California law states that boards of directors must include women

California state-owned companies must include women on their boards, thanks to a bill passed by Governor Jerry Brown on Sunday. In a statement, the outgoing governor acknowledged some legal concerns raised by the law, but cited "recent events in Washington" as one of the reasons he signed the bill, and wrote: "Given all the special privileges that companies have enjoyed for so long, it is high time that business councils include people who make up more than half of the" people "in America." Lizzie O & # 39; Marketplace Leary discussed the new law with Jena McGregor of the Washington Post. The following is a transcript of their conversation.

Lizzie O 'Leary: Give me a glimpse of what is this law and who will be affected.

Jena McGregor: For example, California Governor Jerry Brown has passed a bill that legislators in the United States have long been trying to force California-based companies to have at least one female director. board.

O & # 39; Leary: Do most boards already include women? How unusual is it to have women on boards of directors or not to have women?

McGregor: Mostly large companies, most have a wife on the board. Large companies listed on the stock exchange. But their numbers show that about 25% of California-based companies whose head office is publicly traded do not have women. They are trying to solve that problem by having a mandate. It will increase over time over the next two years, they will add something where it's not just what you need to have, but depending on the size of the board, they want you to have one. , two or three [women]. And in reality, most companies will probably have three, headquartered in California.

O & # 39; Leary: What happens if your company is headquartered in California but, for example, your company is incorporated elsewhere? Does this always apply?

McGregor: That's the big question here. So they passed this bill, but there are two business groups in California, some experts in corporate governance, including former members of the SEC, said, you know what, it might not succeed. This can pose legal problems because very many companies are actually incorporated in Delaware, a state in which the business environment is a little more friendly. And the law said, "These are the legal circumstances under which a company must follow." And if that may not apply. This law may therefore face legal challenges from companies who say that this should not matter.

O & # 39; Leary: When Governor Jerry Brown spoke about it, he talked about "recent events in Washington". And you mentioned Brett Kavanaugh's hearings before the Judiciary Committee of the Senate and the appearance of a prosecutor in the room. How does this affect the appearance and how much is it changing in corporate governance?

McGregor: Well, I saw the same question, whether he was trying to make a statement particularly this week, although it was the deadline – the end of September – to decide to sign it. So, was this a way of making a statement about what the country had engaged in a major national conversation?

O & # 39; Leary: Yeah.

McGregor: The question of whether the number of women on the board has an impact is a good question. Many studies show that this has a positive impact. That leads to higher returns, better decision-making or cheaper mergers. Yet the question is, how do you go about it? Do you really need to do it? Do you have incentives to do them? Do you do it through, in a way, public shame? So what is the best approach to get more diversity within the board or get more diversity in a room full of decision makers?

Click on the audio player above to listen to the whole story.