Comstock's magazine 0319 - March 2019 - Page 69

2016.) As she neared the end of her time at HP, she started planning her next move. She’d served on nonprofit boards and thought joining a corporate board would be a logical way to contribute her leadership skills in another enterprise. Unsure of how to get into a position for a directorship, she started contacting people in her network to find out what it would take. She belonged to the American Leadership Forum, and at an ALF breakfast in late 2011, she mentioned her inter- est in a corporate board. Another member was a director at American River Bank and served on the board’s nominating committee. She sent him her bio, and by mid-2012 she was invited to join and has spent the last seven years there. That also made her attractive to the board of Livermore-based McGrath RentCorp, which she joined last year. Box says her story offers no easy lessons. “Everyone wants a five-step process [for a board seat],” she says. “There aren’t a lot of board positions, so it’s not easy for anyone, including men, to get on them,” she says. That points to a structural reason for the glacial speed of change in board diversity, beyond potential gender bias: They don’t turn over much. A report two years ago found the average age for S&P 500 company directors was 62. The average tenure stands at nine years among S&P 1500 firms — a lethargic pace that worries institutional investors, according to a 2016-17 survey by Institutional Shareholder Services. When there is an opening, only a small group of execu- tives possess the chops that attract attention, experts say. To even be considered, candidates need to either have the right expertise, or in some companies, own a significant number of shares. Expertise normally means C-suite ex- perience at the top of a publicly traded company. And the strongest candidates have a background in the company’s industry, and experience operating in a similar stage of the business life cycle and with a similar business model. “You can’t just take a class; you have to have the skills,” Box says. Her IT background made her particularly attractive as a “digital director,” offering guidance on a firm’s digital strat- egies, for both boards on which she serves. Companies pay attention to whom they include on boards because directors impact profits. A 2016 survey of the aca- demic literature concluded that several board characteristics, including a board’s strength of oversight, independence and diversity correlate with higher corporate performance. That last item has gotten more attention in recent years, with a flood of studies connecting diversity in corporate leadership to better company outcomes. The last UC Davis study, for ex- ample, concluded that the top 25 most gender-diverse com- panies based in California showed average returns on assets Will the New Law Survive? Last August’s law, SB 826, was in part the product of frustra- tion. In 2013, one of its sponsors, Sen. Hannah-Beth Jackson, authored a resolution that urged all publicly held California corporations to ensure one-fifth of their board directors were women by the end of 2016. While adopted by both legislative chambers, the resolution carried no consequences. When the deadline rolled around, fewer than 20 percent of companies had actually hit the target, according to a Senate analysis. Critics like Joseph Grundfest, a corporate governance ex- pert and law professor at Stanford’s Rock Center for Corpo- rate Governance, argue that SB 826 is on shaky legal ground. Grundfest predicted in a September 2018 paper that the law would face legal obstacles because of a 1982 Supreme Court ruling that a company is governed by the laws of the state in which it’s incorporated, not the one where it’s headquartered. If successfully challenged on those grounds, the law would ap- ply to only the 72 publicly traded companies both headquar- tered and incorporated here in California, Grundfest wrote (fewer than 10 percent of the 761 that are headquartered here, according to the Senate analysis). Or it might be entirely struck down on equal protection grounds under the Constitution’s 14th Amendment, he noted. Ann Ravel, a corporate attorney, takes issue with Grund- fest’s conclusion. A good legal defense would argue the law is attempting to create a uniform plan of regulation that’s grounded in an argument of equal protection for women under the 14th Amendment, she says. A company couldn’t exempt it- self from California’s sexual harassment laws merely because the firm’s state of incorporation doesn’t have such laws, she says. She also doubts the law will be challenged at all. “More and more corporate entities are tending to bow to public pres- sure on this issue. Organizations that represent corporations are going to be wary of litigating this.” In Europe, quotas are in place in at least a dozen countries. Norway, for example, has required corporate boards to be 40 percent female since 2004. March 2019 | 71