Should Illinois require women on corporate boards of directors?

Sheryl Sandberg suggested that women should 'Lean In,' and it seems that a few states have been paying attention to the conversation surrounded by Sandberg’s book. States have started the process of legally requiring companies to have at least one woman on their board of directors.

California was the first state to do so when it enacted Senate Bill 826. This bill was recently approved by the governor of California on September 30, 2018 and requires every publicly traded corporation in California to have at least one woman director on their board by the end of 2019. In addition, publicly traded corporations with six or more members on their board are required to reserve at least three seats for women by 2021.

New Jersey followed California’s footsteps with the New Jersey bill AB 4726. Members of the House of Representatives introduced this bill on November 26, 2018, and the bill was referred to the Assembly Women and Children Committee. The bill calls for public companies to have at least one director seat reserved for a woman by 2019. Further, companies with more than five directors must hold at least three seats for women.

Most recently, on March 29, 2019, the Illinois House of Representatives passed HB 3394 which would require all publicly traded companies to have one woman and one African-American on their board of directors by 2021. The bill mentions a fine of $300,000 for failure to comply. HB3394 is now going to the Senate for consideration.

In addition to proposing legislation that requires companies to diversify their boards, some states are passing non-binding resolutions to strongly encourage companies to do so. For example, in 2015, the Illinois House of Representatives passed HR0439, a resolution that says companies perform better when their board of directors include women. HR0439 also encourages public companies with nine or more board members to have at least three women board members, companies with five board members to have two seats for women, and companies with fewer than five seats to have at least one woman on their board. In the same year, Massachusetts passed resolution S1007, which also encourages gender diversity on their boards. Pennsylvania chose to encourage companies in slightly a different way: rather than encouraging an actual number of women on the board, Pennsylvania bill HR 273 urges businesses to have women represent at least 30 percent of boards by 2020.

Other countries have required a certain number or percentage of women to be on a company’s board for years. Since 2008, Norway requires companies with board of directors to reserve at least 40% of their seats for women. Israel and Quebec both require that companies reserve 50% of the seats for each board to women. Belgium, France, Germany, Italy the Netherlands, and other countries require that the board of directors reserve 25-35 percent of their seats for women.

Having women as members of a board isn’t just a request; there are concrete financial benefits to having women on a board. Credit Suisse found that companies with women directors benefit more than all-male boards in finances. Not only can companies benefit, but implementing laws requiring women to be on boards could provide employment to women. Women who choose to leave their current position for a board position could possibly provide an opportunity for someone else to be in the position that the board member was in prior to being offered a seat to the board.

For example, because of California’s newly enacted law, over 700 board positions could be available for women. Those 700 potential positions could combat the fight for women to receive equal wages in comparison to men. Further, there may be 700 non-board positions available to qualified potential employees.

Although it has not been an issue yet, there could be a legality problem regarding the passing of these laws. Gender discrimination is a constitutional equal protection issue and there is a possibility that as these laws are enacted, a claim may be brought for being biased to women. So far, there are no claims that have been brought against states for gender discrimination as it relates to these laws, and it is likely that companies or other organizations will not bring lawsuits because of the timing as it relates to the nation’s culture. With the growth of women movements such as #MeToo and #TimesUp (which are movements that are not about women in leadership, but still speaks to women’s rights), this is a time when women are being more vocal and assertive about the rights they deserve. It could be detrimental for a company, especially as it relates to sales and a company’s reputation, to bring a claim against this issue during a time like this when the culture of the nation emphasizes on amplifying women’s empowerment.

Will Illinois be the next state to require a certain number of women to serve on a company’s board of directors? The future of HB 3394 will determine our answer, but will it shed light on people’s mindsets as it relates to women in leadership? Will those who are not yet convinced soon understand that women play influential roles in many companies and are the “movers and shakers” behind successful projects and committees? To some, the passing of one bill may not seem like a big deal, but it will definitely be a step forward in a positive direction.

Beverly Garland is a second-year law student at SIU Law and appreciates Dean Buys for this opportunity to write about women’s leadership.

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June 2019Volume 24Number 5PDF icon PDF version (for best printing)