On September 30, 2018, Governor Jerry Brown signed into law a bill that sought to reshape corporate boards in California by mandating gender diversity. SB 826 required publicly held corporations located in California to report at least one female on the board of directors in corporate disclosure statements by the close of 2019 or face fines of up to $300,000. By the end of the 2021 calendar year, affected employers must increase gender diversity to 2 female directors if the corporation has 5 directors or to 3 female directors if the corporation has 6 or more directors.
In its preamble, SB 826 highlighted that 26% of the organizations targeted had no women on their boards of directors at the time it was introduced. Has this law changed the landscape of corporate boards? In large part, this remains to be seen. On one hand, as detailed in a March 2020 report issued by the California Secretary of State, of the 330 organizations that filed their 2019 corporate disclosure statements, 282 (85.45%) reported compliance with SB 826. Notably, 305 organizations affected by SB 826 did not file 2019 corporate disclosure statements.
Now, California lawmakers are proposing to expand the board gender diversity requirements to include members of underrepresented communities, defined as individuals who “self-identif[y] as African American, Hispanic, or Native American.” According to a report in the Sacramento Bee, this definition will be expanded to include individuals that self-identify as Asian, Pacific-Islander, Native Hawaiian and Alaska Native. While the gender pay gap has long been the focus of significant policy and advocacy efforts—the Equal Pay Act of 1963 has “sex” as its only protected class—the current socio-political climate makes the persistence of the racial pay gap impossible to ignore. In the UK, for example, a petition to expand the gender pay gap reporting requirements to include race and ethnicity-based pay gap reporting is gaining serious momentum. The expanded board diversity law will levy similar six-figure penalties on organizations that fail to comply.
As the evolving board diversity law demonstrates, a pay equity strategy must be broader than compensation analytics. It must include considerations of diversity, equity, inclusion, and access (“D. E. I. & A.”). A pay equity audit is a diagnostic assessment of D. E. I. & A. based on a deep dive into payroll, HR, time/attendance, EEO, and other data sources. Experts across the human capital, legal services, and business intelligence industries recommend a pay equity audit as a critical tool in an employer’s risk management tool belt. A pay equity audit provides actionable intelligence to be proactive in addressing internal inequities.
Not sure how to get started? Let Trusaic provide your organization with a free Pay Gap Assessment, which can be conducted confidentially.
Here is what you will get:
1-hour consultation to our pay equity team comprised of regulatory compliance experts and data scientists;