Hey Zuckerberg: where’s the dislike button?

So by now we all know that the Facebook IPO mess highlights a plethora of corporate governance problems. But here’s yet another problem that doesn’t bode well for the future of Facebook stock:

Facebook has become much more profitable and innovative since Mark Zuckerberg brought COO Sheryl Sandberg on board. Sandberg brings a diverse perspective outside of the all white-dude mind frame that previously dominated Facebook’s senior leadership. Despite Sandberg’s successes as COO, Zuckerberg has chosen to exclude women from Facebook’s board. So the questions stands: Will Facebook be able to continue to innovate with zero women at the boardroom table, when its demographics are composed of 55% women?

According to the Catalyst report, The Bottom Line, Corporate Performance and Women’s Representation on boards, Fortune 500 companies that had at least three women boards of directors saw on average:

  • Return on equity increase by at least 53%.
  • Return on sales increase by at least 42%.
  • Return on invested capital increase by at least 66%. Diversifying boards also brings different perspectives to companies’ big picture objectives, product development, and problem solving. Companies can’t continue to innovate without diverse leaders at the table.

(Aha! Fortune 500s with least 3 women on the board. I think I might have to try tweaking my portfolio using this principle, and see what happens.)

3 thoughts on “Hey Zuckerberg: where’s the dislike button?

  1. Many thanks for this important post. Most economic experts (who are not bigots/sexists) know that one of the best and primary ways to facilitate economic development is to empower women and reduce gender inequalities. The same arguably applies here (though perhaps in related, contextualized ways). Besides, women are generally smarter than men. If you disagree with that, then consider that (both in the boardroom and in the shops/ordering-forms/purchasing-consumer venues) sexism is just plain bad business for similar sorts of reasons that racism is bad business.

    We need more posts (and links) like this one. Thanks again!

  2. The absence of women may be because women are under-represented in startups. I picture a guy and his buddy starting a company. Most of them fail, but the ones who succeed then hire more people “like them.” This suggests naivete, but not malice. Which may be what you were saying; I just wanted to emphasize it.

  3. It would be nice to see some women on FB’s board. I wouldn’t go so far as to make the Catalyst thesis a stock-picking strategy, though. There’s a lot more to how board diversity affects corporate performance, and the Catalyst study is a little misleading (if one were purely interested in ROI). Adams & Ferrera, for example, in a 2009 J. Fin. Econ. article, noted that the popular press frequently cites studies suggesting an overall positive link between increased gender diversity and corporate performance, but found that when certain habitual problems (mostly regarding endogeneity of gender diversity) in such studies are addressed, that link disappears, and for certain kinds of companies, the performance correlation actually turns negative. More needs to be done to understand why.

Comments are closed.