Opinion

Lucy P. Marcus

Facebook’s board needs more than Sheryl Sandberg

Lucy P. Marcus
Jun 26, 2012 17:09 UTC

When news emerged in May that Facebook had hired an executive search firm to look for a woman to add to its board of directors, I had hoped that with the appointment would come a great deal of diversity of thought and experience and an independent voice. Facebook has now announced that it has chosen its COO, Sheryl Sandberg, to join its board. Having Sandberg on the board is a good step, but does it address the larger shortcomings that are concerning Facebook users and investors?

Facebook has the same problems it had a month ago, and the company is still running counter to this year’s “Shareholder Spring” – a global movement toward transparency, engagement, and checks and balances on corporate boards. The newly public company lacks diversity of thought and international experience outside of the Silicon Valley bubble; and because Facebook is a controlled company, if the board takes issue with something, it doesn’t have the teeth to do much about it.

Sandberg may come on to the board with full voting rights, but her vote won’t count for much if a boardroom battle occurs, since Mark Zuckerberg holds more than 50 percent of the company’s voting shares.

As COO she may not be an independent board member, but one positive change from Sandberg’s appointment is that it brings another internal executive voice to the table. Sandberg is capable, speaks with authority and knowledge, knows Facebook inside and out, and has strong board experience. It will certainly be important that there is more than one executive voice in the boardroom.

Yet her appointment doesn’t address the wider issues that are still at play. If, as a user, you were unhappy with Facebook’s policies – be it privacy issues or inadequate information about changes to the site – or, as a stockholder, you were unhappy about a botched IPO and a lack of communication from Facebook during the weeks that followed, then Sandberg’s appointment to the board won’t make much of a difference to you.

Facebook versus the Shareholder Spring

Lucy P. Marcus
May 17, 2012 18:43 UTC

The corporate world is emerging from several weeks of boardroom turbulence dubbed the “Shareholder Spring.” In annual meeting after annual meeting around the world, boards have been taken to task by investors and other stakeholders on a wide range of issues: remuneration, board composition, competence, diversity, voting control, dual stock, and more. In the meantime, we have also witnessed the soap opera of Yahoo’s boardroom, the rebuke to newly public Groupon’s board for its lack of oversight of accounting practices, and the public condemnation of News International’s chair – and, by extension, its board – questioning his competence to lead the organization. No sector has been immune; no director has been untouchable.

Now Facebook is about to enter the public markets. Its defiant position regarding its old-style governance is in stark contrast with the temper of the Shareholder Spring. Facebook swims against the tide of a global movement toward transparency, engagement, and checks and balances. It feels as if we’ve all stepped into a time machine and none of the past couple of years of governance lessons – including the failures of boards in the banking-sector crisis – ever happened.

Several troubling issues call into question how this company can consider itself groundbreaking, innovative or new: the concentration of power in the hands of one man, the stranglehold on voting rights, the lack of diversity in the boardroom (which in a way is inconsequential, as the Facebook board does not have much bite anyway), and above all else the flagrant disregard of the lessons of the past several years about engaged, active and independent boards contributing to strong companies. Were Facebook striving to be an innovative company built to last, it would encourage healthy dialogue and diversity in the boardroom, and equal shareholder voting rights. It would not need to lock in power, but rather earn authority through excellent performance and results. The leadership would trust that a democratic boardroom would foster greater strength and stability than dictatorship, which brings a false sense of security. That’s a lesson we can take from the Arab Spring, where dictators thought that they held real control.

Why Facebook – and every company – needs a diverse board

Lucy P. Marcus
Feb 8, 2012 23:49 UTC

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.

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