United States: Measures To Increase Gender Diversity On Corporate Boards Gain Traction

On Aug. 26, 2013, the California State Senate passed Senate Concurrent Resolution (SCR) 62,1 which calls for greater representation of women on corporate boards, with a 30-6 vote. Although this resolution does not require corporations to take action, it encourages publicly traded corporations in California with fewer than five board seats to have at least one female director, those with five to eight board seats to have at least two female directors, and those with nine or more director seats to have at least three female directors. It also sets the goal that all publicly traded corporations in the state have at least one woman by 2016. This issue became a front-page headline when Twitter filed for its initial public offering and revealed that its seven-member board was exclusively composed of men. Twitter has named Marjorie Scardino—the former CEO of Pearson—to its board in December 2013.

The resolution cited a number of studies demonstrating positive correlations between gender diversity on boards and improvements in corporate governance and financial performance. One of the largest studies, which was conducted by the Credit Suisse Research Institute and covered 2,360 companies worldwide from 2006 to 2012, found that companies with a market capitalization of more than $10 billion that have at least one female director outperformed peer companies with all-male boards by 26 percent.2 In addition, the Credit Suisse study found that companies with at least one female director averaged higher net income growth, lower net debt-to-equity ratio, and faster reduction in debt compared to companies with no female directors.

Other studies cited in the resolution found that diversity on corporate boards is associated with more effective corporate governance and improved financial value.3 Most recently, a study from the University of British Columbia's school of business in the Journal of Corporate Finance concluded that companies pay less for acquisitions if they have more women sitting on their boards, indicating that women are less inclined to chase risky deals and tend to demand more for the company's money.

Yet, despite evidence showing that greater gender diversity on boards may be beneficial to corporations, women continue to hold a low number of board seats. In 2013, women held approximately 21 percent of board seats of the 100 largest U.S. public companies listed on NYSE or NASDAQ, and only two of those companies have boards comprised of at least 40 percent women.4 Since larger companies tend to have more diverse boards, this percentage decreases when smaller companies are taken into account: While 16.9 percent of directors in the S&P 500 are women, the percentage is 13.5 percent in the S&P Midcaps and 11.3 percent in the S&P Smallcaps.5

Worldwide, women hold 11 percent of board seats at the largest companies. In addition, female representation on corporate boards has increased only incrementally over the past several years. From 2004 to 2012, the percentage of female directors at Fortune 100 companies increased from 16.9 percent to 19.7 percent.6

Initiatives and Advocacy

SCR 62 is part of a larger effort, both in the United States and globally, to increase gender diversity on corporate boards. The United States has tended to favor government action that, like SCR 62, encourages board diversity rather than mandating companies to take specific actions. A rule adopted by the Securities and Exchange Commission in 2009 requires public companies to disclose in their annual proxies whether and how board or nominating committees take diversity into account in identifying board nominees.7 SEC Commissioner Luis Aguilar, who has spoken often about the need for greater diversity on boards, has indicated that this disclosure rule is only a first step. Because it does not define "diversity," the vagueness of the rule has allowed companies to provide disclosures that do not address racial or gender diversity.8

Scott Stringer, the newly elected New York City comptroller, has floated plans to increase female board representation by appointing a "chief diversity officer" to the comptroller's office, sponsoring shareholder initiatives calling for greater diversity, and working with pension funds and other investors to put pressure on companies to increase the number of women directors.

In addition to government initiatives, industry and non-profit organizations have been formed to advocate for greater gender diversity on boards. One such group, the "Thirty Percent Coalition," which is comprised of senior business executives, national women's organizations, institutional investors, corporate governance experts and board members, has taken action by sending letters to large public companies with no female board members and, in some cases, filing shareholder resolutions asking companies to commit to greater gender diversity on their boards.

Another group, "2020 Women on Boards," campaigns to reach 20 percent representation by women on U.S. corporate boards by 2020.

Quota Laws

In contrast to the voluntary approach taken in the United States, several countries, most of them in Europe, have passed quota laws requiring a minimum percentage of women on public company boards. In 2003, Norway was the first country to pass such a law, mandating that public companies achieve 40 percent representation of women on their boards within five years. Non-compliant companies risked fines or even dissolution. Since then, Belgium, France, Italy, the Netherlands and Spain have passed similar laws.

The sanctions imposed on companies that do not meet the quota vary from country to country and include fines, suspension of director benefits and compensation, or public disclosure explaining why the target was not reached. In some countries, such as Spain, there is no specific penalty for noncompliance, although gender diversity is taken into account in awarding public subsidies and state contracts.

Most recently, in November of 2013, the new coalition government in Germany announced its plans to require German listed companies to fill 30 percent of their supervisory board seats with women starting in 2016, and to set and publish individual binding targets to increase female representation in top management by 2015. In Germany, women currently fill just north of 17 percent of positions on supervisory boards, and only 6 percent of management boards.

