California recently became the first state in the US to enact a law requiring companies based there to include at least some women on their boards of directors. The legislation, signed by Governor Jerry Brown on the last day of September, mandates that all publicly traded companies headquartered California (not just those chartered there) have at least one woman on their boards by the end of 2019. For companies with at least five directors, at least two or three of those seats must be filled by women by 2021, depending on the size of the board. Companies that do not comply will be subject to fines by the state.
California’s mandate has ignited a firestorm of controversy, with business groups like the California Chamber of Commerce saying it violates constitutional principles and effectively requires companies to discriminate against men, while even some advocates of diversity in corporate leadership question whether it will have the kind of impact it is intended to have. The state will likely be sued over the law and may lose, which Brown acknowledged in his letter to the state Senate announcing his signature of the bill. “I don’t minimize the potential flaws that may indeed prove fatal to its ultimate implementation,” he wrote. The constitutional issues at hand concern not only the issue of reverse gender discrimination but also a question of jurisdiction, as the Supreme Court has ruled in the past that a corporation’s internal affairs are governed by the statutes of the state in which it is chartered, not where its headquarters is located.
Nonetheless, even if the law is ultimately defeated in court, it is intended partly as a marker of determination on the part of the California state government to ratchet up pressure on companies there to make more progress on diversity and inclusion, particularly in leadership roles where women and minorities remain heavily underrepresented. Simply bringing visibility to the issue counts as a win for some advocates of gender equality, Vox‘s Emily Stewart reported:
“If nothing else, what this law is doing is increasing the visibility and awareness on the issue itself and the importance, and that is a win in and of itself,” said Serena Fong, the vice president of strategic engagement at Catalyst, a nonprofit focused on promoting women in business.
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.
Massachusetts State House (Keith J Finks/Shutterstock)
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.
Andy Mettler/Wikimedia Commons
After 12 years at the helm of the multinational food and beverage conglomerate, PepsiCo CEO Indra Nooyi announced on Monday that she would retire from her position in October. Nooyi will be succeeded by Ramon Laguarta, the head of PepsiCo’s Europe and sub-Saharan Africa business, who has been with the company for 22 years. In an interview with the New York Times, the 62-year-old departing CEO said she was stepping down now in part to spend more time with her 86-year-old mother:
“You reach a point where you get tired,” Ms. Nooyi said. “Physically tired. And your family starts to demand more time of you. I’ve reached that point.” Inside PepsiCo, Ms. Nooyi was known for working incredibly long hours — as many as 20 hours a day, often seven days a week. When asked Monday whether she felt that made her a good role model for other women, Ms. Nooyi said, “probably not.”
“But you have to remember when I started working in this corporate world, there were hardly any women in the jobs I was in. At that time, 30 or 40 years ago, expectations for women were unreasonable. We had to produce a better product and do everything much better than the men in order to move ahead,” Ms. Nooyi said.
Nooyi’s departure will leave just 24 women leading S&P 500 companies, according to the non-profit organization Catalyst, though that number will bounce back up to 25 again when Kathy Warden takes up her new post as CEO of Northrop Grumman next January. Other women have stepped down from CEO roles at big companies this year, however, including Denise Morrison of Campbell Soup and Irene Rosenfeld of the snack food maker Mondelez International, so the gender balance of this exclusive club is on a downward trend.
Nooyi has discussed her remarkable path to corporate leadership in a number of interviews, as well as why more women don’t make it to the top. In her view, the dearth of women in the C-suite has less to do with sexist conceptions of what leadership looks like and more to do with a pipeline problem, Vauhini Vara explains at the Atlantic, pointing to an interview she gave on the Freakonomics podcast earlier this year. That’s because the critical point in many professionals’ careers coincides with the time in their lives when they become parents and raise their children—a responsibility that still falls primarily on women:
A recent study by the Boston Consulting Group and MassChallenge, a global network of startup accelerators, takes a close look at how startups founded by woman compare to those founded by men, both in terms of how much venture capital financing they receive and how well those investments pay off. Looking at five years of investment and revenue data from the startups MassChallenge has worked with, the study found that those founded by women consistently attracted less investment, even though they actually tend to generate more revenue:
Investments in companies founded or cofounded by women averaged $935,000, which is less than half the average $2.1 million invested in companies founded by male entrepreneurs. Despite this disparity, startups founded and cofounded by women actually performed better over time, generating 10% more in cumulative revenue over a five-year period: $730,000 compared with $662,000. In terms of how effectively companies turn a dollar of investment into a dollar of revenue, startups founded and cofounded by women are significantly better financial investments. For every dollar of funding, these startups generated 78 cents, while male-founded startups generated less than half that—just 31 cents.
