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The effect of mandating women on public boards
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Management and Strategy

The effect of mandating women on public boards

In 2018, California mandated women on the boards — a controversial move that raises new questions about governance.

Carlos Alvarenga's avatar
Carlos Alvarenga
Apr 30, 2021
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The effect of mandating women on public boards
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On September 30, 2018, California enacted Senate Bill 826 mandating that all publicly traded companies headquartered in the state have at least one female director by the end of 2019. It also required that by the end of 2021, all firms have at least one female director (in boards with four members or fewer) and two female directors (if the board has five members), and three female directors for boards with six or more members. The law imposed penalties for non-compliance. In addition to mandated, the law imposed penalties. For example, firms are subject to a compliance assessment and subject to a monetary fine of $100,000 for the first violation. With this law, California became the first U.S. state to mandate women directors on the board of public firms.

At the time, the law was presented as both beneficial for California's public firms and a model to be emulated elsewhere. New research from the Kenan Institute of Private Enterprise tries to assess the impact of the California mandate two years later. The results of their study are interesting. They point out the various factors that must be considered to correctly design quota-based mandates and that must be addressed to achieve the impact these laws are intended to create.

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