California’s (Non-Binding) Resolution on Board Gender Diversity

In 2013, the California Legislature passed a resolution (CA SCR-62) calling for female representation on the boards of publicly traded companies in the state. The following is an excerpt of the text of the resolution: 

“This measure would encourage equitable and diverse gender representation on corporate boards, and urge that, within a 3-year period from January 2014 to December 2016, inclusive, every publicly held corporation in California with 9 or more director seats have a minimum of 3 women on its board, every publicly held corporation in California with 5 to 8 director seats have a minimum of 2 women on its board, and every publicly held corporation in California with fewer than 5 director seats have a minimum of one woman on its board.”

It is important to note that CA SCR-62 is a resolution, not a law; therefore companies in the state face no legal ramifications if they do not fulfill the resolution’s challenge to add women to their boards. However, California did set a precedent which other states are following.  In 2015, the House of Representatives in Illinois passed HR 0439 and the Senate of the Commonwealth of Massachusetts passed S1007, both of which are resolutions closely mirroring the California resolution. 

Although these state resolutions are bringing more attention to the efforts to increase gender diversity in the boardroom, achieving the standards they set will require drastic change.  If the approach taken by the resolutions in these states were extrapolated to all US companies, less than one in five (17%) of the 952 Russell 3000 companies in GMI Analyst (from MSCI ESG Research) with a board size between five and eight directors are currently in compliance with this goal (having two or more women on their boards).  Similarly, of the 1,376 Russell 3000 companies in the GMI Analyst (from MSCI ESG Research) with nine or more directors, less than a quarter (23%) are in compliance, with three or more female directors.  Clearly, there is more to be done if US boards are to meet the challenges set forth by state legislatures. 

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