A new law says businesses need to have women on their board or cough up $300,000.
What it means: If you hang out in the business section of newspapers (no? Just us?) then you’ll have heard the term public company bandied around. It’s not an especially good name, because public companies don’t always work with the public, sell to the public, or actually let the public come anywhere near them. Instead, a company is public if it’s owned by shareholders (anyone who wants to buy part of the company on the stock exchange), as opposed to an individual or family. Only about 1 percent of US businesses are public, but they tend to be the biggest, richest ones.
Public companies have to obey certain rules. One is that they have a board of directors, who represent the shareholders and sign off on all big company decisions. They’re the top dogs - even company CEOs can’t do stuff without their say-so. Like many places of power, these board members are overwhelmingly (rich, white) men. Lots of people would like to change that, including California.
Currently, one-quarter of Californian businesses have all-male boards. But from the end of next year they’ll all need to have at least one female member. By 2021 they’ll need up to three (depending on how big the board is) or face a fine of up to $300,000. That sounds like a big number, but it’s not far off the wages big companies pay their board members, which might mean they find it relatively easy to swallow. If California’s law works though, the result will be more women with the power to influence thousands of jobs and billions of dollars.
Obviously lots of people aren’t happy about the law. One of the main criticisms is that it’s wrong to give jobs to certain social groups rather than the ‘best’ candidate for the job. Luckily, putting more women on boards is as good for business as it is for equality. Boards with more than three women outperform all-male boards on a whole host of different business-y things (basically, they create bigger profit and more sales).
Read our explainers on hierarchical workplaces and economic inequality.
