In a unique approach, California has passed a law requiring public companies to diversify their boardrooms. The law mandates that all publicly-traded companies in California need at least one woman on their leadership team.

The law goes into effect this year and companies have until the end of 2019 to comply. There are some benefits that come with a diverse leadership group.

Missing diversity in leadership roles

Unfortunately, companies have struggled with diversifying their leadership. In 2014, only four percent of Fortune 500 CEOs were minorities while a mere five percent CEOs were women.

California aims to address this startling lack of diversity at the top levels. It remains to be seen if other states adopt this same kind of legislation, and the impact it has on companies.

The impact of a varied team

According to Forbes, the benefits of having a more diverse leadership team can be felt in a number of ways. The main benefit comes from allowing companies to challenge the status quo.

Studies have shown that groups with more diverse makeups are more prone to disagreements. While this may seem like a negative, being able to disagree means more conversation. It creates fewer instances of “group think”, where all members of a group go along with an idea regardless of its merit.

Challenging concepts and fighting group think keeps leadership teams engaged and innovating. This leads to more creativity within your company structure. That allows unique ideas to flourish and challenges to conventional wisdom.

The importance of the right structure

California’s new law emphasizes the importance of structure in any business. Companies need the right structure to perform to their highest potential. A strong, diverse leadership group is just one of these important characteristics.

Choosing how to structure your business is just as important as picking strong leadership members. If you have any questions about the options for restructuring a company, consulting a skilled business attorney can help.