Worcester Business Journal

wbjournal.com | February 17, 2020 | Worcester Business Journal 13 Lewis is encouraged they've made it out of committee, when a bill can easily get lost in the shuffle or face resistance from enough members to stall it. "Just the fact that it's being discussed is helping to push this issue forward on the agenda for many companies," he said. A template to follow One state has already beaten Mas- sachusetts to the punch: California, a state whose legislative actions have been known to have outsized influence on the rest of the country. In California, a first-in-the-nation law requiring public companies to have at least one female board member by the end of 2019 has been met with almost total com- pliance. California Sen. Hannah-Beth Jackson, a Demo- crat originally from Newton, first filed a resolution in 2013 urging companies to add more women to their boards. She provided companies with studies showing those with higher rates of fe- male participation tended to have better performance. "We got nowhere," Jackson said. "Clearly, adding women is a benefit, Mass. shouldn't dictate gender diversity F L AS H P O L L Yes, the state needs to make sure boards have some female representation. 23% No, the state shouldn't dictate how companies staff their boards. 58% 19% There should be only a non-binding resolution encouraging such diversity. Should Massachusetts set legislation affecting public company boards' gender composition? "Only a mandate will result in meaningful and sustained change." COMMENTS: A bill under consideration by the Senate Ways and Means Committee on Beacon Hill would require Massachusetts public companies to have at least one female board member by the end of next year. By the close of 2023, the proposal mandates boards have two women if they have five or fewer seats, or three if the board has six or more seats. When polled online, the majority of WBJ readers said such a proposal shouldn't become law. W O M E N I N L E A D E R S H I P F O C U S "Oftentimes, regulations and restrictions exacerbate and perpetuate the subject they are set to combat. Be careful." "Board members of companies should be the most qualified person." Across the developed world, countries with laws requiring or urging public companies to meet minimum levels of female members on boards end up with higher such levels. Women on boards Female participation Type Country rate of law Norway 42% Mandatory France 37% Mandatory Sweden 36% Non-binding Italy 31% Mandatory Finland 31% Non-binding New Zealand 30% Non-binding Denmark 28% Non-binding Belgium 27% Mandatory Netherlands 26% Mandatory Germany 24% Mandatory Australia 24% Non-binding United Kingdom 21% Non-binding South Africa 21% Non-binding Austria 19% Non-binding Spain 19% Non-binding Switzerland 19% Non-binding Canada 17% Non-binding Ireland 16% None United States 15% None Source: Institutional Shareholder Services (2017) California Sen. Hannah-Beth Jackson and yet we couldn't get them to comply voluntarily." e financial services firm Credit Suisse found in 2019 public companies worldwide with more diverse manage- ment teams had a 4% better financial performance than those below the diversity average. A 2017 study by the recruiting firm Korn Ferry found both men and women to be more engaged when a board had a female member. Jackson went a step further, filing a bill that became law in 2018 mandating for the first time all public companies headquartered in California have at least one female board member. Of 650 public companies, only 16 didn't comply, and they were mostly very small or in danger of being delisted as public firms, according to a study by Clemson University professors Dan- iel Greene and Vincent Intintoli, and University of Arizona professor Kathleen Kahle. Companies were most likely to add a member in December, indicating difficulty or reluctance complying. Most companies – about three out of five – chose to add to their board to accommodate a new member, instead of replacing a male member with a female. Companies will need to add more than 1,000 female directors by 2021, when companies must have two or three fe- male members, depending on the size of their board, the researchers estimate. ey see that need as more onerous than adding a single member, estimating a stock market cost of around 1.2%. "It works out to be a pretty big eco- nomic number," Greene said. e law was not without resistance. e bill was opposed by the California Chamber of Commerce and 19 other chambers and employer groups, who argued the bill wrongly considered only one element of diversity, and violated state and federal constitution because an existing or potential board member could be excluded on the basis of gender. Challenges have been filed against the law in court. One claims the law violates equal pro- tection under the U.S. Constitution, and another says it would violate the Cali- fornia Constitution by using taxpayer funds, according to the Associated Press. Laws have shown results Where legislation has forced the issue, the results have been clear. In Norway, a law requires as many as four members of each sex on a nine-member public company board, and the result has been the world's high- est rate of female inclusion on corporate boards. Norway women held 42% of board seats in 2016, according to a study by Maryland advisory group Interna- tional Shareholder Services. e country requires at least two members of each W sex on a four- or five-member board, three of each on a six- to eight-member board, and four of each on a nine-mem- ber board. Other countries in Scandinavia and Western Europe have followed closely behind. France, which has a strict law, and Sweden, whose legislation is less force- ful, each boast rates of 36% or more for female board par- ticipation. Finland and Italy exceed 30%, and Belgium, the Netherlands and Denmark are among those with rates more than 20%. e United States, by contrast, is at 15%, according to a 2017 study of 3,000 companies by International Shareholder Services, Inc. Norway – a wealthy country known for its progressive attitudes – wasn't always open to the idea of quotas, according to a study last year by three Norweigan researchers. e prospect of requiring women on boards first surfaced there in the late 1990s, and the law was enacted in 2003. It went into full effect in 2008. e legislation didn't attract broad attention among Norwegians, and eventually the business community was split between opponents not wanting to be forced into decisions and those who saw no other option to spur change, said Mari Teigen, a researcher at the Institute for Social Research in Norway, and one of the study's authors. In time, the study found, support grew, particularly among male business leaders. "Today the opposition has more or less vanished," Teigen said. at's not to say change would have taken place without the law. Public companies subject to the law had women in 6% of board seats in 2002, the year before the law was approved, according to Statistics Norway, the country's official data agency. By 2017, it was 42%. Limited liability companies, on the other hand, weren't required to change their board compositions. In their case, female participation rose from 15% to 18% over those 14 years. State Sen. Patricia Haddad (D-Somerset)

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