Women in Corporate Leadership: To Impose by Law, or to Develop and Promote from Within?

California has adopted a law (Senate Bill 826) requiring publicly held companies there to have women in leadership.

As the law is phased in, a board with at least six directors must eventually include at least three women. A board with five directors will have to include at least two women. And a board with four or fewer directors must include at least one woman. A failure to have the required number of women will result in six-figure penalties.

Sign of the Times?

Put aside for a moment whether the law is constitutional. And whether imposing female membership is good or bad public policy. The fact that the law exists is a sign. It’s a sign that companies are not doing enough to develop and promote women into the ranks of corporate leadership.

The fact that the law exists also raises a question. Is it women’s job to find their way into management, or management’s job to put them there? In the long run, can companies afford to maintain C-suites and boards that do not account for reality? Look at college campuses, business schools, and professional degree programs. Universities have been majority-female for nearly a decade. Some professional schools now boast more than 60% women. Will firms that fail to adjust for this reality be able to attract and retain women in the long run?

Profiting from Change

The involvement of women in corporate leadership is and increasingly will be as much a business (read: $$$) consideration as it is a matter of fairness. Numerous independent studies have concluded that companies perform better when women serve on their boards of directors and in positions of leadership. Even if someone is an old-school misogynist, he would still be wise to adapt to the changing times, purely in the interest of benefiting his company and his wallet through higher compensation and bonuses as the company performs better.

Even when you strip away morality, ethics, and notions of fairness, and are then left with nothing but a cold, economic perspective driven solely by profit motive, the conclusion is simple: Developing and promoting women to positions of corporate leadership is good business.