SB 826: legislative solution to lack of workplace diversity

October 26, 2018 — by David Koh and Krithi Sankar

On Sept. 30, Gov. Jerry Brown passed Senate Bill 826, which mandates that all publicly traded companies in California include at least one woman on their boards by the end of 2019 and three by 2021, in an effort to promote workplace diversity.

“Given all the special privileges that corporations have enjoyed for so long, it’s high time corporate boards include the people who constitute more than half the ‘persons’ in America,” Brown said in his signing message.

Though the law is controversial, Brown is right in implementing it. Despite California’s advanced economy in comparison to other states, it has lagged behind in gender diversity at the highest corporate levels.

Without the proper state legislature mandating that corporations pursue diversification, there will be no change in the gender inequality that exists in corporate spaces. Currently, one-fourth of publicly traded companies based in California don’t have any women on their corporate boards, according to The Wall Street Journal.

The bill has sparked backlash as opponents of the bill have claimed that it commodifies women into a method of reaching quotas and results in the perception that women can’t gain these positions on their own.

However, this bill is nothing new. In 2013, Democratic senator Hannah-Beth Jackson introduced Senate Concurrent Resolution 62, which encouraged corporations with a board of nine or more members to include at least three women by the end of 2016. California was the first state to adopt this kind of legislature, and five other states have since followed suit.

Notably, the resolution differed from SB 826 in that it did not require or make any mandates of corporations or issue fines for non-compliance. As a result, the resolution was ignored, and three years following the resolution, only 20 percent of companies had come up to the standards.

Thus, it became evident that without legislation, corporate gender disparities become stagnant. Past legislature to encourage gender diversification have failed since there has been no legal enforcement of these standards.

Another suggested alternative has been to empower women from the beginning of their lives and education. However, even when women and men start from similar educational backgrounds, women are more likely to end up in lower positions according to a report by Catalyst. It is evident that without any sort of legislation, women will continue to be treated as lesser in workplace environments.

The bill simply serves as a catalyst for beginning to bridge the gender gap in corporate environments. Gender equality on boards is something that has been promoted over and over again, yet failed due to a lack of legislative enforcement. Even if the bill ends up falling short of expectations, it is a key starting point in breaking the glass ceiling that prevents women from advancing in the workplace.

However, despite its good intentions, the bill has been also attacked for being a potential slippery slope that leads to similar legislature for people of different ethnicities or sex.

This argument is not only convoluted but also flawed; SB-289 was both fiscally and socially motivated. A 2017 MSCI study over a five-year period found that boards with three or more female members reported earnings per share 45 percent larger than companies with no female directors. Any future policy that would be passed would require the same evidence that it would be beneficial to the companies and not just trivial requirements for boards.

The most overwhelming argument for the bill is that without it, studies have predicted that it will take 40 to 50 years to reach gender parity.

Due to previous failures, it is clear that the only option going forward is to pursue policies that are enforceable, rather than creating hollow promises of increasing diversity. Despite claims from opponents, SB 826 serves as a starting point for bridging the diversity gap and will amend the current obstacles that exist in the status quo.

 

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