Ca. Outlawed The All-White-Male Boardroom. That Move Is Reshaping Corporate America

Evan Halper
Los Angeles Times

WWR Article Summary (tl;dr) As Evan Halper reports, “The state’s requirements that publicly traded corporations diversify their boardrooms were ridiculed as quixotic by conservative columnists and some corporate chieftains. The courts are still threatening to erase the quotas, the first of which were signed into law in 2018.”


When Dr. Maria Rivas joined the board of a medical tech firm called Medidata a few years ago, she was a novelty: The company had never had a woman in that role.

Medidata was no outlier. Rivas, chief medical officer at Merck, had impressive credentials when she breached the rarefied world of boardrooms in 2018, but much of corporate America wasn’t looking for candidates like her. “It is unfortunately comfortable for humans to go with people who look like they do,” Rivas said.

For hundreds of public companies, that meant filling boards exclusively from their networks of familiar faces — typically white men.

Then California outlawed the all-white-male boardroom.

The state’s requirements that publicly traded corporations diversify their boardrooms were ridiculed as quixotic by conservative columnists and some corporate chieftains. The courts are still threatening to erase the quotas, the first of which were signed into law in 2018.

But California is having the last laugh. Even as the mandates on women and people of color have become a flashpoint in the culture wars, companies across the country are embracing California’s boardroom diversity directives. Women now control more than a quarter of corporate board seats nationwide — 50% more than they did before the 2018 California law requiring women on boards was passed. Companies are also scrambling to recruit people of color as other diversity mandates begin to take effect.

The state’s crusade is reshaping the corporate boardroom, an institution that for decades refused to evolve — and which guides the direction, culture and financial stewardship of public companies. Even as the courts signal the new rules could collapse legally, the requirements that every public company headquartered in the state have women and members of traditionally underrepresented groups on its board are driving hundreds of companies to make room at the top — and inspiring other states and federal regulators to join California’s push.

“The ripple effect has gone across the nation,” said Betsy Berkhemer-Credaire, chief executive of the Los Angeles-based advocacy group 50/50 Women on Boards. She predicts that within a decade, “it will be quite an anachronism to remember when corporations had all-white-male boards.”

Recently joining California’s crusade is an even more influential force in the business world. The Nasdaq exchange is requiring nearly all of the more than 3,000 companies listed on it to have on their boards at least one woman and one person of color or person who identifies as LGBTQ — or explain to shareholders why they don’t.

Federal regulators gave that diversity rule a green light in August, over the objection of a dozen Republican senators. The rule extends even to firms headquartered abroad, though they are given more time to diversify.

The lawmakers — 11 men plus Sen. Cynthia Lummis of Wyoming — warned in a letter to the Securities and Exchange Commission that the regulation would hurt the economy by pushing a social agenda.

Yet the companies those lawmakers say they are seeking to protect are hardly sounding the same alarm. The U.S. Chamber of Commerce threw its support behind the Nasdaq diversity plan and a similar proposal in Congress for a national rule.

“We have seen California make a lot of progress,” said Democratic U.S. Sen. Alex Padilla, who in his previous job as California secretary of state was charged with ensuring the 647 public companies headquartered there followed the law. “It is what makes sense for the nation, as well.”

Analysts predict the New York Stock Exchange will soon unveil its own blueprint to push board diversity that is modeled after California’s aspirations. Goldman Sachs announced this year that it won’t take a company public in the U.S. unless at least two of its board members are not straight white men.

Investment giant BlackRock expects companies it aligns with to have at least two women on their board.
The rapid shift is creating demand for executives such as Darnell Strom, who heads the culture and leadership division at United Talent Agency. The 40-year-old veteran agent whose job puts him at the intersection of entertainment, media and politics had earlier figured an ossified corporate culture left boardrooms closed to candidates like him.

“The makeup of them were people who do not look like me,” said Strom, a Black millennial. “We all felt it was this exclusive club we did not have access to.”

Now, Strom gets regular calls from board recruiters. He recently became the first person of color to join the board at Wynn Resorts. The Las Vegas company had earlier added three prominent women to its board in an overhaul driven by the fallout from sexual misconduct allegations against former Chief Executive Steve Wynn.

The business case for diversifying a board, Strom said, is obvious. Companies are confronting cultural, security and public health shifts that demand they widen their expertise at the top, and the old guard of board directors isn’t equipped to meet the moment.

Wynn, for example, is an operation that needs to tap into fast-changing social trends. Yet Strom is the rare director on its board with a background in entertainment and media. Other companies are consumed with cybersecurity or pandemic safety concerns, yet have nobody on their boards to take a lead on those issues.
“If you were recruiting for a board 20 years ago, you weren’t thinking about cybersecurity or digital marketing or global supply chain,” said Tracey Doi, the chief financial officer and group vice president for Toyota Motor North America, and also a board member at two public companies — City National Bank and Quest Diagnostics — that have several women in their boardrooms.

“This past 18 months is a critical juncture for companies to step back and ask: Are we operating on a model that is sustainable coming out of this pandemic?” Doi said. “Are we embracing a different mindset for how we will serve customers within their communities?”

The inspiration for California’s diversity push came from Europe, where several countries had imposed mandates. Norway more than a decade ago required that at least 40% of corporate board positions be filled by women. France, Germany, Italy and other European nations later created their own quota systems. France this year went even further, directing companies to fill at least 30% of all their top executive posts with women by 2027. The European rules tend to be mostly gender-focused, as opposed to American targets that also aim to boost racial and ethnic diversity.

Researchers are conflicted on whether a more diverse board helps increase profits, but findings that it does from heavyweight firms such as Morgan Stanley and McKinsey & Co. are solidifying support around the push in the U.S.

The Pacific Legal Foundation, the conservative group taking a lead in resisting the California rules, has not been able to entice a single public company to join its court fight.

‘“There were not any corporations that we could find that were willing to stick their necks out as a plaintiff,” said Anastasia Boden, the lead attorney on the case. “Nobody wanted to be seen as opposing this law, because they were afraid that they would be perceived as anti-woman.”

The plaintiff the Pacific Legal Foundation has instead is Creighton Meland Jr., a retired Chicago lawyer who owns shares in OSI Systems, a California-based security and medical equipment firm.

The foundation’s argument that the law forces shareholders such as Meland to discriminate in favor of women when they choose board directors is getting traction in court. The U.S. 9th Circuit Court of Appeals, finding that Meland’s claims have merit, reversed a lower federal court’s dismissal of the suit.

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