California quota law

California Quota Law: Empowerment or Impediment?

A new California law aimed at breaking the glass ceiling has become the buzz of boardrooms across the country. On Sunday, Governor Jerry Brown signed a bill, passed by state legislators in August, requiring all publicly-traded companies headquartered in California to include at least one female board member by the end of the year.

By the end of 2021, boards with five members must include two women and boards with six members must include three or more—and “inclusion” is the operative word, here.

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Board Tenure: To Limit or Not to Limit?

Statistically, executives tend to linger once they begin serving on a board. In fact, the Wall Street Journal reports, “At 24% of the biggest U.S. companies (S&P 500), a majority of the board has been in place for at least 10 years…It is a marked changed from 2005, when long-term directors made up a board majority at 11% of large companies.”
Board Tenure: To Limit or Not to Limit?

Moreover, some of those long-tenured directors have been serving on boards for upwards of 40 or 50 years.

The conversation about board tenure is a somewhat new one. For decades, seasoned board members have been considered a major asset to corporations—especially at companies where growth has been consistent.

As activist shareholders put more pressure on boards and the call for board diversity (of all kinds) grows, though, companies are beginning to consider the potential benefits of board term limits. In 2012, board turnover hit a 10-year low—forcing companies to face the dilemma of simultaneously seeking diversity while also having very few board positions to fill.

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Research Shows Board Service Supercharges Careers

Just last week, we discussed how public company board membership comes with increasing personal risk these days, yet executives are still doing their best to secure those coveted positions.
Vector illustration of the businessman superhero - stock vector. EPS 10 file.

You might be asking, “Why?” Why would a well-paid executive spend extra time “on the clock” for a company other than their own? According to a recent study, there may be a clear answer: board membership helps advance executives’ careers and enhances their earnings.

The study, which was conducted by four academic researchers, utilized a sample set of 2,140 high-level executives at S&P firms from 1996-2012.

The researchers matched the executives who were serving on boards with executives in similar positions at comparable companies who had not served on a board.

The results were definitive. In the researchers own words, “We found that serving on a board increases an executive’s likelihood of being promoted as a first-time CEO to an S&P 1500 firm by 44%–and even if they weren’t promoted, we found that serving boosts an executive’s subsequent annual pay by 13%.”

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Want to Be on a Public Company Board? Not So Fast!

Securing membership on the corporate board of a publicly traded company is no small feat. In fact, based on recent calculations, there are only about 70-80 board openings for NASDAQ-listed companies in the United States annually. That’s just a handful more people than were accepted into the NBA last year!
public company board

Historically, corporate boards have favored a very narrow type of board member: former CEOs from Fortune 500 companies or prominent CFOs who can be labeled an “audit committee financial expert” in adherence with the Sarbanes-Oxley Act of 2002.

These kinds of board members have long been identified as the “gold standard” for corporate director appointments.

However, the public company board membership selection process has become increasingly competitive over the past couple of decades. Former prominent CEOs and CFOs can no longer expect to slide easily into board membership at public companies. Boards continue to place value on more modern types of expertise—think entrepreneurs or tech experts.

More than ever, executives with unique backgrounds have a shot at obtaining the most exclusive of board appointments. But in order to have the very best chance at one of these opportunities, we encourage you to follow this advice:
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