The California Legislature has passed a bill to require large corporations with base operations in the state to put more female directors on their boards. Democrat Senators Hannah Beth Jackson’s and Toni Atkins’ gender quota bill is illegal, and most definitely a precursor of negative outcomes, as recent history shows.
If Senate Bill 826 is signed into law by Democrat Gov. Jerry Brown, publicly traded companies based in the state, and with operations located in other states, will need to have at least one woman on their boards by the end of next year and, on boards of five or more directors, and two or three women by the end of 2021. Companies found violating the law would face fines.
Lawmakers who are not industry leaders never truly understand downstream consequences of regulations… nor do they seem to care. The bill is also a violation of the U.S. Constitution and the California Constitution..
Ironically, 04/23/18- Senate Judiciary Committee analysis produced eight pages of existing affirmative action law already benefitting women in the California workplace. Also ironic is how many bills Sen. Atkins and her Democrat Caucus members have passed attempting to blur the differences between women and men.
Sen. Atkins is the author of a gender neutrality bill allowing Californians to change the gender on the California drivers license and birth certificate, and created a third gender marker on state-issued identification documents for people who identify as nonbinary or intersex.
If gender is “neutral,” why mandate more women on boards?
A public policy with a good intention rarely translates to a good outcome – especially in free markets, where production of a product, output capabilities and profits are the goal. California corporations are not in business to serve as government mandated employment programs, the way state employment has become.
Europe Has Been There, Done That, And It Failed
“More than a decade ago, countries in Europe began to take measures to increase the gender diversity of their corporate boards,” Harvard Business Review reported. “Norway was the first to adopt a quota for female board members (40%) in 2004. Other nations followed suit – adopting either mandatory quotas (Germany, France, Belgium, Iceland, Italy) or voluntary goals (Austria, Finland, the Netherlands, Spain, Sweden, the UK), with goals for female representation ranging from 25% to 40%.”
HBR interviews found that both men and women directors said quotas lead to less qualified directors.
The irony is that these “highly-developed” countries that have also implemented corporate gender quotas have failed to produce the desired results. Jackson and Atkins look to Norway as their progressive Mecca to emulate. However, The number of public limited companies in Norway dropped from 452 in 2008 to only 257 in 2013. The number of board seats dropped from 2,366 in 2008 to 1,423 in 2013. So now, there are fewer seats for women to fill, The Federalist reported.
Time Magazine found that Spain (22 percent), Germany (14 percent), and Switzerland (13 percent) have some of the lowest proportions of women in senior management roles in the world, despite their own domestic policies addressing this issue.
The cause? Most women make life choices which benefit their families at a certain point in their careers, rather than continue to climb the ladder of upward mobility.
Norway’s mandatory gender quota of 40 percent for the boards of all public limited companies found the substance of the decisions and the quality of decision didn’t improve by simply having more women on boards,” According to Helen Raleigh in The Federalist. “Now corporations in Europe are facing a shortage in finding qualified women to fill the gender quota mandates on their boards,” Raleigh continued. “Some reached for less qualified and less experienced women to meet the quota, which doesn’t help improving corporate performance or governance. Since the law in Norway only applies to public companies, many Norwegian companies chose to become private.
In fact, the quota primarily benefited a small group of women who are already high achievers and are at the top of corporate hierarchies. They also serve on multiple boards, stretching them thinly.
A recent discussion with a friend who lived in South Africa concluded the same. He said the unintended consequences of racial quotas in hiring and corporate board appointments found the same small group of minorities serving on the boards. And there are many reports of increasing numbers of white South Africans saying they find it difficult to get a job and are living in poverty because of racial quotas.
“‘Better to leave a vacancy unfilled than to put a white person into it,’ SA Institute of Race Relations consultant John Kane-Berman said in a newsletter,” in a 2014 news article.
“Our system of government is indeed poisoned by a toxic mix of affirmative action, cadre deployment, and impunity,” South African CEO Frans Cronje said.
“The right-thinking progressives who rule Sacramento aren’t satisfied with punishing business with high taxes and costly regulation. Now they want to dictate to shareholders the gender of whom they can elect as corporate directors,” The Wall Street Journal Editorial Board wrote recently. ‘The Legislature, always alert to possible micro-aggressions, defines female as ‘an individual who self-identifies her gender as a woman, without regard to the individual’s designated sex at birth.’”
This is a bill desperately looking for a cause. Women are not blocked from boards now, as board trends clearly show. “Investment funds like BlackRock and Vanguard already push for board diversity on companies in their portfolios. And it’s a rare board these days that isn’t hunting for more women as directors,” the WSJ reported. “More than a third of new directors appointed in the second quarter this year were women, according to corporate-data firm Equilar.”
What this bill will likely cause is for male minorities to lose seats to white women. Norway has shown us this result.
Lastly, this legislation violates both the U.S. Constitution and the California Constitution. Set-asides for women have been struck down in state appeals-court decisions such as Connerly v. State Personnel Board (2001) and Hiatt v. City of Berkeley (1982). Gender-based affirmative-action is subject to “strict scrutiny” under the state constitution, as Ward Connerly has written extensively in his fight against affirmative action.
Such requirements are at odds with the public policy contained in Article I, Section 31 of the California Constitution, which forbids racial and gender quotas even in the public sector. (See Hi-Voltage Wireworks v. City of San Jose, 12 P.3d 1068 (Cal. 2000).) Hans Bader wrote at CNS News. “While affirmative action can be used to remedy certain types of discrimination against women, the existence of gender ‘imbalance’ in corporate boards is not, by itself, discrimination, contrary to the assumptions of some supporters of California’s gender quotas.”