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Citi, Jane Fraser, and Efforts at Greater Gender Diversity in American Corporate Leadership

In September 2020, Citigroup announced that it had selected Jane Fraser to succeed Michael Corbat as the megabank’s CEO.1  Ms. Fraser, the first woman to lead a major U.S. bank, is a Harvard Business School graduate and former McKinsey & Company partner who has held leadership roles in Citi’s client strategy, strategy and M&A, private banking, home mortgage, Latin American, and global consumer banking departments during her 16-year tenure.2  Ms. Fraser’s ascension marks a significant turn of events in an industry where, just last year, none of the CEOs of the seven largest banks thought they would one day be succeeded by a woman or a person of color.3    

Ms. Fraser is clearly eminently qualified for the CEO role at Citi, and JPMorgan Chase may soon follow suit having recently moved Jennifer Piepszak and Marianne Lake into roles seemingly to position them to succeed CEO James Dimon.4  Given the multifaceted, international presence of a megabank like Citi, Ms. Fraser’s role promises to be one of significant corporate and global influence.

But still, Citi makes just one of those seven banks to have a woman CEO, and only 7.4% of Fortune 500 companies can say the same.5  Below the CEO-level, women in senior corporate positions are often confined to human resources, legal, or other administrative roles and not given the “P&L” responsible positions which commonly feed into CEO roles.6  So, what might be done to create more gender equity in corporate leadership, and what legal issues would any actions confront?  Ultimately there are any number of approaches, but this post will provide brief insight into two: shareholder proposal activity and legislative mandates for greater gender diversity.

First, shareholder proposals for various disclosures and initiatives could prove meaningful in pushing for a more equitable workplace.  These proposals can request that companies release information on median pay by gender (among other things), which investors view as important to improving pay equity and as a benchmark for improving diversity in leadership.7  Intuitively, by making public any pay gap between men and women employees (or between white and non-white employees), companies will be forced to make changes to compensation structures potentially including the promotion of more women into higher-paying executive positions.

Naturally, the success and proliferation of these types of shareholder proposals will depend on their acceptance by the SEC and any associated guidance therefrom.  The SEC recently chose not to block a shareholder proposal requesting reports on global median gender pay and risks surrounding the recruitment and retention of women at Wells Fargo8 indicating a willingness on the SEC’s part to allow investor forces in the banking industry to make a beneficial push for pay equity.  Between 2015 and 2016, Arjuna Capital successfully filed resolutions and engaged shareholders at Microsoft, Expedia, Amazon, Apple, and Intel, all of which reported soon after that they had either closed their gender pay gaps or would do so in the near term.9

In a slightly different vein, SEC guidance currently does not expressly state that companies should release diversity information about directors, but it does expect that companies which consider self-identified diversity characteristics in director selection make those characteristics (and their considerations of them) public as part of their disclosures under Item 401.10  As with gender pay gap information, broader disclosure about diversity in board member selection could lead investors and the general public to demand that major companies diversify their leadership and increase the extent to which they consider various diverse factors in director selection.  

Of course, it is the companies and major shareholders facing the proposals which ultimately need to produce reporting and take necessary action.  Oracle, to take one example, has rejected shareholder proposals requesting a release of gender pay data despite majority support among the shareholders in recent years.11  But the SEC’s acquiescence to certain gender pay equity shareholder proposals indicates that large companies may not have an easy time withstanding investor pressure over the longer term.

Second, California has legislated quotas to ensure some measure of gender diversity in corporate board seats, following the lead of Norway, France, Belgium and Italy.12  California’s statute, originally passed in 2018, required that any publicly held company with its primary executive office in California (regardless of the place of incorporation) have one female board member by the end of 2019.13  By the end of 2021, any such corporation with five directors must have at least two female directors, and any such corporation with six or more directors must have at least three.14  “Female” is defined as self-identification as a woman without reference to a person’s designated sex at birth.15  The statute also includes quotas for such corporations to include directors from underrepresented communities—including LGBT and non-white communities based on self-identification.16  California’s Secretary of State is authorized to impose fines on corporations for violations of the statute.17  

