California corporations must add 1,000 women to their boards to meet gender quota law

California corporations collectively must add 1,000 women to their boards of directors by 2021 in order to be compliant with a new state law requiring more female representation, a new report says.

That report shows “there was a lot of work to be done” for corporate boards to achieve gender parity, said Dottie Schindlinger, executive director of the Diligent Institute, which co-produced the report along with CGLytics.

The institute is a two-year-old organization that researches corporate governance issues. It’s related to the Diligent Corporation, which creates software and services for corporate board management.

Former Gov. Jerry Brown signed the law in 2018 mandating that all California-based publicly traded corporations have a woman on their board of directors by the end of 2019.

By Jan. 1, 2021, boards with five directors must have at least two women, while boards with six or more members must have at least three women.

According to the California Secretary of State’s Office, there are 537 corporations subject to the law.

The penalty for non-compliance is $100,000 for a first violation, shooting up to $300,000 for a second and subsequent violation.

Conservative legal organizations have challenged the law in state and in federal courts. Judicial Watch in Los Angeles County Superior Court has filed a lawsuit calling the law “brazenly unconstitutional.”

In federal court, the Pacific Legal Foundation is suing the state to overturn the law on behalf of a shareholder in a Southern California security firm.

Schindlinger said that 26 California corporations failed to meet the initial quota requirement, with many boards “scrambling right up until the deadline of Dec. 31, 2019,” to do so.

She said that while the goal of the law is to create gender parity, many corporations chose to just add a new board seat.

“Even though you have a lot of women serving on boards, the overall balance isn’t there,” Schindlinger said.

Schindlinger called the law a “really simplistic solution to a really complex problem.”

“I think the intention is good, the spirit is good, I just don’t know that it’s going to have the effect that’s intended,” she said.

This story was originally published February 19, 2020 at 7:00 AM with the headline "California corporations must add 1,000 women to their boards to meet gender quota law."