JURIST Guest Columnist Enkelena Gjuka, St. John's University School of Law Class of 2014, is the author of the sixth article in a 10-part series from the staffers of the Journal of Civil Rights and Economic Development. Gjuka calls upon the Securities Exchange Commission and Congress to increase diversity on corporate boards...
magine that after countless hours of studying, you graduate with honors and are offered an interview for your dream job but when you get there, the human resources director tells you "I just can't hire you, honey, even though you are more than qualified. If I put you on the floor with all those men, I would never get any work done."
This scenario is based on Priscilla Berry's story. She was unable to find employmentnot because she was unqualified, but because she is a female. Priscilla's experience is certainly not unheard of. She is just one among many women who have been discriminated against in the workforce because they are women.
Women, especially those seeking positions on corporate boards, continue to face challenges that men do not. Although women and men currently comprise [PDF] roughly equal portions of the population and 25 percent more women than men graduate from college, only 3.6 percent of Fortune 500 companies have a female CEO and only 14.7 percent of US companies have a female board member.
Board diversity should be increased for a number of reasons. First, increasing the number of women in boardrooms would promote equality. Second, evidence [PDF] shows that corporations whose boards contain more women are more effectively and efficiently run than those that do not. Women bring a leadership style that benefits boardroom dynamics and are likely to invest better than their male counterparts. Some studies suggest that the global financial crisis of the late 2000s to the early 2010s could have been prevented if there had been more women on corporate boards and in financial banking.
The importance of increasing board diversity has also been recognized by the US Securities and Exchange Commission (SEC). Accordingly, the SEC amended Regulation S-K Item 407(c)(2)(vi) [PDF] to require corporations with a diversity policy to disclose how the policy is implemented and how the nominating committee "assesses the effectiveness of its policy." However, the amended Regulation S-K alone will not dramatically increase female board membership because it does not require corporations to consider diversity and does not define the term diversity.
In light of the dearth of women in corporate leadership positions, I have developed a proposal which would be more effective than what the SEC has done so far. My three-step proposal provides that the SEC needs to define diversity in Regulation S-K, Congress should enact a law which would give corporations a tax credit for every female elected to their board, and corporations should implement outreach programs to increase board diversity.
First, the SEC must define the term diversity. To increase gender diversity on corporate boards, diversity cannot be left for companies to define "in ways that they consider appropriate." Therefore, the SEC should amend Regulation S-K to define the term diversity in the following way:
Diversity refers to many demographic variables, including, but not limited to, race, gender, religion, national origin, education, professional experiences, differences of viewpoint and other individual qualities that contribute to board heterogeneity.
Second, Congress should pass an act which would give corporations a tax credit for every female that they elect to their board. The act should be implemented as a seven-year program to encourage 20 percent female membership on corporate boards by 2020. There are two reasons for the time limit: (1) corporations will likely be more prompt in electing female board members when the tax incentive is a limited time offer, and (2) by 2020, corporations will likely realize the benefits of a larger number of female board members, so tax incentives will no longer be needed.
Third, corporations should take measures and implement their own programs to increase board diversity. Outreach programs are generally effective and will likely increase the number of women on boards since many women need encouragement or information to become board members. There are many methods that corporations can use to promote board diversity. For example, a corporation can implement programs where senior women reach out to younger women for encouragement to nominate themselves for board positions.
Some corporations argue that taking measures to increase board diversity is unnecessary because, with time, the number of female board members will increase on its own. However, we cannot wait for change to occur on its own because over the past decade, "the percentage of women on boards of US companies has remained stagnant." Even if the number of women on boards will increase on its own, the US cannot afford to waste time in this difficult economy. It's more important than ever to take advantage of everyone's skills: both female and male.
It is time that we, just like many other countries, take additional measures to increase diversity in the workforce, and more specifically in the boardroom. My three-step proposal is likely to be effective because it would give hard-working women, like Priscilla, a better chance to get elected to a board. Thus, unless the SEC, Congress, and corporations across the country take measures, the battle to increase board diversity will continue to be a difficult one.
Enkelena Gjuka is the Editor-in-Chief of the Journal of Civil Rights and Economic Development. Her experience includes positions with Sterling & Sterling, Inc., St. John's University School of Law Securities Arbitration Clinic, and Kings County District Attorney's Office.
Suggested citation: Enkelena Gjuka, Corporate America, It's Time to Increase Gender Diversity in Boardrooms, JURIST - Dateline, Nov. 11, 2013, http://jurist.org/dateline/2013/11/enkelena-gjuka-womens-rights.php.
This article was prepared for publication by Elizabeth Imbarlina, the head of JURIST's student commentary service. Please direct any questions or comments to her at firstname.lastname@example.org