The countries that impose penalties on non-compliant companies have generally been successful at increasing gender diversity on boards,9 but these laws remain controversial, even in Europe. In 2012, the European Union Justice Commissioner Viviane Reding proposed a law imposing sanctions on Europe's listed companies that have boards comprised of fewer than 40 percent women. Officials of nine countries signed a letter indicating their opposition to European-wide quotas, arguing that any such measures should be adopted at the national level.10 In addition, some argue that quotas are not the ideal way to achieve gender diversity; for example, at least one study has indicated that the Norwegian statute had a negative impact on stock prices, operating performance, and the experience level of directors, perhaps due to the short time frame in which companies were required to comply.11

However, a survey published in the Harvard Business Review demonstrated that support for quotas among both men and women is higher in countries with quotas than in countries without quotas: 95 percent of women and 43 percent of men in countries with quotas believe they are an effective way to increase gender diversity (as opposed to 48 percent and 23 percent, respectively, in countries without quotas). Although it is still unclear why this is the case, the authors suggest that, once quotas are enacted, both men and women may experience the higher satisfaction levels that tend to be associated with working in groups with greater gender balance, thus eroding some of the initial opposition to quotas.12

Countries that have not addressed gender imbalance on corporate boards through quota laws backed up by effective enforcement mechanisms have not made a great deal of progress in increasing the number of women directors, but there is currently no significant political backing for the introduction of European-style quota laws to the United States. It remains to be seen whether pressure from shareholders and the government, without the introduction of legal requirements, will be sufficient to increase the number of female board members in the United States. In Europe, the adoption of quota laws was in part a result of the lack of progress in achieving gender diversity through other means, and it is possible that legislative action may begin to seem more feasible in the United States if corporations fail to increase the number of women directors voluntarily.

Originally published by New York Law Journal on January 7.


1. S. Con. Res. 62, 2013 Leg. Reg. Sess. (Cal. 2013).

2. Heather Perlberg, "Stocks Perform Better If Women Are on Company Board," BLOOMBERG, July 21, 2012, available at http://www.bloomberg.com/news/2012-07-31/women-as-directors-beat-men-only-boards-in-company-stock-return.html.

3. S. Con. Res. 62, 2013 Leg. Reg. Sess. (Cal. 2013) (citing, e.g., Siri Terjesen, Ruth Sealy & Val Singh, Women Directors on Corporate Boards: A Review and Research Agenda, 17 Corp. Governance: An Int'l Rev. 320 (MAY 2009); Vicki W. Kramer, Alison M. Konrad & Sumru Erkut, "Critical Mass on Corporate Boards: Why Three or More Women Enhance Governance" (2006), available at http://www.wcwonline.org/pdf/CriticalMassExecSummary.pdf; Mariateresa Torchia, Andrea Calabrň, and Morten Huse, "Women Directors on Corporate Boards: From Tokenism to Critical Mass," 102 J. Of Bus. Ethics 299 (Feb. 2011)).

4. Shearman & Sterling, 11th Annual Survey of the Largest U.S. Public Companies, Corporate Governance Book 2, 13 (2013).

5. GMI Ratings', 2013 Women on Boards Survey 17 (2013), available at http://info.gmiratings.com/Portals/30022/docs/gmiratings_wob_042013.pdf.

6. Alliance for Board Diversity, "Missing Pieces: Women and Minorities on Fortune 500 Boards 2" (2013), available at http://theabd.org/2012_ABD%20Missing_Pieces_Final_8_15_13.pdf.

7. For instance, Section 342 of the Dodd-Frank Act represents another legislative effort to increase diversity, although it does not specifically target board diversity. Section 342 requires that certain federal regulatory agencies (SEC, FDIC, Federal Reserve Banks and Board, Office of Comptroller of Currency, Dept. of Treasury, National Credit Union Admin., Federal Housing Finance Agency, and Consumer Financial Protection Bureau) each create an Office of Minority and Women Inclusion (OMWI). The OMWIs are responsible for monitoring diversity both within the agencies, at the agencies' contractors and subcontractors, and at the businesses they regulate. In particular, the agencies must take into account the "fair inclusion of women and minorities in the workforce" of potential contractors and subcontractors as part of the review and evaluation of contract proposals. The director of an OMWI may also recommend termination of a contract if he or she finds that the contractor has not "made a good faith effort to include minorities and women in their workforce."

8. Luis A. Aguilar, "Merely Cracking the Glass Ceiling Is Not Enough: Corporate America Needs More Than Just a Few Women in Leadership" (May 22, 2013), available at http://www.sec.gov/News/Speech/Detail/Speech/1365171515760#.Ui0EDD8rqZQ.

9. See GMI Ratings', 2013 Women on Boards Survey 1 (2013), available at http://info.gmiratings.com/Portals/30022/docs/gmiratings_wob_042013.pdf.

10. James Fontanella-Khan, "UK Musters Support to Block EU Women Quota," FIN. TIMES, Sept. 16, 2012, available at www.ft.com/intl/cms/s/0/ed7cac44-fff3-11e1-831d-00144feabdc0.html.

11. Kenneth R. Ahearn & Amy K. Dittmar, "The Changing of the Boards: The Impact on Firm Valuation of Mandated Female Board Representation," 127 QUARTERLY J. OF ECON. 137 (2011), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1364470.

12. Boris Groysberg & Deborah Bell, Dysfunction in the Boardroom, HARV. BUS. REV., June 2013, available at http://hbr.org/2013/06/dysfunction-in-the-boardroom/.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.