Female Representation on Corporate Boardrooms Policy Paper

 Female Representation on Corporate Boardrooms Policy Paper
 By admin  April 24, 2020  Uncategorized  0 Comments
Introduction
            The need for gender parity in various institutions within the corporate world is one of the major concerns in the current society. This is founded on the comprehension that women are underrepresented in corporate boardrooms (CBs), and such an understanding is advanced by the need for more representation of women in executive committees in various companies.  In this regard, different approaches and policies have been proposed as a way of ensuring that the feminine gender is well represented in CBs in different commercial outfits. For example, Senate Bill 826 (SB 826), which has been regarded as California’s women quota, provides a more proactive approach in achieving gender parity and representation in CBs. In 2013, Senate Concurrent Resolution 62 provided direction that would see every public company in California upturn the women representation on their board depending on the size of their panel. California became the first state to adopt such resolutions.

            However, there have been growing criticisms against forceful and radical approaches in achieving gender parity in corporate boardrooms. The intentions of SB 826 are good and should be welcomed as part of measures being taken to give women equal opportunity in organizational leadership and decision making.  Nevertheless, the method that is proposed and inherent in SB 826 in the course of increasing more women as boardroom members is a violation of the internal affair doctrine, the Equal Protection Clause, and illegitimate under the “Commerce Clause” of the United States Constitution. Despite the controversial provisions of SB 826, other states have followed with similar mandates that subject corporations into having a certain number of women in their boards. This is in addition to non-binding resolutions that encourage a corporate culture that advances board diversity.

            It should be taken into consideration that, although SB 826 offers a proactive approach of achieving gender diversity in corporate boards, it does not provide a lasting and in-depth resolution that is more naturalized, and not forceful and coercive. This is because the legislation compels corporations to adhere to certain standards and fails to look at other levels of diversity, thereby promoting gender as a diversity trait that should be holistically reflected in CBs. In this case, a successful strategy of dealing with the underrepresentation of women in corporate governance must have depth; it has to be far-reaching and long-term. Additionally, the proposed approach to achieving gender parity in CBs should similarly be in line with the constitution and, by itself, recognize other facets of diversity such as ethnicity, religion, and race.  

            Consequently, this research paper proposes that Congressional Gender-balanced Policy is a proactive strategy that will address the current underlying problems and issues that exist with the different frameworks that have been adopted. The significance of this policy lies within its ability to empower a cultural structure that embraces diversity. It is a policy that offers a hybrid approach to gender parity (voluntary and disclosure methods) that does not violate the U.S Constitution and the Equal Protection Clause. Therefore, the Congressional Gender-balanced Policy provides resolutions for the current problem by motivating the formation of gender diverse institution, ensuring that diversity is one of the fundamental factors during the hiring process in any startup or existing firms not only in California but in the whole country.  The policy is also essential when implemented on a global scale.

Background
Historical Laws
            In the United States, almost all states have adopted anti-discrimination laws that are related to employment, and protect against discernment based on sex, race, age, ethnicity, language, and religion, to mention a few. These state legislations are in line with the Civil Rights Act of 1964, and in addition, may provide other protection for individuals, depending on their state of residence, in the employment sector. Congressional legislation is significant outlines that have provided means through which diversity and equality can be achieved, while discrimination is vehemently discouraged. In achieving the current state of equality in the workforce, various laws have significantly helped women in overcoming specific barriers that previously existed and simultaneously helped women have a productive progression in multiple careers.

            One such example is the Fair Labor Standards Act of 1938 that was not initially targeted for women but enhanced and helped women earn a living. According to Roger Levesque, the bill fixed the minimum wage at $25 cents, signed by President Franklin D. Roosevelt, making it possible for women to access a consistent living wage that affected more females than men during this period and time. The “Equal Pay Act of 1963,” which prohibited employers from paying employees (men and women) differently for the same work done, is another noteworthy legislation. In 1964, a momentous law protecting women in the workplace was passed; Title VII of the Civil Rights Act of 1964 made it unlawful for bosses to classify people on the basis of race, religion or nationality, and sex.

            Title VII also made it illegal for a person to openly refuse to employ a woman, as was the case before its enactment. Giving an instance, under Title VII, an employer has no legal grounds to refuse to promote a woman because the management views that she has children and has to spend more time with them. As a result, it outlaws the conception of an antagonistic working environment based on sex, an undertaking that significantly benefited women in the workforce. In “General Electric Company v. Gilbert” 1976, the Supreme Court held that sex discrimination did not comprise disability or pregnancy-related instances. In response to this decision, the Pregnancy Discrimination Act of 1978, which amended Title VII, prohibited discrimination of sex based on pregnancy. These legislations have supported and advanced the realization of gender equality in the American workforce, and subsequently removing any discriminatory practices that are specifically gender-biased. 

