The Bar-On Brief: Equality on company boards shouldn’t be a government mandate

Link — The Bar-On Brief: Equality on company boards shouldn’t be a government mandate

Photo by Adriana Sanchez | Daily Trojan

On Sept. 30, California Gov. Jerry Brown signed into law Senate Bill 826, a measure that will mandate a gender quota on the boards of directors of California-based companies. Essentially, the California government requires at least one woman on companies’ boards by the end of 2019, and those who do not comply will be fined. Companies with over five board positions are required to include at least two women by the end of 2021, and companies with six must include three women.

The premise that women should be represented on company boards is undoubtedly full of merit, and a goal that we should strive for collectively and unequivocally. A study by The Catalyst found that companies with women on their boards outperformed those with no women by 53 percent, experienced higher return on sales and a greater return on investment capital. Women are just as capable as men to sit on the board of or lead executive companies — that is unquestionable.

But the solution to achieve an ideal market where women are accurately represented is not through government coercion and intervention. Senate Bill 826 is textbook government overreach in the business sector. Pressure for board diversity must come from the public and company shareholders, not from the government.

The free market is a cornerstone of the American economy, and competition among companies. Government interference in this market should be limited at all costs.

The bill Brown signed essentially mandates affirmative action in the business sector; and in this case, it’s useful to acknowledge the legal view of affirmative action in college admissions as an example. In University of California v. Bakke, the Supreme Court ruled that though race can be considered in college admissions, racial quotas in building an incoming class were unconstitutional. In my opinion, gender quotas are no different. Colleges, unlike corporations, are judged and ranked by how diverse they are. Public pressure from rankings and applicants have effectively forced colleges to admit students with diverse backgrounds. This progressive change came not through a government mandate, but through pressure from universities’ stakeholders and applicants.

If California truly wants to be at the forefront of progressive change, the solution is not government mandates for gender parity in business. While the government may walk a fine constitutional line if they award incentives for female board directors, another solution could be as simple as compiling a list of companies that have no women on their board of directors for consumers to consider.

Annalisa Barrett, a professor of finance at the University of San Diego, estimates that 377 California companies will have to make changes to their board makeup under the new legislation, which translates to roughly 684 women being added to board positions.

This statistic shows how change is necessary.  With the power of social media and the instantaneous transmission of information, a list of companies with no women on their executive boards can be compiled and blasted over the Internet. The public could easily take action, for example, by creating a blacklist of companies to boycott.

Based on the public support for the California bill, citizens should seek action. Nearly all Californians polled by The Boardlist — 95 percent — said that corporations are not doing enough to add more female directors. It is clear that Californians are dedicated to ensuring women are fairly represented. Therefore, they — as players in the free market — can and should take action to force companies to comply with their demands. This should be the solution, instead of the state’s restrictive measures on the free market.

Supreme Court Justice Ruth Bader Ginsburg has said that there would be enough women on the Supreme Court when all nine slots are filled by women. As someone who believes in gender equality and equal representation in all capacities and arenas, I agree. There need not be a set metric for what constitutes “enough” women on any judicial bench, or in any organization for that matter.

Gender diversity is a necessary goal to strive for, but it is not the government’s job, nor should it be allowed to mandate its manifestation, especially not in the private sector. Rather, consumers should know that they can and should push for gender parity by voting with their dollar, and supporting companies that show commitment to the cause.

Shauli Bar-On is a sophomore majoring in political science. His column, “The Bar-On Brief,” runs every other Tuesday.

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