Orrick Releases Report Card on Compliance with New California Law Requiring Female Directors on Public Company Boards

August.13.2019

Benchmarking California Board DiversityProviding an up-to-date report card on boardroom gender diversity in California’s largest publicly traded companies, Orrick today released a study on the state of compliance with a new law mandating at least one female director by the end of this year. The study, led by partner Ed Batts, global head of the firm’s M&A practice, examined the 350 California public companies with more than $750 million market capitalization, including many of the leading tech companies in the world.

In noting the increase in public companies in California over the past three years, the study’s chief conclusion is that while there remains work to do, corporate boards are moving steadily toward compliance as the Dec. 31 deadline approaches. The data also shows that current gender diversity on boards improves based on market cap – companies below the $2 billion threshold are more likely to have 0 to 2 female board members, while the largest cap companies fare distinctly better, with nearly half of them already with at least two female directors in place.

The figures are significant because the California law also requires that by 2021 public companies with five board members must have at least two female directors, while companies with six or more board members will need at least three. In addition, major institutional stockholders – including the three largest rules-based index investors – are also pressing companies to have at least one, and generally two or more female directors.

The report notes that last week’s new legal challenge to the California law likely only raises a question as to legally mandated timing to increase gender diversity on boards. But, the report found an equally important mandate for increased gender diversity is emerging through “private ordering” from other constituencies, including from large index and pension fund investors and proxy advisory firms.

“There continues to be an unmistakable migration towards higher percentage of female board members amongst California’s most significant public companies,” the study concludes. “We clearly would expect this trend to continue as the deadlines at the end of the year and then in 2021 for mandated board gender diversity continue to grow.”

The gender diversity report is Orrick’s latest examination of corporate governance practices among the nation’s public companies. Ed has previously released novel studies of corporate governance practices in the tech sector and the energy sector.

In addition to Ed, associate Sara Gates and summer associate Isabella Fu were instrumental in assembling the data on compliance with California’s gender diversity law.