Does including more female board members help corporations to reduce non-compliance? A study on California’s mandatory gender quota

Abstract

California enacted the law of SB826 in 2018, which mandates corporate boards to include a minimum number of female directors. I study companies’ reactions to this gender quota from the perspective of board diversity as well as corporate compliance. My sample encompasses data on the publicly held firms headquartered in California, Arizona, Oregon, Nevada, Texas, or Washington from 2015 to 2021. I find that compared to companies in the other five states, the companies based in CA enhance female presence in boardrooms markedly after the enactment of the quota. However, with more women in the boards of California corporations, their responses to corporate noncompliance are no different than those of companies situated in the other five states. The findings suggest that including more female board members, in the context of mandatory gender quotas, does not notably help corporations to reduce noncompliance.