Economy

California Law Would Make Companies Have Just One Female Director

Douglas A. McIntyre

Published: October 1, 2018 6:20 am

Last Updated: January 11, 2020 5:06 pm

California’s legislature has passed a bill, which Governor Jerry Brown will sign, that requires each company based in the state to have at least one female director in the near term.

Companies have argued for years that it is too hard to find women with the correct qualifications. The law is likely to be challenged by companies that maintain that philosophy.

The bill reads:

This bill, no later than the close of the 2019 calendar year, would require a domestic general corporation or foreign corporation that is a publicly held corporation, as defined, whose principal executive offices, according to the corporation’s SEC 10-K form, are located in California to have a minimum of one female, as defined, on its board of directors, as specified.

The number would rise over time:

No later than the close of the 2021 calendar year, the bill would increase that required minimum number to 2 female directors if the corporation has 5 directors or to 3 female directors if the corporation has 6 or more directors.

According to research firm Catalyst, 21% of board seats among S&P 500 companies are held by women.

Many legal analysts believe the new law will run afoul of laws that mandate boards of directors, especially among publicly held companies, have the right and fiduciary responsibility to appoint directors who have the skills to act in the best interests of their shareholders. These companies almost certainly will challenge the new law.

For the time being, companies without female board members have just over a year to comply.