The findings are statistically significant, and we ruled out factors that could have affected investment amounts, such as education levels of the entrepreneurs and the quality of their pitches. … The results, although disappointing, are not surprising. According to PitchBook Data, since the beginning of 2016, companies with women founders have received only 4.4% of venture capital (VC) deals, and those companies have garnered only about 2% of all capital invested.
This gender bias may be costly to venture capitalists as well as entrepreneurs: The study calculated that VCs could have made $85 million more over five years had they invested equally in the startups founded by women and by men.
The researchers went one step further and spoke to founders, mentors, and investors to understand the origins of the gender gap in VC funding. Consistent with various other research showing that women are more likely to be challenged, questioned, and criticized in the workplace than men, they found that women founders and their presentations receive more pushback from investors than their male peers. Men are also more likely to talk back to investors when their claims are scrutinized, and to make bold, blue-sky projections in their pitches:
Peter James Sampson/iStock
The accounting firm PwC has adopted a new rule in the UK whereby shortlists of candidates for senior roles must include at least one woman, the Daily Mail reported on Sunday:
Laura Hinton, chief people officer at PwC, said: ‘Diversity in our recruitment processes is something we’ve been focused on for some time and as part of this we are ensuring we have no all-male shortlists and more diverse interviewing panels.’
PwC, which specialises in tax and advisory services, recently set a target to recruit 50 per cent women and 50 per cent men in all of their recruitment drives. The firm also has a sizeable 35.9 per cent pay gap for its Black Asian and Minority Ethnic (BAME) employees. The move comes as it emerged that the three other companies which make up the Big Four – Deloitte, KPMG and EY – had all called for greater diversity on their candidate lists.
PwC and its competitors all released their UK gender pay gap data in March in line with a law requiring most organizations in that country to do so. These firms’ partnership structures starkly illustrated the degree to which the underrepresentation of women in leadership roles compounds the gender pay gap.: PwC reported a mean gender pay gap of 43.8 percent and a median gap of 18.7 percent when partners were included, whereas the mean gap for employees of PwC Services Ltd., the legal entity that employs most of the company’s UK workforce, was just 12 percent.
Overall, the 61.4 of the roles in the top quartile of the firm are occupied by men, the report showed. Absent the underrepresentation of women in senior roles, PwC said its overall UK pay gap would be as low as 2.9 percent—a difference that “can largely be explained by time in role and skill set factors.”
Like other Scandinavian countries, Denmark has a robust social welfare system that supports gender parity in society and the workplace through benefits like subsidized child care and a generous parental leave entitlement for working mothers and fathers. Yet women still make up a small minority of top-level executives in Denmark’s business community, while Danish women’s earnings still lag well behind those of men performing similar work.
In a recent piece at the Harvard Business Review, Bodil Nordestgaard Ismiris, VP at the Danish Association of Managers and Executives, shed some light on this disconnect and suggested some reasons why Denmark’s progressive institutions have not automatically resulted in gender parity.
One problem is that Danish women suffer a motherhood penalty just like women in other countries: Their earnings drop after the birth of their first child and never recover, whereas fathers’ earnings hold steady. Other scholars have pointed to this paradox in the Scandinavian system, wherein working mothers are offered generous parental leave entitlements, but end up harming their lifetime earning potential by spending lengthy periods of time either out of the workforce or in part-time “mommy track” jobs that pay little and offer no room for advancement.
To help correct this imbalance, Denmark and other Scandinavian countries offer fathers generous parental leave as well. In the case of Denmark, Ismiris explains, new parents get 52 weeks of leave with at least partial pay, which they can divide anyway they like; new mothers are also guaranteed 18 weeks of this at full pay, while fathers are guaranteed two weeks. Despite the law encouraging couples to share parental leave, however, in practice women take the bulk of that leave: 300 days on average, compared to just 30 days among men. That means women are still taking on the majority of household and child care duties—and making greater career sacrifices to do so.