People

California’s women-on-boards quota worked — well, mostly

Despite the new law, 27 public companies still had all-male boards at the end of 2019.

People in a conference room

California firms have added 138 women to their boards — but 27 still have none.

Photo: FangXiaNuo via Getty Images

Silicon Valley benefits administrator WageWorks announced on April 9, 2019, that Carol Goode, a 35-year HR veteran, would join its all-male board of directors. Two days later, TiVo added tech finance executive Laura Durr and IP specialist Loria Yeadon to its board. Others followed with female board additions: gunshot-tracking company Shotspotter in late April, insurance software provider Guidewire in September and biopharmaceutical company Nektar Therapeutics in December, among others.

All told, 126 California public companies added 138 women to their previously all-male boards last year, ahead of a Dec. 31 deadline for a new law requiring companies headquartered in the state to have at least one woman director, according to an analysis released this week by KPMG. Companies who don't comply face a $100,000 fine for the first offense and $300,000 for further offenses. While there are some two dozen holdouts in California that haven't yet changed their board lineup, those who work on board diversity say that researchers, investors and policymakers in other states could soon force the issue at greater scale.

Get what matters in tech, in your inbox every morning. Sign up for Source Code.

"The legislation has clearly been a game-changer, not only in California, but in other states as well," said Shannon Gordon, CEO of theBoardlist, a board member matchmaking service. "What we're seeing right now is just a tipping point, frankly, of all these pressure points."

While research has accumulated on how diverse boards make better decisions, big-name investors like BlackRock and Goldman Sachs are moving from platitudes to more-concrete requirements. Starting July 1 in the U.S. and Europe, Goldman Sachs will no longer take a company public unless it has "at least one diverse board candidate, with a focus on women," CEO David Solomon told CNBC at this year's meeting of the World Economic Forum in Davos. The wording is less than precise, but Solomon said the push is driven by financial performance.

"Look, we might miss some business," Solomon said, "but in the long run, this, I think, is the best advice for companies that want to drive premium returns for their shareholders over time."

Then-Gov. Jerry Brown signed the California law, Senate Bill 826, in July 2018, requiring public companies to add at least one female board director (based on that person's self-identified gender) by the end of 2019. Larger boards must have up to three women by the end of 2021.

Some California companies, however, don't appear to be in a rush to comply: 27 companies had all-male boards at the end of 2019, KPMG found, representing about 4% of public companies headquartered in California. That's compared with the 29% that had all-male boards when SB 826 became law in mid-2018.

KPMG did not name the companies, citing neutrality rules for accounting firms, but the California secretary of state is expected to release its own report on board diversity next month. In the meantime, websites for companies including San Jose's A10 Networks and Fremont-based Enphase Energy still list all-male boards. Neither company responded to questions about their board lineups.

The KPMG report found that the health, pharmaceutical and biotech sectors are notable laggards, accounting for 37% of the companies that did not appear to have complied.

"Smaller companies tend to have smaller boards, and smaller boards have fewer women," said Annalisa Barrett, senior adviser to KPMG's Board Leadership Center, which authored the report. Scientific companies tend to have more industry-specific investors who may place less emphasis on diversity, Barrett said.

Carolyn Broughman, who heads the Boardroom Ready program at biotech industry group Women In Bio, said California's move to "the stick instead of the carrot approach" was a logical next step. The industry has been roiled by scandals in recent years, including a trade show party featuring scantily clad models, as well as other #MeToo horror stories, but lagged in adding female board members and executives.

"Of course everybody wishes this would happen organically," Broughman said. "It hasn't happened for 50 years."

At the Silicon Valley office of law firm Fenwick & West, partner David Bell has told clients not to wait around: "'You should plan on complying with this law,'" he said. That's in large part, Bell said, because of the blowback that could face a company sued over gender inequality.

"There is no board out there that wants to be the first defendant in this case," said Bell, who co-authors the firm's annual gender diversity survey. "There's lots of reasons why these laws may be subject to challenges, but nobody's going to challenge them."

Among the potential legal complications are the fate of companies headquartered in California but registered in Delaware, and the results of constitutional challenges that are regularly fought over other forms of affirmative action.

Unlikely to succeed, Bell said, are two lawsuits that have been filed against the state over SB 826 by tangentially related groups: a shareholder in a California company who lives in Illinois and a conservative activist group based in Washington, D.C. In the case of OSI Systems shareholder Creighton Meland, the industrial electronics company added a female board member in December even as the case winds through the court system.

Among companies that have gone on a board-recruiting binge after the new California law, Barrett found that 94% of women joined as outside directors, allaying concerns that boards would lose independence if companies hire from within their own ranks. The KPMG report also found that nearly half of new female board members currently hold a C-suite position, though companies are broadening their search to consider attorneys, investors, academics and others.

Though anecdotes abound about high-profile female executives being inundated with board offers as companies scramble to follow the law, Barrett found that "overboarding" concerns have been largely overblown, since 88% of new female directors serve on either one or two boards.

"This was one of the concerns that was continually cited as maybe an unintended consequence of the law," Barrett said. "To the extent that there weren't enough quote-unquote qualified women — which we knew wouldn't be true — would the same women be tapped?"

Many companies who are adding women, including bigger-name tech companies like TiVo, are opting to expand the size of their boards and create new seats for female members. Those who substitute a woman in place of a man often do so at a strategic time, like when an increasingly common board retirement age kicks in.

Europe has long led the way on gender diversity quotas, but a list of other U.S. states — some blue like California, others not — have passed their own rules for increased board disclosure, including New Jersey, New York, Maryland, Colorado, Ohio and Pennsylvania. Still, most states are steering toward corporate guidance policies, rather than requirements, said Gordon of theBoardlist. She's equally intrigued, she said, by ripple effects that happen in the wild.

