Amid growing calls for women on corporate boards, and headlines about corporate wrongdoing like the sexual harassment scandals at Google, California’s 662 publicly traded companies have added 669 women to their boards in the past two years.

While that’s an impressive jump in women on boards, the companies didn’t do it because it suddenly struck them as a great idea.

“(Jerry Brown) called SB 826 a shot across the bow of the male-dominated world. And beneath his signature was his wife’s signature.” — Hannah-Beth Jackson

This sea change is driven by California Senate Bill 826, which took effect in 2019 and requires many of the West Coast’s most powerful corporate boards to give seats to women.

And now, under the state law, those firms must add another 600-plus women to their boards, by the end of 2021.

But instead of pushback, SB 826 has had a powerful impact. Washington State has copied the California law, and 10 other states are considering a mix of California-like diversity quotas, sunshine laws that disclose the number of women on boards, and in one state a resolution that encourages corporations to diversify their boards, according to the Harvard Law School Forum on Corporate Governance.

“It’s quite a story,” says SB 826’s author Hannah-Beth Jackson, recently retired from her seat in the California Senate. After her bill passed in 2018, she recalls, then Gov. Jerry Brown “wrote a ‘signing’ letter’ — which he rarely did. He called SB 826 a shot across the bow of the male-dominated world. And beneath his signature was his wife’s signature.”

Hannah-Beth Jackson

SB 826 still faces a challenge from the conservative activist group Judicial Watch that could be decided by a court this year. Another suit by the Pacific Legal Foundation on behalf of a company shareholder, which was dismissed by a trial court, is on appeal to the Ninth Circuit Court of Appeals. The groups contend the law is unconstitutional by requiring companies to discriminate in choosing board members based on gender.

But even if one or both prevail in court, leading experts say there will be no turning back.

In early December, Nasdaq announced that, with approval from the Securities and Exchange Commission, it will require 3,000-plus firms listed on its exchange to have at least one woman or member of an underrepresented minority on their boards, within two years — or explain why not. Days later, BlackRock Inc., the huge multinational investment management firm, announced it would vote against directors who fail to increase gender and ethnic diversity on  their boards.

“Other ecosystems are doing it now, with BlackRock saying, ‘We are going to vote against board members who don’t understand diversity,’ says Coco Brown, founder and CEO of Athena Alliance, which coaches senior-level women on moving higher in corporations and into boardrooms. Brown says, “What’s happened is a movement not just led by women, but one that has taken hold within the power system.”

In 2013, women held just 15.5% of the board seats at California’s publicly traded companies.

That year, Jackson authored a non-binding resolution urging boards to add women. Her resolution was approved but ignored. The persistent Jackson kept tabs, and recalls being “disgusted five years later, when data showed that by 2018 those same boards had only 16% women. Men pick men because they are more comfortable with their bros.”

Attorney Ann Ravel, a former member of the Federal Election Commission and a lecturer at the UC Berkeley School of Law, calls the changes “a great victory” over old-school attitudes.

Fast-forward to late 2020, with SB 826 now two years old. Olivia Morgan, co-founder and executive director of the non-profit California Partners Project, which is conducting in-depth studies of SB 826, says that the number of publicly traded companies with zero female board members plummeted from nearly 30 percent before SB 826 to 2.3 percent by late 2020.

California Partners Project found that 669 women were added to the boards of publicly traded California firms after SB 826. By the end of this year, those firms must add roughly 665 more women to their boards.

Morgan notes that one claim by opponents — that SB 826 would create “hogging of board seats by a few select women” — proved wrong. “There are 1,275 seats in California now filled by women, and only about 150 are held by women on multiple boards,” Morgan says.

Just 10 holdout firms in California have not added a woman to their boards. Morgan declined to name them, but attorney Leigha Weinberg, a program consultant for California Partners Project, described them as companies ‘’you have never heard of,’’ such as special purpose acquisition firms formed solely to raise capital to buy an existing company.

Attorney Ann Ravel, a former member of the Federal Election Commission and a lecturer at the University of California, Berkeley, School of Law, calls the changes forced by SB 826 “a great victory” over old-school attitudes, including those in the tech world and Silicon Valley.

Besides California and Washington, at least 10 other states have enacted, or are considering, board diversity laws.

Ravel was on a team at Renne Public Law Group that led part of the 2020 negotiations in which Google’s parent company, Alphabet, agreed to spend $310 million on diversity, equity and inclusion efforts in its settlement of sexual harassment claims and misconduct by some Google officers and directors. Ravel says some higher-ups in the tech industry thought “they didn’t have to behave like typical people should.”

Against that backdrop, Ravel says, “SB 826 is going to have a real impact,” throughout the state and beyond.

In 2020, Washington became the second state to mandate more women on boards. The Harvard Law School Forum on Corporate Governance says that besides California and Washington, at least 10 other states have enacted, or are considering, board diversity laws. Hawaii, Massachusetts, Michigan and New Jersey are considering mandates like California’s, while Maryland, Illinois and New York now require corporations to disclose the number of women holding seats. Colorado has passed a resolution encouraging corporations to add women to boards.

Add to that the impact of AB 979, a 2020 state law that requires California publicly held companies to appoint, by the end of this year, at least one director from an underrepresented group defined as Black, Latino, Asian, Native American, Pacific Islander, Native Hawaiian, Alaska Native, gay or transgender.

“We still hear, ‘Gosh, I really wanted to add a woman or person of color to the board,’“ perpetuating the myth that the talent isn’t there. — Shannon Gordon

Several firms and organizations, ranging from the National Association of Women Business Owners to Athena Alliance to the Boardlist, are helping pave the way for qualified women and members of underrepresented groups.

But many are asking, why did it take a law?

Shannon Gordon, CEO of theBoardlist, which matches qualified women with boards at public and private companies, thinks that despite momentum in the past decade, “board seats are often filled via referrals from investors and board members”, often resulting in “getting the same exact names again and again.”

Gordon says, “We still hear, ‘Gosh, I really wanted to add a woman or person of color to the board,’“ perpetuating the myth that the talent isn’t there. “Many really genuinely mean it — because they made 20 calls to their network.”

“They golf together, literally,” says the more plain-spoken Jackson.

The conservative activist group Judicial Watch argues that companies with homogenous boards are well within their rights. Judicial Watch President Tom Fitton sees SB 826 as “brazenly unconstitutional.” He says its gender quotas go against California’s constitution, which says the state cannot discriminate “or grant preferential treatment” based on gender or race, while other critics say the law violates similar provisions of the Equal Protection Clause of the U.S. Constitution.

Fitton says Judicial Watch also filed a letter objecting to the Nasdaq attempt to impose a similar quota on the exchange. “So, what happened in California is spreading,” Fitton said.

Only half-kidding, Coco Brown of Athena Alliance says there’s another powerful force at work  that is spreading across California board rooms: “Many people don’t want to be jerks.”
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Editor Note: This story was produced by FairWarning, (www.fairwarning.org), a nonprofit news organization based in Southern California that focuses on public health, consumer and environmental issues.