Current Situation
            Even though women have considerably joined the workforce, there are still concerns about their underrepresentation in CBs; this brings out concerns on whether corporate culture discriminates against qualified women who could provide leadership and diverse representation in the decision making of a company. In 2018, the state of California became the first state to enact board diversity quotas. The renowned SB 826 required all public companies to have at least one woman as part of their board members by the end of 2019; the companies which fail to adhere to this directive will be subjected to a $100,000 fine. This directive forces business outfits to either expand the size of their board or replace existing board members, and even though it will increase women representation in CBs, it comes with grave economic costs. Apart from the economic cost, the current bill violates the Equal Protection Clause, Commerce Clause, and internal affairs doctrine.

            According to the provisions of the Equal Protection Clause, states are mandated to assure the same privileges, rights, and protections for its inhabitants. States are, therefore, mandated not to draw distinctions between people solely on irrelevant differences to state interest and other minority considerations. From this understanding, SB 826 does not equally protect the citizens of California since it advances the inclusion of gender as an important aspect of diversity alienating other facets such as race, religion, and even disability. This is because the bill requires companies to make employment decisions grounded on sex differences. The court in Coral Const. Co. v. King County mentions that some degree of prejudice should occur in a particular occupation before gender explicit mandates are introduced in such a filed. Thus, under the Equal Protection Clause, the government of California bears the burden of validating that its differential treatment of sex is concerned with specific state interest.

The Supreme Court, in Ricci v. Destefano, held that the employment law infrequently permits the formation of quotas. The creation of quotas is explicitly prohibited in Title VII, which states that an employer cannot “limit, segregate, or classify his employees or applicants for employment in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee.” This means that Title VII guides against preferred action of any inflexible percentage to favor marginal workers; as a result, prohibiting the use of quotas. It similarly offers “affirmative action” as a remedy and not a sort after solution. By the underlying fact that SB 826 enhances the creation of women quotas, it violates Title VII. The approach to increasing women representation poses a risk on affirmative action jurisprudence

            In regards to the Commerce Clause, the current bill (SB 826) violates provisions that give the Congress sole authority of regulating commerce between states: SB 826 regulates corporations that are chartered in other states. In Pike v. Bruce Church the court held that even if laws are not discriminatory against interstate commerce, it is not legal if they burden interstate commerce in a way that exceeds benefits to local trade. As a result, SB 826 forces corporations that are not chartered in California to conflicting state regulations concerning the size of their CBs-violation of internal doctrine. This makes the bill defenseless under the Commerce Clause.

Assessment
            Looking at the historical legislations that have advanced and supported women in their careers, it is noticeable that such laws were not built and grounded on the creation of women quotas. For example, Title VII does not mandate employers to have a certain number of women representation in a workplace but prohibits the discrimination of people for employment opportunities based on their gender. This is similarly iterated in the EPA of 1963, which prevented dissimilar remuneration of men and women for the same amount of work performed. This legislation did not mandate employers to have a specific payment approach to gender but made directives that employers should ensure equal pay for equal work. Besides, these legislations did not advance the formation of women quotas, as seen with SB 826.

            Consequently, congressional legislation as a vital part of enhancing gender parity in CBs should not use coercive and forceful ways of achieving diversity in corporations; it comes with a certain degree of backlash from commercial entities. Thus, a feasible policy approach to increasing female representation in CBs should seek to provide equal opportunities for people irrespective of their sexual characteristics, race, religion, or sexual orientation. This is the critical feature that is holistically represented by the framers of Title VII and the Equal Pay Act: the provision of equal opportunity for all. The policy that will, therefore, improve the diverse representation of people in CBs should be engineered at ensuring that organizational cultures of corporations embrace diversity by offering tax incentives to establishments that have a diverse workforce at their management level and CBs.

The policy should also encompass a voluntary and disclosure program that is prepared on a company-by-company basis to choose the objective and aim in relation to the number of women directors for the enterprise. According to Greene et al., institutions opting in to such a program will engage in additional training advantages to ensure that a pipeline of creative talent of women is available for executive positions in the company. Finally, having such a policy is a significant part of attaining gender parity in CBs, without the advancements of legislations that are unconstitutional.

Analysis
Inequality in Corporate Boardroom
            Gender diversity in the workplace is a significant concern in the current civilization, given the importance of a diverse corporate culture that simultaneously represents the diverse nature of the American population. With each and every passing decade, more women have joined the workforce and have made significant progress in attaining financial independence. Despite such tremendous success, there is an unequal representation of women in CBs. According to Conyon and He, gender diversity in CBs is an important feature that heightens financial performance. Having that studies have demonstrated the significance and importance of gender diversity in corporate boardrooms, there is still a limited number of female representation in CBs. For example, Kirsch notes that gender diversity is reflective of the workforce in the organization and the rules that govern the company. This understanding begs the questions on whether qualified women are denied equal opportunity for executive positions or the current institutions do not have the required pool of women directors that they can choose from.

