The State Senate on Monday passed a resolution urging companies to add women to their boards of directors — an attempt, its author says, at speeding the slow progress detailed annually in UC Davis reports.
What is believed to be the first such resolution in any state passed on a bipartisan vote of 30-6.
It calls for publicly held companies with boards of nine or more to fill at least three of those seats with women, for boards of five to eights seats two women, and for smaller boards at least one woman, all during the next three years.
Women held 10.5 percent of board seats at the state’s 400 largest companies in 2012, according to UCD’s eighth-annual study on California women business leaders, released last December. That was up from 8.8 percent in 2006.
The resolution’s author, Sen. Hannah-Beth Jackson, D-Santa Barbara, said it was time to take the discussion out of academia and into the public policy arena.
Making a business case for adding women directors, armed with studies that show businesses with women directors perform better, should grab the attention of shareholders, she said.
“It is critically important that we shake hundreds of years of not just inertia but clear gender bias in corporate America…,” Jackson said. “The days when men were completely in charge, when men did the buying, men did the decision-making — those days are gone. And that’s why companies do so much better when they have women on the board who understand some of those issues that women bring to the table when they go to purchase products and services.”
Led by Norway, a number of European countries have imposed quotas for corporate boards of publicly held companies while others, like the United Kingdom, have set goals. In 2011, 35 percent of Norwegian, 25 percent of Swedish and 20 percent of French directors were women, according to a report by McKinsey and Company, a global marketing firm.
A 2012 Credit Suisse Research Institute report found that of 2,360 companies worldwide, those with women directors averaged 14 percent net income growth over the preceding six years, compared to 10 percent growth for those with all-male boards.
“It’s just as important to have women on corporate boards as it is to have women in the state legislature, the Supreme Court, in Congress and in the White House,” said Betsy Berkhemer-Credaire, a board member of the National Association of Women Business Owners-California. “It’s just good business and it’s good for the economy.”
Berkhemer-Credaire said that “the pipeline of qualified women is absolutely bursting with potential board candidates.” Among the obstacles they face is a requirement by many companies that directors have experience on another board or as a chief executive officer.
“It just requires those boards looking beyond the usual CEO requirement,” she said. “For business purposes, corporate boards today need much more input for doing business in a global environment, not just from other CEOs who may not have functional expertise. In today’s corporate board room, the need for (compensation) and benefits expertise, for human resources and for senior level marketing, as well as operations expertise, is very great.”
Men are remaining on corporate boards until later in life, however, opening up fewer board seats, she said. Her organization wants companies to consider adding seats.
“When openings occur, men tend to bring forward other men they know from the golf course or from their university, and to not consider women they may not know personally,” Berkhemer-Credaire said.
She said that she hoped the resolution will encourage companies to plan for succession. There’s a reason to set a goal of at least three board seats:
“Research shows that one woman alone on a board is just a token; two women is a conversation; but three women actually make an impact and their voices are heard,” Berkhemer-Credaire said.
One place companies can find directors is to look for company leaders who have director experience with nonprofit organizations, she said.
“Now that women are more aware of how to develop networks and visibility throughout their careers — it’s a career-long pursuit to get on a corporate board — where women just did not know before,” she said. “It was probably a well-guarded secret or women just weren’t involved in the business world. Now we are.”
Steven Currall, dean of the Graduate School of Management, said that UCD’s annual study, authored by researcher Amanda Kimball, “continues to paint a dismal picture”: Of the state’s 400 top companies, which boast $3 trillion in stock market value, 128 have no women directors or women in top management.
Currall called Jackson’s resolution is “an exciting development.”
“I think she was very wise to frame this as a resolution to urge companies to consider greater diversity but not necessarily call for a quota,” he said. “I think that may come to California and the U.S. at some time in the future, but I think what she is doing today, with this resolution, is interjecting this topic into the dialogue about business competitiveness in California.”
Boards benefit from having directors with a greater diversity of backgrounds, skills and experiences, he said.
Women, Currall said, “often have a more sophisticated view of risk, of the potential downsides of decisions and are perhaps, in some cases, more careful than men, who I think tend to rush ahead and perhaps be motivated by their own career advancement, by their own visibility and by publicity by making bold strategic moves, like making acquisitions and things like that.”
Currall said the requirement that directors have CEO experience is “fading a bit.” He said that women benefit not just from mentorship, as Berkhemer-Credaire suggested, but from “sponsors”: leaders who will advocate for their advancement to top jobs.
Jackson said that women can hinder their own chances, at times, by believing they must be “100 percent ready” for being a director before stepping forward.
“Women wait until they’re perfect until they try to get into these kinds of jobs. Men wait until they’re ready or they play golf with a buddy,” she said, adding, “We’ve got to get over the days where women have to be twice as a good to get half as far.”
Sen. Lois Wolk, D-Davis, was among those who backed the resolution.
Six Republicans voted “no.” Of them, five were men. Three other GOP senators abstained.