We Californians are generally proud that our state leads in most categories – but California is not exemplary when it comes to women on corporate boards. UC Davis research last year showed that almost half (44.8 percent) of the 400 largest publicly held corporations in California have no women on their boards!
The state Senate recently passed a resolution urging all publicly held corporations in California to add women directors over the next three years. Senate Concurrent Resolution 62 should come up for an Assembly vote before the session ends this week. If it passes, California would become the first state whose Legislature has made a statement about this issue – because it’s all about the economy.
Credit-Suisse research over a six-year study released a year ago made the business case that corporations with women directors significantly outperform those that don’t. CalSTRS and CalPERS include gender balance among factors for evaluating companies in which they invest. Sponsored by the National Association of Women Business Owners-California, which represents issues and interests affecting 1.3 million women entrepreneurs in the state, SCR 62 is authored by Sen. Hannah-Beth Jackson of Santa Barbara, vice chair of the bipartisan Legislative Women’s Caucus, and sponsored by the National Association of Women Business Owners – California, which represents interests and issues affecting 1.3 million women entrepreneurs in the state.
The resolution calls for a three-year goal (not a quota) that at least three women should be on every corporate board of nine members or more. Boards with five to eight seats should have a minimum of two women; boards with four or fewer seats should have at least one woman. A resolution is a symbolic show of support for a concept, but does not carry the force of law behind it.
Citing a study titled “Critical Mass on Corporate Boards: Why Three or More Women Enhance Governance,” SCR 62 says, “Having three women on boards creates an environment where women are no longer seen as outsiders and are able to influence the content and process of board discussions.” One woman on board is a token, two is a conversation and three actually can make an impact.
One of the most outstanding examples is Sempra Energy, No. 281 on the Fortune 500 list this year and parent company of Southern California Gas Co. and San Diego Gas & Electric. Debra L. Reed is chairman and chief executive, and there are two other women directors, Lynn Schenk and Kathleen Brown.
Reed is one of 58 women corporate directors who advise women about getting on corporate boards in my book (“The Board Game – How Smart Women Become Corporate Directors,” published by Angel City Press in June). As co-owner of a retained executive search firm in Los Angeles, I share my expertise learned from handling corporate board searches for large public companies. The biggest challenge for a woman is to be selected for her first corporate board.
Why are there so few women on corporate boards? Because when board seat openings occur (which are rare), boards traditionally have sought other chief executives (only 4 percent of Fortune 500 CEOs are women); or board members tend to nominate candidates they already know through their own circles of contacts (mostly men); or they want “prior board experience,” which few women have; and, finally, only now are women becoming informed early in their careers about how to build strategic networks, focused on ultimately getting to corporate boards.
Look beyond the Fortune 500 for a moment. Bloomberg counts approximately 15,000 publicly traded companies in the United States, of which about one-third are traded on stock exchanges and the other two-thirds over the counter.
Assuming those 15,000 public companies average 10 directors each, that means approximately 150,000 board seats exist. If women held just one-third of those seats, 50,000 women would be sitting on America’s corporate boards. That would dramatically expand the number of women with current and prior corporate board experience, the prerequisite for larger boards. And it would dramatically change the way corporate boards make decisions.
Just good business
Right here in California, if the 400 largest companies had three or more women on their boards, that would mean at least 1,200 seats occupied by women directors.
Why should we care? Because it’s just good business. Directors on corporate boards are there to represent the shareholders, first and foremost, and to hire/fire and counsel the chief executive. Boards also set the compensation structure for senior management. Credit-Suisse says women on boards help companies perform better overall because women tend to be more risk averse. To compete with the best, California corporations should benefit from the different points of view and sound judgment that comes from having both genders seated in their boardrooms.
It is just as important for women to serve on the boards of California’s corporations as it is for women to serve on the city council, on the Supreme Court, in Congress and in the White House. If having more women on boards might help California achieve greatness again, why not give it a try?
Betsy Berkhemer-Credaire is president and co-founder of Berkhemer Clayton Retained Executive Search, with offices in Los Angeles and Hong Kong. She also is a statewide board member of the National Association of Women Business Owners-California and chairwoman of the L.A.-O.C. Chapter of Women Corporate Directors.