            One of the significant barriers that heighten boardroom inequality in many corporations is the lack of consistent efforts in different countries and states. While other states or countries engage in broadening the diversity in executive management of companies, other countries lag in such initiatives and make it difficult for the achievement of gender parity. Additionally, the lack of enough women holding senior positions is another significant factor that enhances boardroom inequality. Globally, women in executive positions are at about 4.4%, and other important managerial roles comprise only 12.7%. Having that these positions are what propels individuals into CBs, the number of women in the C-suite should be improved to increase their opportunity at achieving corporate governance roles.

            In this regard, there is a deficiency in the pool of women directors who possess the necessary human capital required for senior positions and membership in CBs. This is one of the underlying factors why women’s representation in CBs is low. Therefore, more female talents should be natured to take on senior roles in companies. Achieving this through women quotas makes it difficult for companies to select the best talent from their female employees to take up such executive roles. However, through a policy that programs and continuously seek to train more women in leadership roles, not only ensure that those taking the positions are drawn from a pipeline of female employees but also ensures that they have sufficient training to deliver on their mandates.

            Gender is not the only facet of diversity that is not equally represented in CBs; race is another major significant aspect of diversity that is not equally represented in CBs. Ethnic minority workers such as black Americans or Americans of Mexican descent have not been holistically represented in corporate governance. Based on this understanding, the number of African American women represented in CBs in relatively less compared to the number of Caucasian women in company executive roles. The underlying problems with underrepresentation is a multifaceted issue and are not only attributable to a specific element. The understanding of the unequal representation of gender and racial groups in corporate boardrooms makes a case for disallowing women quotas and embracing frameworks that holistically improve every aspect of diversity in corporate governance.

Approaches to Addressing Board Diversity
            To achieve board diversity, different methods can be employed to attain an increased representation of women in CBs. One such approach is the creation of quotas, which has been widely practiced in a number of European countries such as Germany and Finland, and have similarly increased the number of women representation in corporate governance in these countries. Gender quotas in employment is a system that compels individuals in the hiring process to ensure that a certain number of women or men make part of the hired candidates. Having such quotas are effective in improving gender equality in the American workforce and corporate governance. However, it comes with a significant risk of violating the constitution under the Equal Protection Clause and Title VII.

            On the other hand, disclosure policy as an approach to gender and board diversity embraces transparency in communicating the performance of the firm and its corporate governance. In such measures, the public is able to access the policies and initiatives taken by the company to enhance gender diversity in its management. Additionally, the company, by releasing the composition of its executives, brings to light how diverse their board is. Corporations that disclose less diverse managerial positions are likely to attain significant attention on their hiring culture. This approach makes it feasible for companies to ensure diversity in their board as a reflection of the American population and their workforce. Equally, institutions that have a diverse board is likely to have a positive public image.

            The final approach to improving gender diversity in CBs is the implementation of voluntary programs. Under these initiatives, companies are required to opt into programs that would ensure a pipeline of talent from a gender-diverse group that can take on managerial roles. This ensures that a company has many women candidates to pick for membership in CBs when compared to the pool of male employees available for such positions. These are the major initiatives that are enhanced and supported by a voluntary approach to board diversity. Additionally, this approach is the one that forms the basis for the policy proposed in this paper to enhance gender diversity in CBs- Congressional Gender-balanced Startups Policy.

Congressional Gender-balanced Policy
            This paper proposes a Congressional Gender-balanced Policy that integrates both voluntary and disclosure approaches to board diversity in American corporations. This policy similarly comes with tax benefits that are enjoyed by companies that disclose the composition of their workforce and systems that they have enacted to ensure they comply with different constitutional mandates such as Equal Pay and Title VII. This policy uses a hybrid method of attaining a culturally balanced corporate governance that does not violate the constitution. This section of the paper highlights the elements of the proposed Congressional Gender-balanced Policy under the disclosure and voluntary approaches to gender diversity in corporate governance, including its validity under the constitution.

Voluntary Approach in Congressional Gender-balanced Policy
            Under the voluntary approach to gender diversity as proposed in Congressional Gender-balanced Policy, mandatory quotas are not effective in the long run. Therefore, meaningful and sustainable changes should be incorporated into all levels of governance. Companies that engage in a voluntary program that has a cultural diversity propensity at the roots of its hiring process ensures that a consistent, diverse pipeline of talent is available in the company. Through such initiatives, women leadership does not only increase in CBs, but similarly in all levels of corporate governance, ensuring that gender parity is not only achieved in a specific enterprise level. To achieve th