• California law on female directors seeks to boost equality
  • Diverse leadership has been shown to help public companies outperform
  • Goldman Sachs, BlackRock are lending Wall Street clout to the movement as gender equality in the corporate world gains momentum

A California law requiring publicly traded companies to include at least one female director has almost eliminated all-male boards, lending momentum to the push for equality in boardrooms.

The number of California-based companies in the Russell 3000 index with all-male boards dropped to seven by the end of last year from 91 when the law was passed in 2018, the Wall Street Journal reported, citing data from corporate-governance research firm Equilar.

While groups including DirectWomen, 2020 Women on Boards and the Female Quotient have pressured companies for years to diversify, the California law and the buy-in of major Wall Street players may lead to even more women on boards. Goldman Sachs CEO David Solomon said that starting in July the investment bank won’t do IPOs of companies in which white males fill all board seats. BlackRock also is pushing for more women and minorities to be added to boards.

The moves by Goldman Sachs and BlackRock may ripple throughout the industry by creating a new standard for diversity, Shannon Gordon, CEO of theBoardlist, told Karma. TheBoardlist runs a talent database that helps companies recruit and find qualified women to fill board seats.

When big players in the finance world say they want diversity, “it becomes more of a norm,” Gordon said. She predicted that the push for equality in the corporate world may be nearing a tipping point.

Benefits to companies should be obvious, she said. Companies building leadership teams seek the best talent and “if you are only looking at 50% of the people available you are not getting the very best,” Gordon said. A diverse board brings a variety of perspectives that may eliminate blind spots like cultural issues within a company.

Gender diversity at companies has paid off for investors, at least when women become CEOs and CFOs, according to a study from S&P Global Market Intelligence in October. Companies beat the index’s average stock performance two years after women took over those positions, while companies led by men were “statistically indistinguishable” from their sector peer group, the study showed.

Female representation on corporate boards in the U.S. overall grew last year, according to a study of the MSCI All Country World Index members. As of Oct. 31, 26% of board seats were held by women, compared with 23.4% in 2018, the study said.

The California law is being challenged in court, and a survey of male and female board directors nationwide found that more than 4 out of 5 didn’t think government mandates were the best way to get diversity, the WSJ reported. Companies that don’t have at least one female director face a fine of $100,000 under the law.