California’s Corporate Assault (2018 Oct)

by Barry A. Liebling

The reliably leftist California state legislature has recently passed a bill that will become law if the governor signs it. It requires that all corporations registered in the state with $1 billion or more in sales will have a minimum of one woman on their Board of Directors by 2019 and at least three women directors by 2021. Failure to comply will result in a $100,000 fine for the first offense and a $300,000 penalty if there is an additional infraction.

Nearly everyone who learns of this proposed law has a strong opinion. In general, those who are sympathetic to the leftist political agenda applaud this effort. By contrast, those who are not leftist (this includes conservatives, libertarians, and – by far the most numerous – people who do not have an articulated political philosophy but sense something is wrong) are repelled by the attempt to make the government even more intrusive.

So what is the significance of the proposal? What – if anything – is problematic about the intentions of the California officials?

The purpose of the Board of Directors is to serve the interests of the shareholders, the owners. The Board supervises and oversees top management of the corporation. Usually this means maximizing the long term financial success of the business. But in a free society the owners might decide that money is not their top priority and may focus on other objectives – such as having the company participate in a wide range of arenas – even if this dampens profits.

The Board is generally composed of individuals who have a large stake in the company – or represent people who are substantially invested in the firm. Also on the Board of Directors are people that do not have a lot of equity but bring expertise and influence to the company that will help it achieve its goals. Notice that there is nothing in the concept of Board-member that implies how many or how few women should be inducted. Ideally, the Board is composed of the best people that can be recruited. And with that standard there is no way to know in advance how many women a given company will have on its Board.

In a free society corporations have the authority to decide for themselves who will be a Director. That means that if the controlling shareholders want to deliberately have more women on the Board and take actions to make this happen they have the authority to do so. Alternatively, if the dominant owners want to reduce the number of women on the board they can make this happen. Note well that both purposely putting more women on the Board or intentionally keeping them out is a sexist policy – where “sexist” means making gender count where it should be irrelevant.

What if a private citizen believes a company has too few or too many women on the Board of Directors. Anyone can complain and make an attempt to persuade the firm to change its ways. Shareholders have special powers to ask for changes, and if they do not get their way they can sell their shares and invest in a company that is more to their liking. Customers who are not pleased can decide to stop doing business with a corporation that has “the wrong number” of women on its Board.

To summarize, if people are free they can use their best judgement (or can foolishly refrain from making wise decisions). How many women are on the Board of Directors of each large company will be settled on a case-by-case basis, and whatever the outcome is, it will be reached voluntarily without coercion.

Now let us interpret the meaning of the proposed California law. First of all, whether or not the authors of the legislation and their supporters realize it, the attempt is inspired by Marxism. The original nineteenth century version emphasized the permanent conflict between classes. Members of the propertied class are oppressors, and the proletariat is being oppressed. It is the job of the good socialist-communist to take the side of the “inevitable winner” (the oppressed) and do whatever is necessary to put down the oppressor.

In the late twentieth century the Marxist idea of class conflict was extended to other categories – mostly ethnicity, gender, and sexual orientation. A modern Marxist knows that the oppressed are to be given every special favor, while the oppressors deserve nothing but scorn. Of course, today’s most reviled oppressor group consists of straight, white men (three marks against them at once).

So members of the California legislature are demonstrating their commitment to bringing even more of their identity politics into the business world. They are seeking social justice (a different concept from simple justice which is concerned with individuals not groups). According to leftist thinking women have historically been given a raw deal, and it is only right that corporate boards reserve special slots for them as a gesture of restitution. Incidently, if the new law results in fewer men on corporate boards in California the legislators will be delighted. After all, men as a group are inherently oppressors and deserve their comeuppance.

If the California law is passed it will encourage the social justice crowd to continue their efforts to make group identity count as much as possible in business and to punish those who do not belong to enough oppressed groups. For example, not all women are equally deserving of government-mandated Board of Director positions. Once a quota on women is established the next step is to divide women into categories that are presumed to be in conflict and demand sub-quotas. Social justice activists will insist that women who belong to “under represented” ethnicities and sexual orientations be given special consideration. Straight white women, get to the back of the line.

Some conservative pundits have lambasted the proposed California law by pointing out that in the past three decades women have made tremendous strides in the business world. They are more likely than ever to hold executive positions and to be business owners. The new law, say the critics, is not necessary. But notice that this remark plays directly into the hands of leftist zealots. It concedes to the fallacy that there is a “correct proportion” of women on corporate boards, and it gives license to unleashing the government to enforce compliance.

It will be challenging, but not impossible, to convince those who are pushing for the California law that they are mistaken. Committed leftists are set in their ways and do not want to hear anything that contradicts their world-view. For those who understand and are committed to the principles of liberty the mission of explaining the virtue of individual freedom never ends.

*** See other entries at in “Monthly Columns.” ***

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