The movement to increase the number of women in the boardroom has gained momentum since The Ticker published “Spotlight on Gender Diversity in the Boardroom,” in February. Most notably, California recently enacted a bill requiring all public companies headquartered in the state to have at least one woman on their boards by December 31, 2019. By December 31, 2021, affected companies with five directors would need to have at least two women on their boards, and those with six or more directors would need to have at least three women on their boards. While affected companies who fail to comply will ostensibly face financial penalties, the law’s enforceability is under considerable doubt on various constitutional grounds, according to this article in The Wall Street Journal.
Another example of the pressure mounting against all-male boards is a draft voting policy released by Institutional Shareholder Services (ISS) on October 18. Beginning in 2018, the proxy advisor’s research reports began noting where a company’s board lacked gender diversity. However, no adverse recommendations were issued on director elections for this reason. Under the new voting policy, which remains open for comment until November 1, ISS proposes to issue adverse recommendations against nominating committee chairs at boards with no gender diversity. The proposed policy would take effect in 2020 and would be applicable to companies in the Russell 3000 and S&P 1500 Indices.
Somewhat surprisingly, the newly-released Commonsense Corporate Governance Principles 2.0 (discussed in greater detail in Release of Commonsense Principles 2.0), do not speak explicitly to the issue of gender diversity in the boardroom. Instead, the principles stress the importance of director diversity more generally.