A recent meaningful challenge to the statute came up in the Eastern District of California in April 2020,18 and presents several legal considerations which will likely be expanded upon by additional case law.  Plaintiff, a shareholder in OSI Systems, a California-based and publicly held entity incorporated in Delaware, complained that the California quota statute violated his right to vote for OSI Systems’ board of directors under the Equal Protection Clause.19  The court in Meland dismissed the complaint due to a lack of standing, stating that Plaintiff did not suffer an invasion of his rights because the statute applies to corporations, not to shareholders, and Plaintiff may still vote for directors as he pleases.20  Even if Plaintiff could have established an invasion of his interests, the court stated that any injury would have been too abstract for the establishment of standing.21

If standing could be established and an Equal Protection Clause claim could be adequately stated, statutes like California’s could be subject to an “intermediate scrutiny” level of analysis.  The intermediate scrutiny test, as originally laid out by the Supreme Court in Craig v. Boren, stipulates that “classifications by gender must serve important governmental objectives and must be substantially related to achievement of those objectives.”22  This could be an important component of eventual court decisions.

Beyond the potential for additional legal challenges to the California statute, it is also unclear if a similar statute could be applied to executive managerial positions, particularly ones with “P&L” responsibility.  If a Plaintiff can successfully establish standing in challenging a gender quota, will a different or higher federal court find a violation of the Equal Protection Clause in a quota system?  Even if a quota statute is found to be legally permissible, is it a particularly effective way to create a more equitable work environment?  Or, as critics have claimed, do these statutes oversimplify a highly complex and systemic issue?23  Could a meaningful wave of shareholder proposals do enough work to preempt the need for legislative action?

These questions will be continually debated and answered in coming years for this quickly developing area of the law.  For now, congratulations to Ms. Fraser for her promotion and here’s to hoping that she is the first of many among the major banks and many more among the Fortune 500.

  1. Claire Zillman, How Jane Fraser Broke Banking’s Highest Glass Ceiling, Fortune (Oct. 19, 2020, 5:30 AM), 

  2. Id. 

  3. Id. 

  4. Brian Chappatta, Citi Beats JPMorgan to Shatter Wall Street’s Glass Ceiling, MSN (Sept. 10, 2020), 

  5. Alisha Ebrahimji, Female Fortune 500 CEOs Reach an All-Time High, But It’s Still a Small Percentage, CNN Bus. (May 20, 2020, 10:46 AM), 

  6. Vanessa Fuhrmans, Where Are All the Women CEOs?, Wall St. J. (Feb. 6, 2020, 10:34 AM), 

  7. See Press Release, Arjuna Capital, Arjuna Capital Commends Citi for Being First U.S. Company to Disclose “Global Median Gender Pay Gap” Data (Jan. 16, 2019), 

  8. Wells Fargo & Company, SEC No-Action Letter, 2018 WL 7290814 (Feb. 21, 2019) at *1, *3. 

  9. Arjuna Capital: Momentum Builds – Over Half Of eBay Shareholders Vote In Favor Of Gender Pay Equity Resolution, Company Reacts By Saying It Will “Fix” Problem, PRNewswire (Apr. 27, 2016 5:46 AM),—45-percent-of-ebay-shareholders-support-gender-pay-equity-resolution-company-reacts-by-saying-it-will-fix-problem-300258670.html. 

  10. U.S. Sec. & Exch. Comm’n, Regul. S-K: Compliance & Disclosure Interpretations (Sept. 21, 2020), 

  11. Allison Levitsky, ‘Costly and Time-Consuming:’ Why Oracle’s Board Refuses to Release Gender Pay Gap Data, Silicon Valley Bus. J. (Nov. 19, 2019, 5:46 PM), 

  12. Charlotte Whelan, Policy Focus: Gender Board Quotas, Indep. Women’s F. (Mar. 10, 2020), 

  13. 2020 Cal. Legis. Serv. Ch. 316 (A.B. 979) (West). 

  14. Id. 

  15. Id. 

  16. Id. 

  17. Id. 

  18. see Meland v. Padilla, No. 2:19-cv-02288-JAM-AC, 2020 WL 1911545 (E.D. Cal. Apr. 4, 2020). 

  19. Id. at *1. 

  20. Id. at *4. 

  21. Id. at *4. 

  22. Craig v. Boren, 429 U.S. 190, 197 (1976). 

  23. Dottie Schindlinger, Want Gender Balance in Boardrooms? Here Are 3 Alternatives to Quotas, Fortune (Apr. 25, 2020, 9:00 AM),