A new law, Senate Bill 826 will change the way corporate boards operate. The law, enacted in 2018, requires that a publicly-held corporation based in California must, by the end of 2019, have at least one woman on the board of directors of the company.
Generally, the shareholders of a corporation elect the board of directors. The new law requires that both domestic general corporations and foreign corporations which are publicly held – and where the principal executive offices (as identified on the corporation’s SEC 10-K form) are located in California – must have at least one woman on its board of directors.
By the end of 2021 (December 31, 2021), the publicly-held corporation must:
- Have at least two female board directors – if the corporation has five directors
- Have at least three female board directors – if the corporation has six directors
The law also authorizes the California Secretary of State to publish Internet web site documentation identifying (by certain dates) the number of corporations that are complying with this law.
The law further gives the Secretary of State the authority to impose fines. To the extent possible, the fines would be used to offset the administrative costs of the law. The fines could be $100,000 for a first violation and $300,000 for a second violation.
France, Spain, Iceland, and the Netherlands
The reason for the law
The bill states the reasons for more female representation on the boards of publicly-held companies include the following:
Studies show that companies with females on the board perform better:
- “A 2017 study by MSCI found that United States’ companies that began the five-year period from 2011 to 2016 with three or more female directors reported earnings per share that were 45 percent higher than those companies with no female directors at the beginning of the period.”
- “In 2014, Credit Suisse found that companies with at least one woman on the board had an average return on equity (ROE) of 12.2 percent, compared to 10.1 percent for companies with no female directors.”
“2012 the University of California, Berkeley study called ‘Women Create a Sustainable Future’ found that companies with more women on their boards are more likely to “create a sustainable future” by, among other things, instituting strong governance structures with a high level of transparency.”
The bill also noted that many countries have strict female representation requirements for corporate boards including Germany, Norway, France, Spain, Iceland, and the Netherlands.
“Female” means an individual who self-identifies her gender as a woman, without regard to the individual’s designated sex at birth.”
Call Danz and Associates if you are being treated unfairly due to your gender or sexual preference
At the law offices of Stephen Danz & Associates, we understand that women have numerous rights in addition to corporate board representation. These rights include freedom from discrimination, sexual abuse, and sexual harassment in the workplace. For help understanding your rights, please call (877)789-9707 to schedule an appointment. We fight to assert your rights. Se Habla Espanol.