A California law passed in September 2018 mandated that any public company headquartered in California have at least one woman on its board of directors by the end of 2019, or face a $100,000 one-time fine.

Less than two weeks from the deadline, dozens of companies have yet to comply, according to The New York Times. It's not entirely clear how many California companies still have all-male boards, because companies are making a flurry of appointments as the end of the year approaches. The Times estimates that 30 to 60 companies have yet to add a woman to their board.

It seems strange that, in 2020, two years after #MeToo hit Silicon Valley hard, some companies should still not be able to find a single woman they deem competent to sit on their boards. Part of the trouble is that historically, public companies have been run by men, and they decided on the qualifications needed to put someone on a public-company board: Ideally, a board member had to have already run a public company, or at least a very large division of one.

More recently, it's been venture-backed tech companies that, ironically, seem to have had trouble entering the modern era. A recent study from Crunchbase, not-for-profit Him for Her, and Kellogg School of Management found that board homogeneity starts long before companies go public. That study examined 200 private companies with at least $100 million in venture funding and valuations of $500 million and found that 60 percent had all-male boards. Public companies tend to do better, as every S&P 500 company has at least one woman board member.

The companies having trouble complying with the California law tend to be newer companies in either tech or biotech, according to Kathleen Kahle, a professor of finance at the University of Arizona. These companies tend to have smaller boards to begin with and also smaller market capitalizations. Since board members are generally appointed for three years, and companies don't want to boot off an existing director to make way for a woman, adding a woman to a board generally means expanding the board's size. And California board members get paid an average of $181,000 a year--nearly twice the fine--as well as travel fees and other expenses.

Companies that don't add at least one woman director soon are going to find themselves falling further behind as the law's requirements ramp up. By the end of 2021, companies with five board members are going to have to have at least two female directors. Companies with six board members will have to have at least three women among them. By that time, the penalty will rise to $300,000 for every "missing" female board member.

In the U.S., women hold about 20 percent of board seats at Russell 3000-listed companies, according to the nonprofit 2020 Women on Boards. Of about 600 public companies headquartered in California, about one-third had all-male boards when the 2018 law was passed. Two lawsuits filed this year claim that the law is discriminatory.

Published on: Dec 18, 2019