"There's this halo effect there, where we're seeing increased activity within private companies," Gordon said. "My read of that is that this conversation is happening on a national level."

Climate

New Jersey could become an ocean energy hub

A first-in-the-nation bill would support wave and tidal energy as a way to meet the Garden State's climate goals.

Technological challenges mean wave and tidal power remain generally more expensive than their other renewable counterparts. But government support could help spur more innovation that brings down cost.

Photo: Jeremy Bishop via Unsplash

Move over, solar and wind. There’s a new kid on the renewable energy block: waves and tides.

Harnessing the ocean’s power is still in its early stages, but the industry is poised for a big legislative boost, with the potential for real investment down the line.

Keep Reading Show less
Lisa Martine Jenkins

Lisa Martine Jenkins is a senior reporter at Protocol covering climate. Lisa previously wrote for Morning Consult, Chemical Watch and the Associated Press. Lisa is currently based in Brooklyn, and is originally from the Bay Area. Find her on Twitter ( @l_m_j_) or reach out via email (ljenkins@protocol.com).

Every day, millions of us press the “order” button on our favorite coffee store's mobile application: Our chosen brew will be on the counter when we arrive. It’s a personalized, seamless experience that we have all come to expect. What we don’t know is what’s happening behind the scenes. The mobile application is sourcing data from a database that stores information about each customer and what their favorite coffee drinks are. It is also leveraging event-streaming data in real time to ensure the ingredients for your personal coffee are in supply at your local store.

Applications like this power our daily lives, and if they can’t access massive amounts of data stored in a database as well as stream data “in motion” instantaneously, you — and millions of customers — won’t have these in-the-moment experiences.

Keep Reading Show less
Jennifer Goforth Gregory
Jennifer Goforth Gregory has worked in the B2B technology industry for over 20 years. As a freelance writer she writes for top technology brands, including IBM, HPE, Adobe, AT&T, Verizon, Epson, Oracle, Intel and Square. She specializes in a wide range of technology, such as AI, IoT, cloud, cybersecurity, and CX. Jennifer also wrote a bestselling book The Freelance Content Marketing Writer to help other writers launch a high earning freelance business.
Entertainment

Watch 'Stranger Things,' play Neon White and more weekend recs

Don’t know what to do this weekend? We’ve got you covered.

Here are our picks for your long weekend.

Image: Annapurna Interactive; Wizard of the Coast; Netflix

Kick off your long weekend with an extra-long two-part “Stranger Things” finale; a deep dive into the deckbuilding games like Magic: The Gathering; and Neon White, which mashes up several genres, including a dating sim.

Keep Reading Show less
Nick Statt

Nick Statt is Protocol's video game reporter. Prior to joining Protocol, he was news editor at The Verge covering the gaming industry, mobile apps and antitrust out of San Francisco, in addition to managing coverage of Silicon Valley tech giants and startups. He now resides in Rochester, New York, home of the garbage plate and, completely coincidentally, the World Video Game Hall of Fame. He can be reached at nstatt@protocol.com.

Fintech

Debt fueled crypto mining’s boom — and now, its bust

Leverage helped mining operations expand as they borrowed against their hardware or the crypto it generated.

Dropping crypto prices have upended the economics of mining.

Photo: Lars Hagberg/AFP via Getty Images

As bitcoin boomed, crypto mining seemed almost like printing money. But in reality, miners have always had to juggle the cost of hardware, electricity and operations against the tokens their work yielded. Often miners held onto their crypto, betting it would appreciate, or borrowed against it to buy more mining rigs. Now all those bills are coming due: The industry has accumulated as much as $4 billion in debt, according to some estimates.

The crypto boom encouraged excess. “The approach was get rich quick, build it big, build it fast, use leverage. Do it now,” said Andrew Webber, founder and CEO at crypto mining service provider Digital Power Optimization.

Keep Reading Show less
Tomio Geron

Tomio Geron ( @tomiogeron) is a San Francisco-based reporter covering fintech. He was previously a reporter and editor at The Wall Street Journal, covering venture capital and startups. Before that, he worked as a staff writer at Forbes, covering social media and venture capital, and also edited the Midas List of top tech investors. He has also worked at newspapers covering crime, courts, health and other topics. He can be reached at tgeron@protocol.com or tgeron@protonmail.com.

Policy

How lax social media policies help fuel a prescription drug boom

Prescription drug ads are all over TikTok, Facebook and Instagram. As the potential harms become clear, why haven’t the companies updated their advertising policies?

Even as providers like Cerebral draw federal attention, Meta’s and TikTok’s advertising policies still allow telehealth providers to turbocharge their marketing efforts.

Illustration: Overearth/iStock/Getty Images Plus

In the United States, prescription drug advertisements are as commonplace as drive-thru lanes and Pete Davidson relationship updates. We’re told every day — often multiple times a day — to ask our doctor if some new medication is right for us. Saturday Night Live has for decades parodied the breathless parade of side effect warnings tacked onto drug commercials. Here in New York, even our subway swipes are subsidized by advertisements that deliver the good news: We can last longer in bed and keep our hair, if only we turn to the latest VC-backed telehealth service.

The U.S. is almost alone in embracing direct-to-consumer prescription drug advertisements. Nations as disparate as Saudi Arabia, France and China all find common ground in banning such ads. In fact, of all developed nations, only New Zealand joins the U.S. in giving pharmaceutical companies a direct line to consumers.

Keep Reading Show less
Hirsh Chitkara

Hirsh Chitkara ( @HirshChitkara) is a reporter at Protocol focused on the intersection of politics, technology and society. Before joining Protocol, he helped write a daily newsletter at Insider that covered all things Big Tech. He's based in New York and can be reached at hchitkara@protocol.com.

Latest Stories
Bulletins