Opinion

Lucy P. Marcus

Why Facebook – and every company – needs a diverse board

By Lucy P. Marcus
February 8, 2012

On Tuesday, the California State Teachers’ Retirement System (CalSTRS), the second-largest pension fund in the United States, wrote to Facebook to address the fact that the company has an unusually small, insular board with no women. With this bold and public step, CalSTRS brought to the fore an issue of genuine concern: diversity in the boardroom.

Most of the press will pick up the part about the absence of women board members, and that is vital — there is no doubt that women are severely underrepresented in the boardroom. The lack of women on boards, however, is a reflection of a wider problem with diversity: It is one of color, age, international perspective and more. The Facebook boardroom has virtually no variety, and that is a serious issue. Boards that don’t represent the stakeholders of the business and the environment in which companies operate are not able to do their jobs as capably.

A lack of diversity is not simply a problem of “optics.” In the modern world, it does look odd not to have it, but does diversity make a difference in real economic terms? Does it actually affect the bottom line? To my mind the answer is a resounding yes. We do not need diversity for diversity’s sake, but because diversity on the board contributes to the profitability of the business. Diversity of thought, experience, knowledge, understanding, perspective and age means that a board is more capable of seeing and understanding risks and coming up with robust solutions to address them. Businesses led by diverse boards that reflect the whole breadth of their stakeholders and their business environment will be more successful businesses. They are more in touch with their customers’ demands, their investors’ expectations, their staffs’ concerns, and they have a forum in the boardroom where these different perspectives come together and successful business strategies can be devised.

Some fear that too much diversity and independence of thought can be damaging to the cohesion of the board. Given the iron grip that Chairman and CEO Mark Zuckerberg has on the Facebook board, that may be a concern that is driving him. Yet for healthy boards with capable independent chairs, the very opposite is true. The modern board requires that there be room for open, constructive, dynamic discussion, with respect and regard for the people around the table. In my experience, the result is a more capable and better functioning board, one that can withstand the challenges of an ever-shifting landscape in which the organization it serves operates. Diversity then becomes part of the very DNA that marks a business as healthy and ready to face the future.

Healthy businesses need comprehensive diversity. Without it there is no independence of thought or action, and no way to hear what is happening outside of what would otherwise be an echo chamber. Also, diversity is not a static, one-time result that boards need to achieve, but one that poses a constant challenge of renewal. Good corporate governance in this sense also requires “turnover” in the boardroom so that organizations are capable of dealing with today and tomorrow.

In an ever-more-global business environment, diversity also has an international dimension that extends beyond gender, culture, age, etc. Every board needs to keep a finger on the pulse of what is happening around the world, and given the exceptionally global nature of Facebook’s business, the absence of international expertise is that much starker. International diversity is required to broaden a board’s knowledge and understanding of what is happening in the rest of the world and how this affects the environment in which the organization it serves operates. International diversity in this sense also means that the best boards will be able to be proactive in instituting these changes, striving to live up to the highest standards of corporate governance from around the world, not simply waiting for the world to force them to do so.

When I see a business with a board that has a preponderance of people with similar, if not identical, profiles, this is a signal that it is not a healthy business built for the long term. It is the canary in the coal mine — the warning that business fundamentals are not being looked after. If a board is not diverse, it makes me wonder about the business as a whole. If Facebook wants to continue to grow, now is the time when Mark Zuckerberg needs to be willing to release a little bit of his grip and open his boardroom to new voices and ideas.

PHOTO: People walk past the Facebook wall inside their office in New York, December 2, 2011. REUTERS/Eduardo Munoz

 

Comments
22 comments so far | RSS Comments RSS

I think there is a really important point in this about board turnover to achieve and also maintain diversity. As hard as it may be, all directors need to accept that whilst experience is valuable, they do have a shelf life and this should definitely incorporated as part of long term strategy.

Posted by AlexWGov | Report as abusive
 

I think a really important point is about board turnover to achieve AND also maintain diversity. As hard as it may be for directors to understand: whilst experience is key, they have a shelf life. This therefore, must be a key part of long term strategy.

