Not This Time: Facebook’s Board Should Optimize for Wisdom, Not Diversity
High-profile companies like Facebook always receive extra media attention when they announce their plans to go public. The extreme scrutiny is appropriate, as these deals attract more individual customers — some with less investing experience. Yet in addition to studies of the terms, valuation, nuances and executive salaries, these companies are also magnets for seemingly endless editorial pontification.
For Facebook, the cause du jour is the lack of women on the board of directors. Gallons of virtual ink have been spilled decrying the shamelessness of it all. Well, here’s more, but this time directed not at Facebook, but rather to those who feel aggrieved. Get over it. Your complaints, while well-intentioned, are misguided.
First, those shouting “injustice” need look no further than one rung down the ladder from Mark Zuckerberg to see that he clearly has no issue with listening to women in positions of power. In Sheryl Sandberg, Mark — and perhaps the board that existed at the time — chose an incredibly capable operating leader who, while probably given many labels over her career, has never once been called a shrinking violet. She’s not one to shy away from contentious conversations, and her reputation was well established by the time Mark selected her from the fleet of talented candidates raising their hands to move in to Facebook’s executive suite. Unless there is some Oscar-worthy acting going on, Facebook’s C-suite is no boys’ club.
Second, those proclaiming the company cannot be well directed without boardroom diversity argue that varied board member demographics add needed depth to the conversation. How will the company process disparate perspectives with an all-male board? While in many cases this argument is spot on, this time it makes no sense at all. Friends, Facebook is a social media company. Does anyone really think that Mark Zuckerberg waits for board meetings to collect opinions and observations about what is working and what isn’t? This company receives opinions and data-based feedback from millions of active users every day. Has there ever been a company exposed to so much diversity on such a frequent basis? Think that users don’t share their opinions? Think that Mark doesn’t ever listen? Then think about Beacon or the company’s progress on privacy controls. Facebook can accumulate, process and react to unbiased opinions of its product, service and direction in less time than it takes most corporate governance groups to schedule a conference call.
Third, as has been widely publicized, thanks to the dual-class stock system and other disclosed elements of the company’s voting structure, the Facebook board, excluding Mark, will not have meaningful voting power. Control rests with the founder. If you don’t like that reality, don’t buy the stock. If you are willing to tolerate consolidation of power in the hands of the pilot who has flown the plane to its current heights, then your best hope is that from this point on, Captain Mark will surround himself not only with tremendously thoughtful advisers, but also with those to whom he will really listen. Yes, he can build a board to appease outsiders by checking all the right demographic boxes, or he can make his selections based only on his perception of which individuals will genuinely be most helpful to him. Given that the company appears on track to produce one of the greatest returns on investment ever generated by a company of its age, so far his record speaks for itself.
I am not arguing that boards don’t need diversity. Most of the time they do, but let’s pick those fights thoughtfully and where the board has power. Facebook receives instantaneous feedback from every demographic out there, and if it fails to listen and respond, Google+ or other emerging competitors will. Combine that feedback channel with diversity in the management team and the company’s governance power structure, and potential shareholders should be cheering for this 27-year-old to surround himself with those who can successfully impart wisdom that he will heed, not those who look appropriate in the annual report photo.
Lise Buyer is the Founder of the Class V Group, an IPO Advisory firm. She founded Class V to leverage her experience as an institutional investor (T.Rowe Price), investment banker (CSFB), internal IPO specialist (Google) and public company board member to guide management teams through the IPO process more efficiently and effectively.