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 Calabrò, 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.

Similar Articles
Relevancy Powered by MondaqAI
Hughes Hubbard & Reed LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Hughes Hubbard & Reed LLP
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions