California's new law requiring certain publicly traded companies to include women on their boards will more than double the total number of female-held board seats in the state. In two other states that are considering similar legislation, the number of women-held corporate board seats could see a comparable increase, according to an analysis of S&P Global Market Intelligence data.
In September 2018, California became the first state in the nation to enact a board gender diversity mandate, and Democratic lawmakers in four additional states have since introduced related legislation, three of which would largely mirror California's law.
California requires all publicly traded companies with "principal executive offices" in the state to have at least one female director by the end of 2019. Affected companies with five-member boards would need at least two women directors by the end of 2021, and those with boards of six or more members must have at least three female directors before then.
Related board gender diversity bills that would set the same thresholds but with varying deadlines have been introduced in Illinois, New Jersey and Massachusetts.
As of Feb. 12, women held 873 of 5,304 seats on the boards of 684 California-headquartered publicly traded companies. Assuming that all women currently serving on those boards remain in their positions, the state's new gender diversity mandate effectively would require those companies to dedicate at least another 1,076 seats to women by the end of 2021. The law says companies can fill existing seats or expand their boards to comply.
If the proposed Massachusetts and New Jersey laws are enacted, the number of female-held board seats in those states would increase from 369 to 741 and from 209 to 458, respectively. While the Illinois legislation would not quite result in a doubling of women-held seats, they would increase 273 to 464 if that mandate passes.
The first deadline under the California measure will hit smaller companies the hardest, given that many larger corporations already have at least one female director on each of their boards. And some of the state's largest companies by market capitalization, including Adobe Systems Inc., Facebook Inc., Visa Inc., Chevron Corp., Wells Fargo & Co., Oracle Corp., Walt Disney Co., Netflix Inc., Salesforce.com inc., and Amgen Inc., already meet the second threshold requirement. But others, such as Apple Inc., Alphabet Inc., Intel Corp., Cisco Systems Inc. and Broadcom, would have to add at least one more woman to their board ranks by 2021.
The state legislation and California mandate come as companies are under increasing pressure to adopt a variety of gender diversity-related practices. A number of major asset management funds and influential proxy advisory firms have pressed companies listed on either the Russell 3000 or S&P 1500 indices to include women on their boards, noting that studies have found board gender diversity to be positively associated with better company performance.
Of all the California companies to which the law applies, about 27% currently have no female directors. And companies in some industries in California are further along than others when it comes to including at least one women on their boards. Although the healthcare and the technology, media and telecommunications sectors together comprise about 63% of all impacted California companies, they appear to have the furthest to go on complying with the law. About 32% of companies in the healthcare sector and 31% of corporations in the technology, media and telecommunication sector currently have no female directors.
Since this data was first compiled, some companies may have moved headquarters from or into the states reviewed for this article. Moreover, a small number of companies were excluded from the analysis because the gender identities of those companies' board members were not readily obtainable.