California Bill to Mandate Women on Boards Faces Challenge From Businesses

California Bill to Mandate Women on Boards Faces Challenge From Businesses

The California legislature is considering a bill that would make it the first state in the US to require women’s representation on the boards of companies headquartered there, but the business community is pushing back, saying the proposed mandate is unconstitutional and counterproductive, Antoinette Siu reports at TechCrunch:

SB 826, which won Senate approval with only Democratic votes and has until the end of August to clear the Assembly, would require publicly held companies headquartered in California to have at least one woman on their boards of directors by end of next year. By 2021, companies with boards of five directors must have at least two women, and companies with six-member boards must have at least three women. Firms failing to comply would face a fine. …

Yet critics of the bill say it violates the federal and state constitutions. Business associations say the rule would require companies to discriminate against men wanting to serve on boards, as well as conflict with corporate law that says the internal affairs of a corporation should be governed by the state law in which it is incorporated. This bill would apply to companies headquartered in California. … Similarly, a legislative analysis of the bill cautioned that it could get challenged on equal protection grounds, and that it would be difficult to defend, requiring the state to prove a compelling government interest in such a quota system for a private corporation.

Legislative mandates or quotas for women on corporate boards are rare, with only a few European countries having adopted them. Norway was the first to do so, introducing a 40 percent quota in 2003, while France, Germany, Iceland, and Spain have since introduced their own mandates. Sweden had an opportunity to join this group but declined it early last year, when the parliament voted down a proposal to fine listed companies where women make up less than 40 percent of directors. In these countries, quotas have proven effective at driving gender equality on boards; critics acknowledge this, but argue that making women’s representation a matter of compliance isn’t changing corporate cultures to really value women in leadership.

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Massachusetts Enacts New Restrictions on Non-Compete Agreements

Massachusetts Enacts New Restrictions on Non-Compete Agreements

After several years of legislative wrangling, Massachusetts Governor Charlie Baker on Friday signed a bill into law that will limit the conditions under which employers in the state can enforce non-compete agreements on their employees. The law goes into effect on October 1 and will apply to all non-compete agreements signed after that date. Lisa Nagele-Piazza outlines the law’s provisions at SHRM:

The Massachusetts law aims to prevent overuse of such agreements by prohibiting noncompetes with employees who are:

  • Nonexempt under the Fair Labor Standards Act.
  • Under age 18.
  • Part-time college or graduate student workers.

For a noncompete to be valid, it must be:

  • Limited to 12 months in duration (with some exceptions).
  • Presented to new hires either with an offer letter or 10 days prior to an employee’s start date, whichever is earlier.
  • Signed by the employer and the worker.

The agreement must also inform employees of their right to consult legal counsel before signing it. If employers want existing staff to sign noncompetes, they will need to offer “fair and reasonable” consideration beyond continued employment for the agreements to be valid.

The new law is also the first in the U.S. to require that employers offer “garden leave” pay to former employees bound by non-competes. The law requires to pay these employees 50 percent of the highest base salary they earned in the prior two years for one year after their departure, or some other “mutually agreed upon consideration.”

That alternative represents a huge loophole in the law, Michael Elkon, an attorney with Fisher Phillips in Atlanta, tells Nagele-Piazza. What sort of “consideration” counts as valid for the purposes of this law will likely be hashed out in court in the coming years, but Elkon notes that employers will expose themselves to a risk of litigation (before an unsympathetic judge) if they attempt to get around this provision by offering an employee a “consideration” that undercuts the law’s guidelines.

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Sweden Declines to Legislate Boardroom Gender Quotas

Sweden Declines to Legislate Boardroom Gender Quotas

Last week, Sweden’s parliament rejected a plan to impose a gender parity quota on corporate boards by fining listed companies where women make up less than 40 percent of directors, Agence France-Presse reported:

The leftwing government announced in September that it was drafting the legislation, but the centre-right opposition and a far-right party, which together hold a majority in parliament, told parliament’s law review committee on Thursday that they would not support the project. “The current gender distribution on the boards of listed companies is not satisfactory. However, the committee thinks a more even gender distribution should be encouraged through other means than legislation,” parliament summarised on its website. …

Women hold 47.5% of jobs in Sweden, and 32% of board positions in listed companies – higher than the 23% average in the European Union, but below the European commission’s goal of 40% by 2020 for major European companies. The Swedish government had hoped that by 2019 it would have introduced annual fines of between 250,000 and 5m kronor (between £23,000 and £460,000), depending on a company’s market capitalisation.

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Study: Companies With Women CEOs More Likely to Have Women on Boards

Study: Companies With Women CEOs More Likely to Have Women on Boards

The ET Intelligence Group, the business arm of the Economic Times, investigated the prevalence of women in corporate leadership at India’s leading companies and found an interesting, if not terribly surprising, correlation between women CEOs and women on boards of directors, Kiran Kabtta Somvanshi and Rica Bhattcharyya report:

Companies struggling to find a woman director should take heed. Those with female CEOs typically find it easier to comply with the regulatory requirement, which is aimed at redressing the gender imbalance and promoting diversity in the boardroom. Of the 17 companies with woman CEOs on the BSE 500, about two-thirds have women directors, according to ETIG data. These include companies such as Apollo Hospitals, Axis Bank, Jindal Saw and Biocon.

Against this, only 25% of BSE 500 companies with male CEOs have more than one woman on the board. In the case of Nifty 50 companies run by male CEOs, only 22% have more than one woman on the board. Companies such as UltraTech Cement and Cipla, which have male CEOs, are exceptions, having four and three women directors, respectively.

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Boardroom Gender Quotas Work, But Do They Really Work?

Boardroom Gender Quotas Work, But Do They Really <em>Work?</em>

To close the gender gap in corporate boardrooms, several European countries have introduced gender quotas in recent years, mandating that companies reserve a certain percentage of board seats for women. Some members of the US Congress have considered trying to do the same. Although critics of quotas contend that they are too blunt an instrument and run the risk of saddling organizations with unqualified directors, even the critics admit that when it comes to improving gender parity, they’ve been remarkably successful. Oliver Staley has the story at Quartz:

That’s the view of Rajeev Vasudeva, the CEO of Egon Zehnder, one of Europe’s largest executive search firms. Vasuveda said he’s no fan of quotas, but concedes they’re having an impact. “I’m not a great supporter of quotas but in this case it’s making difference,” he said in an interview. “It has changed the conversation—it clearly has been put on the agenda of companies.”

Norway was the first to introduce quotas for women in 2003, requiring that public companies fill at least 40% of their board seats or risk dissolution. Iceland, Spain and France followed with 40% targets—although with less severe penalties—and other countries have lower thresholds. Last year, Germany became the largest economy to impose a quota, mandating 30% of supervisory board seats be filled by women.

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