Orange County’s most valuable public companies are taking steps to increase the diversity of their boardrooms.
In mid-2017, about 12% of all board seats of public companies based in OC were filled by women, according to corporate governance research.
Business Journal analysis shows more progress recently, at least among the largest of the large.
At the 25 top public companies based in OC, about 17% of board seats are now filled by women, and those without any representation tell the Business Journal they’re working to address the issue.
The recent uptick became evident after some notable appointments over the past six months.
In May, Irvine-based real estate investment trust HCP Inc. (NYSE: HCP) appointed Lydia Kennard, who serves on its audit and compensation and human capital committees, doubling the board’s female representation. Later in the month, title insurance provider First American Financial Corp. (NYSE: FAF) in Santa Ana added Martha Wyrsch, general counsel of San Diego-based Sempra Energy (NYSE: SRE), also doubling female membership.
In August, Santa Ana-based telematics specialist CalAmp Corp. (Nasdaq: CAMP) expanded its board to eight members with the addition of independent director Roxanne Oulman, giving it three female members.
For women who’ve been striving to make inroads for themselves and their peers, the appointments are heartening.
As of mid-2017, OC’s public companies lagged behind their counterparts nationally and in the state, including Silicon Valley, whose tech companies have come under fire in recent years for their lack of workforce diversity.
“We’re making progress,” said business consultant Betsy Berkhemer-Credaire, chief executive of 2020 Women on Boards, an L.A.-based trade group instrumental in securing passage of a new state law requiring public company boards to have female representation.
She’s chief executive and owner of Berkhemer-Clayton Inc., an executive search firm that specializes in placing women in board roles. Berkhemer-Credaire has spent more than seven years on the issue, a period she said has brought nominal changes.
“It has improved minimally,” she said. “I do believe optimistically that the greater public awareness we have about the importance of the issue, that more companies will put more women on their board,” (see separate story, above).
Board membership, besides the gender and professional achievement and business connections it affords women, can also bring strong financial rewards. A 2016 Wall Street Journal analysis found that median director pay at S&P 500 companies was about $230,000 to $295,000—some companies paying a director as much as $1.7 million.
New Push for Change
The issue of boardroom diversity in California has picked up momentum in the past year against the backdrop of a charged national political climate, the #MeToo movement, renewed calls to eliminate gender pay gaps, and the recent appointment of Justice Brett Kavanaugh to the U.S. Supreme Court.
The dearth of female directors, according to experts, is a result of decades of exclusion—despite women flocking to the workforce starting in the 1970s—from the C-suite and boardroom to leisure settings, like golf courses and country clubs, and civic clubs, where friendships and alliances often lead to business opportunities, and in some cases where women were banned not so long ago.
Census Bureau figures show women made up just about 38% of the U.S. workforce in 1970 but now comprise 47%. Yet they take up just 16% of public company board seats.
Typically, directors are current or former chief executives and often recommended by colleagues or peers. Since women comprise a smaller percentage of corporate leadership, there are fewer that ascend to boards, panelists said at a September discussion at the Center Club in Newport Beach on women and boards. The event featured Berkhemer-Credaire, former PAAMCO Chief Executive Jane Buchan, and Julie Hill, a board member at Anthem Inc. and trustee of several Lord Abbett funds.
SB 826
Under California Senate Bill 826, the first of its kind in the country, every publicly held domestic and foreign corporation with principal executive offices in the state must have at least one female director by the end of next year.
SB 826 was named in remembrance of Aug. 26, 1920, when the Nineteenth Amendment was enacted, giving American women the right to vote.
It requires companies on major U.S. exchanges by the end of July 2021 and with at least five board members to have at least two seats filled by women, and those with at least six members to have at least three women on their boards.
“California should be the leader,” said Berkhemer-Credaire, author of “The Board Game: How Smart Women Become Corporate Directors.”
Companies face fines of $100,000 for an initial violation and $300,000 for repeat offenses.
The law will likely face legal challenges.