Posted by AlexWGov | Report as abusive
 

Blake and Mouton published this result of their research into failure of Perot’s “Saturn” (GM) project decades ago.

Posted by Suchindranath | Report as abusive
 

I can’t wait for Facebook to be as successful as public schools in California

Posted by tytus_s | Report as abusive
 

I support fully this opinion. if Facebook had a diverse board we would be speaking about at least $200billion valuation, now, instead of a measly $100b.

Posted by tytus_s | Report as abusive
 

Lucy, this is the weakest argument you can write for a diverse board. All you do is throw down some generic buzz-words and call it a day. No examples of how diversity helped companies or lack of diversity crippled them. Get it together.

Posted by the_boss | Report as abusive
 

Considering probably over half the users are woman..pretty stupid indulating the company from new ideas and comments. Maybe he should talk with my 16 year old daughter, that stated Facebook is passe and Twitter all the rage with her peers.

Posted by k12rs | Report as abusive
 

I would take a competent board of all pygmy gay male transgender lesbians, over an incompetent board hired according to perfect color, sex and ethnicity quotas.

Educate those who will learn, and let them compete by ability and only ability.

NO MORE RACIST, SEXIST QUOTA SYSTEMS.

Pressure employers if you think they are doing wrong – but don’t make laws which create victims of reason, choice and common sense – and which assume that most employers want anything other than competence. It is a lie.

It’s the best person for the job – PERIOD.

Posted by Parker1227 | Report as abusive
 

I would take a competent board of all pygmy gay male transgender lesbians, over an incompetent board hired according to perfect color, sex and ethnicity quotas.

Educate those who will learn, and let them compete by ability and only ability.

NO MORE RACIST, SEXIST QUOTA SYSTEMS.

Pressure employers if you think they are doing wrong – but don’t make laws which create victims of reason, choice and common sense – and which assume that most employers want anything other than competence. It is a lie.

It’s the best person for the job – PERIOD.

Posted by Parker1227 | Report as abusive
 

I would take a competent board of all pygmy gay male transgender lesbians, over an incompetent board hired according to perfect color, sex and ethnicity quotas.

Educate those who will learn, and let them compete by ability and only ability.

NO MORE RACIST, SEXIST QUOTA SYSTEMS.

Pressure employers if you think they are doing wrong – but don’t make laws which create victims of reason, choice and common sense – and which assume that most employers want anything other than competence. It is a lie.

It’s the best person for the job – PERIOD.

Posted by Parker1227 | Report as abusive
 

I would take a competent board of all pygmy gay male transgender lesbians, over an incompetent board hired according to perfect color, sex and ethnicity quotas.

Educate those who will learn, and let them compete by ability and only ability.

NO MORE RACIST, SEXIST QUOTA SYSTEMS.

Pressure employers if you think they are doing wrong – but don’t make laws which create victims of reason, choice and common sense – and which assume that most employers want anything other than competence. It is a lie.

It’s the best person for the job – PERIOD.

Posted by Parker1227 | Report as abusive
 

I apologize for the multiple posts.

Computer glitch.

Posted by Parker1227 | Report as abusive
 

This is exactly the problem of the Catholic Church’s hierarchy. In the retrenchment that followed the Vatican II Council’s aggiornamento, extremely conservative bishops, all of basically like mind, were appointed by Pope John Paul II. Lost was the variety provided by original thinkers like Cardinal Bernardin. As a result, the bishops have slid into group think, losing touch with reality and their own laity.

Posted by fredschumacher | Report as abusive
 

Not a bunch of hand-picked rubber-stampers??? That is wholly un-American!

