Five years ago, and just over the Mason-Dixon line, the Pennsylvania General Assembly set about tackling a nationwide problem of gender inequity in business leadership. Women made up 44% of the commonwealth labor force in 2016, but only held 17% of the available board seats and 12% of executive positions at the largest public companies.
At the time, California had recently passed a law that would require a certain number of women directors in publicly traded companies based in that state. Maryland would follow suit in 2019 with its own legislative proposal, and in 2020 Washington state’s legislature acted on the issue.
It was a controversial position for businesses that did not think the state should weigh in on the makeup of their leadership. In May, a California court found that law violated the equal protection clause of the state’s constitution. Pennsylvania’s legislature decided to make its effort a non-binding resolution, setting a goal that urged all nonprofit, privately held and publicly traded institutions and companies doing business in the commonwealth to achieve a minimum of 30% women on their boards.
So, how did it turn out when states intervened?
This year in its Women and Leadership Report, the Forum of Executive Women in Pennsylvania recognized 35 of the region’s top 100 public companies for having at least 30% women on their boards, which is a record number. Only four top companies in the Philadelphia region have no women in the boardroom, but there are only two female CEOs of the commonwealth’s top 100 public companies.
“So, we can definitely celebrate forward progress, but in terms of gender parity alone, we have a ways to go,” said the forum’s board chair, Katherine Kelton. She said the forum continues to review actions needed to move the needle faster, turning her attention to the success of quotas, even though they continue to be challenged in the U.S.
“It is undeniable that mandates work to ensure that hiring managers and boards consider the diversity of their teams when making decisions,” Kelton said. “Look at the NASDAQ Rule, and those European countries that have legislated mandates — they have had more long-standing success on this point than we have here.”
Maryland’s law addressing this issue is closer to Pennsylvania’s than California’s. The law set an aspirational goal of 30% women participation in all the nonprofit, privately held, and publicly traded institutions and companies doing business in the state by Dec. 31, 2022. It created a requirement for companies to report pertinent information on a form they already have to submit to the state.
So far, the Maryland group that produces a report on the statistics have determined too many companies neglected to answer the questions, or incorrectly filled them out, making them practically unusable.
Rebecca Snyder, executive director of the Executive Alliance, which represents professional women, said the self-reported data amounted to “trash data” when they examined it, but she noted the state’s law did a respectable job raising visibility.
The alliance has compiled data on Maryland’s publicly traded companies since 2007 since that information is publicly available, but they are a “drop in the bucket” of Maryland companies. As of last year, there were only 72 publicly traded companies that met that target.
With poor state data, the alliance decided to choose the top 20 companies in three sectors and try to obtain the information themselves.
In this year’s report, the alliance highlighted low turnover on boards as one factor that is keeping the progress on representation slow. She hopes that by raising awareness, more companies will choose to impose term limits in an effort to live their values.
“It’s going to take a lot of different angles to fix or ameliorate something that’s so deeply embedded in our culture,” Snyder said. “You can’t just wave a magic wand and make it happen.”
The alliance is not proposing further legislative fixes at this time, but this Maryland General Assembly session they are hoping for a new state law promoting pay transparency, like what was done in Colorado.
Maryland’s gender diversity law may become more high-profile without any legislative changes. Comptroller-elect Brooke Lierman (D) was a co-sponsor on the bill so she could work with companies to fill out the forms completely or make that data more prominent and available.
Sen. Shelly Hettleman sponsored Maryland’s law when she served in the House of Delegates. She said she remains committed to this long-term project, because it improves opportunity for women in the workplace, and compelling studies show businesses with gender equity in their leadership actually did better.
“Ultimately, our goal is to shine a light on the lack of gender diversity in the boardroom,” Hettleman said. “And Maryland has lagged behind some of the national figures. It’s important to have corporations be very conscious and deliberate, taking into account this gender equity in the boardroom.”
She and Snyder are also encouraged the incoming administration will set an example in state boards and commission appointments.
“The incoming governor and lieutenant governor are committed to having their administration reflect the diversity in terms of gender, race and ethnic affiliation that the community has, and that’s what we’re after here too,” Hettleman said.
Nasdaq leading the way
Outside of state initiatives, advocates are hopeful about a decision by Nasdaq and approved by the SEC to enhance board diversity disclosures and encourage the creation of more diverse boards through a market-led solution.
How much impact the Nasdaq rule is yet to be determined — annual board diversity disclosure matrix is due either August 2022 or the date the company files its 2022 proxy, whichever comes later. The disclosures for one diverse director or an explanation is required in August 2023, and the disclosures for two diverse directors or an explanation is required in August 2025/August 2026, depending on a company’s listing tier.
“We are pleased that the SEC has approved Nasdaq’s proposal to enhance board diversity disclosures and encourage the creation of more diverse boards through a market-led solution,” Nasdaq said when the rule was approved last year it has plans to aggregate the data reported by the listed companies, a spokesperson said.