If a qualified male and a female candidate are both up for the same director position, the company would be required to select the woman solely based on gender, said Daniel Callahan, founder and principal of Santa Ana-based law firm Callahan & Blaine.
“SB 826 may be in violation of both the California and United States Constitution, as well as federal and state civil rights laws,” Callahan said in an email.
“It further means that, if there are no vacancies on the board and the shareholders of the company do not approve of additional positions as SB 826 contemplates, the company will have to displace an existing board member, solely based upon gender,” he added.
Mixed Local Picture
According to a Business Journal analysis of Orange County’s 25 largest local publicly-traded companies ranked by market cap, the blue chippers are slightly ahead of the national curve in terms of boardroom gender diversity, though some fall short.
Among the findings on the five- to 11-member boards:
• Women account for about 17% of board seats at the companies, or 34 of 196.
• Four of the companies, or 16%, have no female directors.
• Three companies have three female directors each, and no company has more than that.
• Eleven of the companies, or 44%, have one female board member.
The largest public companies without women board members last month were Irvine-based Masimo Corp. (Nasdaq: MASI), Irvine-based Sabra Health Care REIT Inc. (Nasdaq: SBRA), CareTrust REIT Inc. (Nasdaq: CTRE) in San Clemente, and Mission Viejo-based builder Ensign Group Inc. (Nasdaq: ENSG).
Executives of Masimo, whose market value is about $6.2 billion, say the board has had female representation in the past and that the “company continues to evaluate a number of well-qualified board member candidates and diversity is one of the factors considered as part of this evaluation.”
Sabra Chief Executive and Chairman Rick Matros said about two-thirds of employees at the company, valued at about $3.8 billion, are women. “We are committed to being more diversified,” he said in a statement.
Last year, Banc of California Inc. (NYSE: BANC) contracted Los Angeles-based consultancy Korn/Ferry International due to the pressure of activist shareholder Legion Partners Asset Management LLC, which owned 6.6% of outstanding common stock at the time. Legion urged the addition of two independent directors to the bank’s board. As a result, Mary Curran and Bonnie Hill were appointed last June at its annual shareholder meeting at The Pacific Club.
“I’m fairly new to corporate board work,” said Curran, who spent 25 years in various senior roles at MUFG Union Bank. “We’re latecomers in a male-dominated world, and so we’re trying to play catchup.”
For Hill, though, the experience is familiar.
She’s been a director for 27 years in board stints at California Water Service Group (NYSE: CWT), The Home Depot Inc. (NYSE: HD), Yum Brands Inc. (NYSE: YUM) and AK Steel Holding Corp. (NYSE: AKS).
Extra Effort
Hill’s appointment to Banc of California’s board is her 12th, and she said that in nearly every post, she’s served with other women and minorities. She attributes that to good fortune and company efforts.
Moreover, “I venture to say that every board I’ve served on in the past now has at least two women on them,” due in part to her own effort, she said. “I’m a strong proponent of making certain that when you retire from a board, you should do everything you can to ensure there is another woman or another person of color to replace you on that board.”
Banc of California Chairman Robert Sznewajs said the board listened to its stockholders, who pushed for expanding the number of directors. He didn’t indicate whether gender was a factor in the appointments.
Benefits
More women in the boardroom and in executive suites is good for business, leadership and morale, several executives told the Business Journal.
A 2015 study published in the Academy of Management Journal that drew from more than 140 reports, found that companies with greater board gender diversity posted slightly higher asset returns, though stock market performance and investor gains weren’t necessarily causal.
Some local public companies’ leaders say they appreciate the benefits.
“My team is almost half women,” said Dean Stoecker, chief executive of Irvine-based Alteryx Inc.
The fast-growing analytics software maker, whose board has two of eight seats filled by women, went public last year. Shares are up 115% this year to $54.30 and a $3 billion market cap as of press time.
“I don’t look at it from a gender, or a race or age perspective,” Stoecker said. “It’s about different experiences that people bring.”
