Boys in the boardroom, consider yourself warned
Resolutions passed in the Legislature often prompt a roll of the eyes because they lack the power of the law. But here’s one that has come to haunt the boys in the boardroom: a 2015 resolution sponsored by Senator Karen Spilka and Representative Patricia Haddad calling for more women on boards.
It read: “Resolved, that by December 31, 2018, all corporate boards with nine or more members should have a minimum of three women directors; all boards with fewer than nine members should have a minimum of two women directors; and all companies, privately held as well as publicly traded, should measure their progress toward a goal of equal representation of men and women in leadership positions on an annual basis.”
Four years later, how are Massachusetts companies measuring up? If the Boston Club’s annual census of female leadership is any indication, not so well. The club, which dedicates itself to women’s advancement, found in its 2018 census of the 100 biggest public companies in Massachusetts that only 24 had three or more female directors.
Now what? Well, here’s what: Boys, consider yourself warned. Time’s up on self-regulation.
Spilka, now Senate president, and Haddad, the House’s number three leader, are back at it again. But this time they’re pushing a pair of bills to mandate women on boards of public companies headquartered in Massachusetts, as well as on state commissions.
In other words, gender diversity in the boardroom would become law.
The reality is that the bill requiring public-sector boards to reach gender parity by 2022 will probably have an easier time passing than one mandating women on corporate boards. It may shape up to be a redux of the 2016 battle royale to pass the state pay-equity law.
“We can control the public boards a little more,” Haddad said, referring to the Legislature. “When you’re dipping into the corporate world, people get their back up.”
Here’s the thing: As with pay equity, no one is against having more women on boards; studies have shown that gender diversity in the boardroom is good for the bottom line. Many companies and business groups have launched programs to build a pipeline of female directors. But Corporate America famously does not like more regulation.
So far, the powerful trade group Associated Industries of Massachusetts is opposing the corporate board bill. The Greater Boston Chamber of Commerce, Massachusetts Roundtable, Massachusetts High Technology Council, and Mass Technology Leadership Council have not taken a position.
But some people in the business community already have voiced support for the bills. The board of the Alliance for Business Leadership voted last week to support both the corporate and public board bills.
“Increasing the number of women on the boards of companies with principal executive offices in Massachusetts is good for business and good for the Commonwealth’s economy, and the bill before the Legislature will help us get there sooner rather than later,” said Jesse Mermell, the president of the progressive business group.
And while the Massachusetts Business Roundtable is still discussing the bills, board chair Bob Rivers, who is the CEO of Eastern Bank, supports the corporate board bill and testified at the bill’s first hearing last week. Eastern Bank itself would meet the gender diversity standard proposed in the bill, with three women on its board of 12 directors.
“I recognize this is not a popular opinion among my peers in the business community,” Rivers told me. “I don’t like regulation either, but sadly, this is necessary.”
The Senate bill, whose chief sponsor is Senator Jason Lewis, would require public companies headquartered in Massachusetts to have at least one female director by the end of 2021. By the end of 2023, a public company based in Massachusetts with six or more directors would be mandated to have a minimum of three female directors.
By 2022, the state will start publishing an annual online report detailing public companies headquartered here that have complied with the corporate board law. If the law’s enacted, violators could face fines of up to $100,000.
Last fall, California became the first state to pass a bill requiring publicly traded companies headquartered there to have women on boards. (Some countries in Europe have similar laws.)
Many believed the California law would face legal challenges, but so far it has not. Boston lawyer Beth Boland, who conducted a legal analysis of the Massachusetts bill that was shared at the hearing, determined that mandating gender diversity on boards could potentially pass constitutional muster. That’s partly because Massachusetts passed an Equal Rights Amendment in 1976 to protect equality for women and adopted a resolution in 2015 asking companies to increase board diversity.
Putting more women in boardrooms is a critical step toward getting more of them into the C-suites.
A 2008 Catalyst study found that putting more women on the board does, in fact, lead to more women at the top of a company.
“Put simply, women board directors are a predictor of women corporate officers,” the study concluded.
Many big companies appear to get that, and some already would meet the proposed standards from Beacon Hill. General Electric, for example, has four women on its 10-member board. Such a law would probably be a heavier lift for small and medium-size public companies, which typically have only one woman board member, if any.
I understand why business leaders want government to stay out of the boardroom. But the fact is that too many companies have not aggressively added a critical mass of women to their boards. Consider this statistic from the 2018 Equilar Gender Diversity Index: At the current rate, it would take another 15 years for small public companies in the United States to reach gender parity.
Women shouldn’t have to wait so long for their turn.