Diverse boards repeal in California is a wakeup call to Corporate Amer

Earlier this month, California law Assembly Bill 927, which called for publicly traded companies with headquarters in California to have board directors from underrepresented groups (race, ethnicity, gender), was deemed unconstitutional. The repeal pushes back on what I hoped was the promise of transformative gains in the board diversity realm, building on California Senate Bill 826 from 2018, requiring state-based corporations to have women on their board of directors.

While the repeal is discouraging to say the least, leaders, companies, and board directors need to step up in the absence of this legislation to inspire change and embrace diversity starting now.

The clear benefits of diversity

First, let me share a reminder of all that we stand to gain when we do the right thing. The last few years alone have put diversity, inclusion, and equity on center stage. From hiring practices and board diversity to compensation and workplace policy, so many elements under the DEI umbrella have attracted closer attention in this new age of business.

Before, boards used to get away with cookie-cutter composition and minimal involvement (think older, white males attending quarterly meetings or meeting over a round of golf), but today’s boards are expected to deliver robust value, ask the right questions, and help CEOs and top leaders think creatively.

This value cannot be delivered when board directors all think and look similarly, including if they share backgrounds, ethnicities, genders, and areas of expertise. On the other hand, a balanced board, powered by diverse perspectives, can ignite creative thinking and collaboration, uncover new opportunities, reduce risk, and reveal overlooked areas. These are more than just nice-to-have’s: Anything less on a board can run the risk of group-think or status quo.

This is not simply good thought leadership, it’s good business and good governance. This widening of perspectives affects business operations from one end to the other, including from your hiring practice to your bottom line.

Mandates are forces for changes

Mandates and laws often lead to discomfort, because they put pressure on people and groups to make change, which is especially relevant to so many boards in need of a refresh.

However, the best boards of directors—those that understand what is the duty of care and who strive for good governance to make a real difference, embrace diversity. They possess an understanding that tough questions are good questions (even when they pose such questions to themselves), because they press forward for change.

I’m grateful for those boards, investors, and CEOs who serve as today’s pioneers by pursuing sweeping change in their boardrooms to ensure each group’s makeup reflects the societies they serve.

Change management and aside, mandates and laws have the power to lead to fundamental societal discomfort change. History has proven this: women’s right to vote in 1920; the Equal Rights Amendment in 1972; the Civil Rights Act in 1964; and the Pregnancy Discrimination Act in 1978. We’ve always had to make hard pushes for the right thing, but we’re not yet pushing hard enough in the boardrooms of corporate America.

Like so many others, I wish mandates weren’t required to drive change, to treat people with decency and respect, to create fairness and equity, and to drive social change. However, they’re a proven mode for forcing change when society itself is too slow to act.

Other ways to embrace diversity

In the wake of the discouraging repeal to California Assembly Bill 927, I want to remind leaders that there are other ways to ignite and embrace change.

  • Take a stand and spread influence. Nasdaq now requires companies listed with them to have at least two women on their boards. And Goldman Sachs announced he will refuse to IPO a company if its board is all white men. Obviouslt, private companies are wielding their influence; let’s not just get behind them but follow their lead.
  • Practice methodical, inclusive board director onboarding. It’s not enough to just get a woman on your board—make sure she feels welcome, included, and that she can begin her service in a position of influence.
  • Place venture capitalists into observer seats. VCs typically receive a board seat when they invest. In the interest of broadening perspectives (and because many VCs are white men), forward-thinking VCs may opt for an observer seat in the interest of the greater business good, in order to leave an actual board seat open for a member from an underrepresented background (kudos to Fred Wilson, managing partner at Union Square Ventures, for so courageously suggesting this in 2020).
  • Don’t stop at one seat. Don’t do the bare minimum by adding one “token” woman to your board. Refuse to just check the box; set a higher bar for yourself and your board. For example, research shows that women need at least three seats on a board to create critical mass, where they are no longer seen as mere outsiders.
  • Create a culture where diverse perspectives are valued. This starts at the top. Leaders need to look inward and ask themselves where their gaps are, what they want for their company, their employees, their customers, and their community. They must be willing to listen and, above all, be willing to change.

While I’m disappointed in the law repeal, I’m encouraged by the ongoing discussion. I’m inspired by the companies and leaders who are doing the right thing anyway, like Reddit, Instacart, HubSpot, Rippling, and many others who are recruiting women to their boards in the absence of mandate.

And, I’m continually moved by the diverse women leaders within communities like ours who are creating their own seat at the table and inspiring future generations.

While diversity mandates are critical to overarching success in the long term, change happens when we all act—as we all must take it upon ourselves to do now. One action at a time, one day at a time will add up if we all do our part.

Carolyn Childers is cofounder and CEO of Chiefa private network designed for women executives where they can strengthen their leadership, enhance their influence, and pave a path for the future.

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