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NAWRB had the pleasure of writing a formal letter to the various committees on the California State Assembly and Governor Jerry Brown regarding the passing of SB 826 bill, which requires that at least one woman be on the board of publicly held companies in California by year end 2019.
At time of writing, California Jerry Brown has officially signed the SB 826 bill this year, a landmark legislation requiring female representation on corporate boards. Despite concerns over its potential efficacy. The bill is an important step in diversity and inclusion, as well as for the advancement of women.
Having diverse members on corporate boards is not only an ethical decision—it’s good for business. Credit Suisse research demonstrated that companies are more profitable and more productive when they have at least three women directors on their boards, especially in return on equity and stock performance.
In terms of female representation on corporate boards, California, at 15.5 percent, lags behind the national average of 16.2 percent for the Russell 3000. Also, the bill states, “one-fourth of California’s public companies in the Russell 3000 index have NO women on their boards of directors.”
SB 826 requires that at least one woman be on the board of publicly held companies in California by year end 2019. Existing male board members would not be replaced. If there is no turnover of board seats in 2019, held by men, then a new seat would be added for a woman. This proposed law does not apply to private companies. The Chambers that oppose SB 826 represent primarily small private companies, which would not be affected by this bill.
In an official letter, Governor Brown states, “There have been numerous objections to this bill and serious legal concerns have been raised. I don’t minimize the potential flaws that indeed may prove fatal to its ultimate implementation.” He continues, “Given all the special privileges that corporations have enjoyed for so long, it’s high time corporate boards include the people who constitute more than half the ‘persons’ in America.”
How does this concern real estate? Publicly-held real estate companies in California are most likely to be affected by this new legislation requiring female representation on their boards. This might be a productive start for increasing the share of women in areas where they are greatly underrepresented, such as commercial real estate.
A report by The Real Deal, looking at top investment sales and leasing brokerages in Los Angeles, CA, demonstrates the significant difference in female representation between commercial and residential real estate brokers. In the top commercial real estate firms in LA, the percentage of women brokers ranges from 0 to 29 percent, compared to 42 to 60 percent in residential firms.
At the executive level, the 2015 Commercial Real Estate Women Network Benchmark Study found that 17 percent of men surveyed held executive titles, while only 9 percent of women stated the same. Although residential real estate has a fair ratio of male-to-female agents, commercial real estate and leadership positions across the board are male-dominated.
A common reason for why there are few opportunities for female advancement in leadership positions is that the industry continues to be a “boys’ club,” where key players often conduct business at outings, golfing and retreats, where women are not invited. Also, those who are able to climb the ladder rely heavily on connections and networking, since the industry is based on relationships.
Corporations and brokerages might find it costly to change their hiring processes, but the results will likely increase their customer base and book of business in the long run. However, gender diversity should not stop at just meeting quotas to improve the quality and longevity of diversity in firms.
Other ways companies, and their employees, can address the gender gap at all levels of employment include mentoring and collaboration among both men and women employees, changing hiring practices, such as recruiting ads that emphasize women’s strengths, and advertise recruitment opportunities at speaking engagements.
Some public companies in California may feel that they are already displaying diversity awareness in their hiring processes, thus enforced legislation is not needed. When they search for board members, taking into consideration candidates of both genders, their priority is hiring the most qualified directors.
An open mindset while reviewing candidates is good to have, especially since the board selection process predominantly occurs within social networks, but the numbers show it has not been enough for increasing female representation at the top level. At this rate, studies predict it will take over 40 years to achieve gender parity.
Gender diversity and female representation at the board level requires a more rigorous and formal approach from top down. Corporations will have to embrace diversity and inclusion as a core tenet in their ethos and daily operations until it becomes a continual practice with long-lasting effects.
Realistically, it will take time for companies to create a pipeline that helps advance women through their corporation. SB 826 gives us an opportunity to take action now regarding one aspect of the lack of female representation on boards. The bill can always be revised as its effectiveness is reviewed by the Secretary of State through implementation so as to meet our shared goal of women’s inclusion.