.

California’s solution intrudes into a field where it does not belong. And where does this intrusion end? If California can tell companies how many women to have on their boards, why can’t it set quotas for Asian Americans, African Americans and Native Americans, or enforce numbers for people from certain religions or the LGBTQ community?

This bill is bound to cause more problems than it solves. American women can climb the corporate ladder without the help of the state legislature, as they already have been doing for the past few years. The business world is undoubtedly hungry for the aptitude, talents and ingenuity of female leaders and does not need government to intrude in its hiring decisions.

 

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