Posted by possibilianP | Report as abusive
 

I applaud Miss Marcus in her understanding that all people are not created equal. It’s about time for all hard working and successful people to step aside and relinquish their positions to people with a minority status. Her understanding that hard work, determination, and experience can only further degrade Facebook’s somewhat meager success and profitability. I hope that Miss Marcus will lead by example and forfeit her position writing for Reuters.com to someone other than a member of the ethnic majority.
If I may be so bold, I’d like to suggest a candidate for her position. He is a, soon to be unemployed, Nigerian born man by the name of Barack Obama. Don’t let his lack of any qualifications deter you from appointing him. Miss Marcus, what he lacks in tangible experience and qualifications he more than makes up with his incredibly diverse world perspective and killer smile. His failures in his current position are always to the fault of other and given a few more years to practice he may be ready for the proverbial “training wheels” to come off.
His writing would sure to have a more diverse view that your stereotypical white suburban perspective is, of course… lacking.

Posted by SpaceCoaster | Report as abusive
 

So many platitudes and unoriginal cliches in this article where to begin.

Firstly, there is no evidence that ‘diversity’ the fashion of the decade provides for a better board. Many very successful companies such as Apple do not have so-called diversity on the board.

What one is looking for is not so much diversity, but independent thought. The ability to stand against prevailing board views. There is not evidence that a diverse board does that simply because the board includes women and minorities.

The diversity argument is often used as a way of getting oneself onto a board – you are not diverse enough argues the woman or minority person…..by implication let me in.

Would Facebook benefit from diversity? Unlikely since Zuckerberg and his idiosyncrasies holds such a sway over the company that any board will not make much of a dent in its trajectory (for good or bad).

Posted by eleno | Report as abusive
 

Hire the best, the brightest, the most intelligent and the most successful. Hire leaders, movers and shakers. If they happen to be diverse, then so be it. Show me that hiring a different ethnic group or gender will increase profits or get better, more revolutionary ideas and you got a deal. Show me that John F. Kennedy was derailed by hiring people that couldn’t stand up to the President when needed to do so, then you have made your point. If yours is an opinion based upon feelings or emotions, then I don’t want it.

Posted by RealOscar | Report as abusive
 

What, exactly, is the point of this article? All I see here are generalities about “diversity” and its perceived benefits to business…and no proof.

Facebook just had one of the most successful IPO’s in history. They are quickly gaining on Google as the number 1 site in the world. How much better can/could diversity make this company?

You say diversity is not about “optics,” but that is clearly the measuring stick of your point. They are all white male. Did you even consider their backgrounds?

Contrary to your viewpoint, I think commend facebook for staffing their board with some of the most qualified, innovative, and revolutionary people of this generation. Peter Thiel is on it…enough said.

There is nothing concrete in this article. All speculation and fluff.

Posted by pcasinelli | Report as abusive
 

I am an African American businessman. I have worked hard to build up a successful business. I provide jobs to inner city blacks that might not otherwise have a job. I have a board of directors that happens to be all black. The city I live in is less than 50% black. I may soon be taking my company public. It sounds like Lucy thinks I need to find some white people to put on my board in order to make it “diverse”.

Posted by arbor | Report as abusive
 

I do think this article was weak on convincing me that a diverse board is fundamentally a better performing board. I would like to have seen some analytical proof that show that this is the case. If it cannot be proven, then we should disregard sex and ethnicity and focus on selecting the best possible persons irrespective of those factors.

Posted by Dubious7 | Report as abusive
 

Diversity is needed mainly to remove the influence of a particular ethnic group, conservative whites, from organizations they built. It has been a rousing success, from that perspective. Of course the members of that group might disagree.

Diversity builds a diffuse, unfocused organization able to claim membership in a wide number of communities and able to relate well to none of them. It is the ultimate vision of globalism and is a reliable organization to no one who is not on some “promote now” list of “underrepresented” groups. If such boards were honest they would all be dominated by China. Of course, they are not.

Posted by txgadfly | Report as abusive
 

In fact, this is the problem with this world.. One creates something which everyone start liking and accepting as a part of life,Facebook. Then they want to control it and find it difficult to trust the person who started it. I mean why everything need to be operated in the same way as others.

Posted by ajeeb | Report as abusive
 

Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
  •