As reported in the New York Times, in September 2018 California became the first state requiring corporate boards to be diverse and just recently Washington became the second state to do so through the amendment of the Washington Business Corporation Act (WBCA). The new legislation becomes effective June 11, 2020 and requires public corporations to either have a gender-diverse board by January 1, 2022 or comply with new board diversity disclosure requirements. Three other states in addition had diversity bills introduced soon after California to promote board diversity: Illinois, New Jersey, and Massachusetts, but with no subsequent enactment.
The recent gender diversity legislation in Washington State is the long term result of a grass roots movement championed by organizations that were founded a decade or more ago. The organizations sought to increase the number of women on boards in view of women comprising 50% of the workforce.
In 2010 the organization 2020 Women on Boards was founded in Boston by Stephanie Sonnabend and Malli Gero with the goal of raising the percentage of women on U.S. corporate boards to 20% or greater by the year 2020. In addition the organization offers research based on their tracking the gender composition of the boards of directors of Russell 3000 companies that in aggregate accounts for 98% of all incorporated equity securities in the U.S. In addition to showing the percentage of women on the board of each company, their Gender Diversity Index (GDI) provides an annual comparison of the percentage of women on these public company boards, indicating the size of each board, their location by state, and each’s industry sector— that yields an overall ranking.
Their latest data shows that:
- 64% of companies increased board size to add women directors in 2019
- At the largest IPOs 11% of board seats are held by women, up from 10% in 2014-2018
- Women hold 20.4% of board seats in Russell 3000 companies as of June 30, 2019
Upon Washington following California’s lead to have gender-diverse boards of directors, Susan C. Keating, CEO of the Women Corporate Directors Education and Development Foundation, Inc. (WCD), stated: “One state mandate is a data point; two is a trend; three is our future…We know that the pipeline of women qualified to serve as directors is vast, experienced, and quickly growing. Every one of our 2,400 members knows at least two more equally qualified women. With the state of Washington’s new ruling, we are accelerating our pace into the future.”
WCD is a 501(c) (3) foundation with a membership comprised of directors serving on more than 8,500 public and private boards around the world. Approaching its 20th year WCD has had a key role in preparing women for board service through training, while offering board opportunities and facilitating introductions to nominating committee chairs around the world. Globally it has 76 chapters and its members serve on boards that in aggregate have a market capitalization of public companies of over $8 trillion.
In 2019 an annual report titled Women in the Workplace by McKinsey & Company and LeanIn.Org identified the point on the corporate ladder where women struggle the most. It revealed that the first step up to a managerial position is especially difficult for women and if companies were to directly address this issue, it is estimated that about 1 million women could become managers within five years. Without a strong pipeline of future women leaders, the goal of having more women on boards is that much more difficult. On a positive note, the report revealed that in the last five years more women have moved into leadership positions and with more corporations committing to gender diversity it reached an all-time high in 2019 with 87%, in comparison to 56% in 2012.
Gender parity throughout the workforce that will help bolster women leadership is being championed by a range of organizations such as The Conference Board that held the Women Leadership Summit in 2018, gathering senior executives from industry leading companies such as Johnson & Johnson, Hasbro and Boeing, among others.
Learn about the Bloomberg Gender Equality Index
