California Lawmakers Push for More Diversity in the Boardroom

California Lawmakers Push for More Diversity in the Boardroom

AB979 is a robust approach to a longstanding problem, but raises a complicated question: Who counts as an underrepresented minority? The bill defines the category as someone who “self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native.” Gay, lesbian, bisexual, or transgender employees also qualify as underrepresented.

But those categories may not fit neatly with how people identify. Uber, for example, has two directors from outside the US, neither of whom fit any of the bill’s categories: CEO Dara Khosrowshahi, who was born in Iran, and Yasir Al-Rumayyan of Saudi Arabia. Prospective board members who “look” white may nonetheless have nonwhite or mixed race parents. Combating discrimination means engaging with race, but judging someone’s status as “underrepresented” based on race, or worse, phenotype, is unsettling.

Assemblymember Chris Holden, another sponsor of the bill, acknowledges the complexity, but says the bill is the first step in a longer, iterative process. “I think the bill is really looking for those who would self identify and describe themselves to fit one of these categories,” he says. “Progress sometimes just takes one step at a time. And that’s what this bill is designed to do. It’s not perfect.”

The bill would require companies to submit annual reports on board composition. Holden says the plan is to compile this data and potentially adjust the law over time. This includes adding nuance to the definition of “underrepresented.” For now, however, he hopes the bill supplements the changes from the 2018 law.

While it’s important to build a coalition, the authors recognize that different groups face different barriers. Black and Latinx workers, for example, face historically low recruitment numbers that haven’t budged much over the years. This is very different from Asians, who are well represented at technical levels in Silicon Valley, but face different issues in corporate advancement.

At Google, for example 42 percent of the US workforce is Asian, but only 30 percent of people in leadership roles. Facebook’s workforce is roughly 44 percent Asian, but its leadership is only 25 percent. In 2005, consultant Jane Hyun coined the term “bamboo ceiling” to describe the paradox faced by many Asian workers kept from leadership roles.

“Each of our communities are challenged in different ways when it comes to corporate advancement,” says Chiu, who is chair of the legislature’s Asian & Pacific Islander caucus. “Part of what we wanted to do with this bill was to help level the playing field with policies that are broad enough so that every community could benefit.” He says the so-called “model minority” stereotype that Asians perform well, often “masks the challenges that our communities are facing.”

Some businesses may be wary of the resources needed to change board demographics. A 2018 study from researchers at the University of North Carolina at Chapel Hill found that the value of California firms suffered, compared with similar firms headquartered elsewhere, after the bill requiring women on boards became law. Companies that had to add the most women to their boards suffered the most. The authors theorized that the companies that needed to add more women had to spend more money to do so, hurting returns.

That’s the short term view. In the long term, the authors considered the changes “ultimately may lead to improved outcomes” for the firms. If companies are struggling to find qualified talent, the problem doesn’t rest solely with prospective hires.

“I am not going to sit back and allow companies to make an excuse that the talent is not there,” says Thomas, the Silicon Valley Leadership Group CEO. “We want to open up an entire new set of opportunities to people who have been excluded from many of the conversations that they deserve to be a part of.”

Companies have often pointed to a “pipeline problem,” referring to a small talent pool of qualified individuals who have difficulty finding their way to companies. Holden and Thomas proposed a different framing: that companies have myopic networks that aren’t designed to bring in new talent.

“You go to the same headhunter, the headhunter goes out and finds the same people they normally look for,” Holden says. “By having this law, maybe companies need to find some diversity in hiring their headhunters.”

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