Business Litigation Alert: "Catching a Wave - The Business Case for Diversity Beyond California’s New Mandate for Women on Corporate Boards"

In September, California became the first state in the nation to enact a law requiring certain publicly traded companies to include women on their boards of directors.  Although the law only applies to companies “whose principal executive offices are located in California,” it is squarely aimed at all U.S. businesses.  In signing the bill, California Governor Jerry Brown stated, “Given all the special privileges that corporations have enjoyed for so long, it’s high time corporate boards include the people who constitute more than half the [population] in America.”

However, several business groups and even some gender-diversity advocates have raised concerns and it is likely that the law will not survive a legal challenge.

But regardless of whether it survives, fails, or expands beyond California to other states, what does this bill mean for Texas companies – public and privately owned? 

The law simply highlights the fact that there are significant benefits to having a diverse board reflecting diverse viewpoints, including:    

  • Better decisions - Having a diverse board typically fosters better decision making.  Diversity on your board means diverse backgrounds and experiences that can help to better influence the decisions before the board. It allows for different perspectives and ways of approaching difficult situations. 
  • Better oversight - Diversity also leads to better oversight – which can mean fewer costly corporate blunders.  Again, when you have a more diverse board, you are expanding the range of situations your board members have encountered and their knowledge of how to effectively govern. 
  • Better business - In addition to the positive aspects of having a diverse board, diversity and the board is likely something that is going to be increasingly important moving forward from a compliance standpoint.  Therefore, it is important to look at the make up of your board for a variety of reasons.

California may be the only state with this law officially on the books, but it would be unwise to simply dismiss it as a “one-off.”  More importantly, adding diversity to your board can lead to improved performance, which is something that every business owner can support whether it is required by law or not.

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