California's Unprecedented Leap to Advance Board Gender Diversity Suceeds Before Strike Down

"Corporations influence everything from income equality, communications, community health, the environment, and responses to calls for gender and racial equity. That's why it's imperative to have women's perspectives represented in the rooms where these decisions are made. Jennifer Siebold Newsomw, California's Fisrst Partner and California Partners Co-founder

The Impact of California's Gender Quota Law on Corporate Strategy

This study explores how California’s gender quota law, enacted in 2018, affects corporate strategies and increases the number of women in leadership roles. After implementing this law, companies saw a significant rise in female board members from 15% to over 30%. This increase promotes long-term thinking within firms by boosting investments in research and development (R&D), capital expenditures, intangible assets, and organizational growth. Additionally, having more women on boards improves environmental performance and strengthens company culture through better teamwork and innovation. Surprisingly, for some critics who worry about qualifications being overlooked with quotas, findings show that women's educational backgrounds match those of their male counterparts. While gender quotas may initially hurt profits, they lead to better long-term strategies and diversity. The benefits aren't confined just to California: other states are also experiencing an uptick in female representation. Overall, the data suggests that gender diversity supports equality and enhances corporate success while fostering sustainable practices.

Results

Before the enactment of SB826 in 2018, California's public companies lagged the national average in board gender diversity. Now California, with 32% of seats held by women, is a world leader in gender diversity on public company boards, ahead of the United States as a whole and the European Union.
CPP's data shows companies are overwhelmingly complying with the law, nearly tripling the number of public company board seats held by women – from 766 in 2018 to 2,055 today.
Among the California companies studied, those with three or more women on their board had 29% higher revenue in 2021 than those with fewer women board directors.

Strike down and appeals

The law was challenged and ruled unconstitutional in 2022. Since then, the percentage of women on corporate boards has started to decrease, and at the end of September 2023, the proportion of women on boards fell to 32.75%. The State of California is appealing the court decision.