Mandatory women on California boards of directors: the potholes in SB-826

In a huge strike for equality[1], California has decreed that all-male boards of directors need to go the way of the dinosaurs:

This bill, no later than the close of the 2019 calendar year, would require a domestic general corporation or foreign corporation that is a publicly held corporation, as defined, whose principal executive offices, according to the corporation’s SEC 10-K form, are located in California to have a minimum of one female, as defined, on its board of directors, as specified. No later than the close of the 2021 calendar year, the bill would increase that required minimum number to 2 female directors if the corporation has 5 directors or to 3 female directors if the corporation has 6 or more directors.
Of course, there could be no material ill effects from this policy. Otherwise, I'm sure they'd have been addressed in the California Senate, whose members are clearly much more concerned with the financial health of their state rather than virtual signaling.

Speaking of which, I have a very attractive bridge situated between San Francisco and northern California which I'd be willing to sell to any interested reader.

Did anyone notice that this implies that it requires moderate-sized boards to move to 50% female representation within three years? I'm sure that this is excellent news for moderately-well-known near-C-level (tech, pharma) females in California. If I could buy shares in this demographic, I'd be all-in. However, a more directly accessible trading strategy would be based around the aforementioned set of California-based companies with 10 or fewer board members. Please note that this is not professional trading advice, you'd be crazy to trade based on the superficial research of a random person on Twitter, etc.

  • For any such company which already exceeds the 2021 criteria, hold.
  • For any such company which doesn't currently meet the 2021 criteria but will meet it with 1 additional board hire, sell if you hold it.
  • For any such company which needs to hire 2+ females to meet the 2021 criteria, sell short based on the predication of a 2022-2023 disaster
Bringing in people to the board based on gender is unfortunately disproportionately likely - based on ease of discovery - to incorporate vocal SJW-biased women who spend the majority of their time selling the story that "women are discriminated against in tech!" Now, this may even be true - in my experience, it's not, but that's another blog post - but by hiring these women the affected boards of directors are bringing aboard people whose primary interest is the "improve female representation in tech" narrative, rather than (say) "make this company work better and be more profitable". What could possibly go wrong?

In particular, any company hiring Anita Sarkeesian, Ellen Pao, Zoe Quinn, Brianna Wu, Erica Baker or other such vociferous campaigners in the context of this act is doing the equivalent of filling five of six chambers of a revolver with live ammo, pointing it at their head, and squeezing the trigger.

On the other hand, if a company's board can persuade one of its existing male members (ooh err) to "identify as female" then I'd go long on that company based on willingness to turn SJW rules back on themselves. What is California going to say? "Oh, you're not really a woman, you're just pretending?" According to the bill:

“Female” means an individual who self-identifies her gender as a woman, without regard to the individual’s designated sex at birth.
I'd imagine that any such willing volunteer would see a sharp bump in their compensation.

Practically, this incentivizes a medium-size board of directors which has at least one woman to trim excess (male) directors in order to bring them into compliance without introducing a potentially disturbing (female) member to the board. Expect to see the distribution graph of board sizes in California to take a leftwards lurch in the next couple of years.

Now, let's consider the perspective of a woman hired to a board of directors in a California-based company after this law is passed. How many people in the company will believe she was hired for her expertise? And how long will she hold the label "diversity hire" - even if the board actually hired her for her expertise? If I were a C- or D-level female executive in California, I'd be spitting mad about this devaluation of my expertise. But then, I'd bet that the lobbying for this bill came from the achievement-challenged section of the prospective candidates. "Damn my dubious merits, hire me because I'm kinda-female and very woke!"

[1] For non-British readers, this is irony. There may be more instances of this phenomenon throughout this blogpost.

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