In the wake of AB 979, the now off-the-books California law that required California-based companies to to have a minimum of minority-appointed Board seats, being tossed out of court in a Superior Court ruling earlier this week, companies have noted that more board seats had been going to minorities as well as women in recent years organically anyway.
In a March report by the California Secretary of State’s office, the AB 979 quota of requiring companies with fewer than 4 board seats to have at least one minority member, companies with 4-8 seats having 2 members and any with more than 8 requiring at least 3, has already been met by 84% of all California companies and growing. Companies meeting the gender-based requirements of SB 826, which has similar quotas for women on boards, was at 52% of all companies meeting it, but also rising quickly.
While factors such as California’s changing demographics and investor pressure boosting racial and gender diversity have already been changing board makeup organically without the Californian laws, many Board members on California companies and economic experts noted to the Globe on Thursday that it makes economic sense to do so without these laws in place.
“On boards, you want the best people there to make the best decisions for the company,” Charles Kaufman, a New York-based economist who has studied racial and gender diversity in high positions in companies, told the Globe on Thursday. “And what we’ve noticed, especially in the last 10-15 years, is that boards want members from all walks of life to make the best decisions. Women in particular have been moving up fast. In 2017, 16% of board seats on large companies were held by women. Today, it’s 25%. All without gender diversity laws. Why? Well, there is some bragging rights for companies to say how diverse their board is, but the big part is that a lot of companies had struggled for decades to really appeal to women. But boards with women on them not only turned that around, but to many male-centric boards, they held their own and went on to even being Chairwoman because of business savvy.”
“I’m not pretending there wasn’t a glass ceiling there, but the most successful companies had more women on the board giving these new view points and, honestly, being heavy hitters business-wise. If you are a company that is refusing to bring women on a Board, it’s like those Major League baseball teams that refused to bring on black athletes after integration. They sucked because they wouldn’t get with the times and pick from a larger pool of qualified people who could bring new things to the table.”
“Same with other races and gender orientation. Successful companies don’t ignore that, especially with the U.S., and especially states like California, having a growing minority population. How can a company in California, with a large Latino population, not have Latino input when it comes to marketing or choosing where to expand, or a host of other decisions? You need the best people, and companies are smart enough to figure that out. 84% of Californian companies meeting the requirements already before the law was struck down in court? Honestly, it’s probably higher than that, and not because of the law. Because it makes sense for a company.”
AB 979: Trying to enforce Board diversity despite it already happening
A board member of a food-based company who wished to remain anonymous also agreed that the law wasn’t needed because it has been already happening.
“When we saw that AB 979 had been passed, no one, at least in my company and several others we meet regularly with, seemed to care all that much,” sad the board member. “One of the other boards members, who is black, actually joked to us that he was worried because he ‘thought’ the law set a minimum meaning they could freely reduce the number of board members from other races freely. A lot of us felt that they were shaming us even though we were already well above what they wanted.”
“Gender equality and racial equality have been building for sometime and companies boards have begun to reflect more and more of that. We had a rival, well actually two, that were all older white guys and, like, one older white woman in charge of companies that were like 85% Latino workers. This was over a decade ago. You know, they refused to change and hear other voices on how to improve and bringing other voices in to strengthen their companies. There was no new blood, no minority voices no point out worker issues and to better appeal to more customers, and almost no women on board either. Your company suffers if they don’t do that.”
“I can’t go too much into details, but we had our first Latino board member some time ago, and he quickly started pointing out ways to change to appeal to customers when it came down to make decisions. profits went up because of him. Same thing when we had more women on the board. We tied in issues they brought up in company votes, like approving a Breast cancer awareness program, and we saw customer interest go up. Again, profits went up.
“And that’s not even getting into other benefits of having a diverse board. Millennials and Zoomers have been pushing more for diversity, so when they see a company with a well represented board, they’re more likely to go with it. You know, not everyone is looking at that of course, but enough are to make a difference. So just by doing it you get more customers, with those customers being young and likely to remember this for decades.
“AB 979 just did not make any sense because it is really economic Darwinism. Your company fails to have a diverse board? You’re going to lose money and customers and market share. Pure economics was already leading the change. Still is.”
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