These Tech Companies Will Need More Women on Their Boards

by Oct 2, 2018Personal Inspiration0 comments

Several major tech companies—including Apple, Google parent Alphabet, and Facebook—will likely have to add women to their boards of directors by mid-2021 under a pioneering new California law aimed at bringing more women into corporate boardrooms.

California governor Jerry Brown signed the measure, known as SB 826, into law on Sunday. In an unusual note attached to his signature, Brown nodded to the #MeToo movement and last week’s charged hearings for Supreme Court nominee Brett Kavanaugh. “Recent events in Washington, DC—and beyond—make it crystal clear that many are not getting the message,” about equal treatment of women, Brown wrote. “It’s high time that corporate boards include the people that constitute more than half the ‘persons’ in America.”

The law, sponsored by state senator Hannah-Beth Jackson, requires all publicly traded companies based in California to have at least one woman on their board by the end of 2019. By the end of 2021, all boards must have two women, and boards with six or more members must have three women.

Apple, Alphabet, and Facebook each have two women on their boards, as do chipmakers Intel and Nvidia. Among the biggest Silicon Valley companies, Cisco, Oracle, and Netflix meet the 2021 requirement, with three or more women on their boards.

Beyond big tech, the impact of the law could be even greater. Annalisa Barrett, of Board Governance Research, says only 62 of the 439 California companies in the Russell 3000 stock index comply with the 2021 requirement. The others will have to add 684 women to their boards by July 2021 in order to comply, including 66 companies that now have no women directors. In a study last year, Barrett found that women account for 15.5 percent of directors on California-based companies, compared with 16.2 percent of directors on all Russell 3000 companies.

In an interview, Barrett says the law’s biggest impact will be at smaller companies, far from the media spotlight and pressure from institutional investors seeking more diversity in the boardroom. “That is going to take a lot of these smaller companies by surprise,” she says.

The California Law

But the law’s reach could be stunted. In a paper posted online last month, Joseph Grundfest, a law professor at Stanford, said California can only dictate the makeup of boards that are both headquartered and incorporated in the state. Attempts to apply the law to companies incorporated in other states will likely be found unconstitutional, said Grundfest, a former member of the Securities and Exchange Commission. Most big California companies are incorporated in business-friendly states such as Delaware or Nevada. Among the biggest companies, only Apple and Cisco are incorporated in California.

Brown acknowledged such concerns in his signing message, saying, “I don’t minimize the potential flaws that indeed may prove fatal to its ultimate implementation.” Nonetheless, the governor said he was signing the bill in part because of the broader national climate.

Other lawyers disagree with Grundfest’s analysis. Ray Cardozo, a partner at Reed Smith LLP, says the board requirement is similar to other anti-discrimination laws that apply to all companies in California. Jackson, the bill’s sponsor, predicts the law will hold up in court. “I believe there is an extremely compelling state interest in California moving forward to protect women and the state’s economy,” she said in a statement. “From everything to establishing labor laws to reporting requirements and tax laws, states have historically and consistently developed ground rules for companies operating in their states.”

California is the first US state to require that women be represented on corporate boards. Several European countries have similar laws or guidelines, following the lead of Norway, which a decade ago required all companies to have at least 40 percent women on their boards. The Economist reported earlier this year that the laws have led to big increases in women directors in France, Germany, Italy, Britain, and the Netherlands.

The law arrives amid concern about the number, and prominence, of women in technology. Women account for 24.5 percent of technical employees at Google, 23 percent at Apple, and 22 percent at Facebook, according to those companies’ most recent diversity reports. Those numbers have been creeping higher in recent years, but not quickly enough for critics of the companies’ diversity efforts.


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