Twitter, Tech, and Tardy Diversity

Twitter (NYSE: TWTR  ) has finally added a woman to its board of directors post-IPO. Unfortunately, this tardy move rings hollow. Social media's power is its transformative influence on the Internet, allowing more close human connections than ever before. For that reason alone, you'd think companies like Twitter would be particularly inclusive and wise about their management and board structures.

Look around the Internet -- it's by no means a man's game. At Twitter and many companies in the tech industry, that doesn't seem to be the case. There's a serious shortage of females in the top ranks, and this shortfall flies against simple common sense no matter where you look.

Deja vu all over again
In a bizarre case of deja vu, Twitter didn't deal with its all-male board until after the IPO, and only after pointed criticism of the fact. It could have been avoided had it been paying attention to a certain other IPO. Social media industry bro Facebook (NASDAQ: FB  ) attracted criticism about its lack of women on its board of directors before it went public.

Facebook responded by putting Chief Operating Officer Sheryl Sandberg on its board of directors. Despite the "better late than never" tinge, it's at least a step in the right direction.

Marjorie Scardino's appointment to Twitter's board of directors is legitimately a heartening move. She has an impressive resume and surely will add the value of diverse experience to the board. She has worked as an editor and reporter for The New York Times and she also served as CEO of Pearson (NYSE: PSO  ) from 1997 until last year.

Still, given Facebook's high-profile controversy and criticism, Twitter should have known better than to wait until after it went public. Even more pitiful, the excuse was myopic, hackneyed, and sadly canned -- basically the old "shortage of qualified women" excuse.

Is the tech industry hanging out too much with grandpa? Particularly tech companies like Twitter should nip diversity shortfalls in the bud long before people even start noticing -- and criticizing.

Thinking deeply about the word "assume"
Cognitive diversity makes groups smarter. Businesses of all kinds should be interested in adding people who will make their own operations and decision-making more robust and effective. Homogenous groups too easily fall into groupthink, caught in a tiny box of what they know and perceive. It's like preaching to the choir.

In industries like tech, resplendent with "brogrammer" jokes these days, one might assume females aren't there because they're not interested in the field at all. Maybe what women really aren't interested in is fighting their way in and struggling for recognition.

Even beyond tech, though, the lack of female leaders may not always even be for consciously cruel reasons. While, unfortunately, conscious bias still exists, so does an arguably more insidious one: unconscious bias. It's particularly difficult when individuals have no clue their perception is skewed.

Great managements and boards should challenge themselves to truly look for real, deep-down merit, even if it comes in different forms and styles. We can always examine our own hearts and ask ourselves if we're making unconscious assumptions we weren't even previously aware of.

On a brighter note, we can find some companies improving on these issues.

Shaking up the status quo
Just this week, General Motors (NYSE: GM  ) named Mary Barra as CEO once Dan Akerson resigns. Barra is viewed as a logical, competent internal choice, having successfully served as the company's global product head. She has played a significant role in getting the company's wheels back on instead of falling off.

She's also the first woman to head up a massive auto company, so this might not be seen as the most expected move. That's pretty awesome for an old-school company.

Another interesting industry with a surprising number of females in high places: defense contractors. Lockheed Martin (NYSE: LMT  ) and General Dynamics (NYSE: GD  ) both have female chief executive officers.

Lockheed Martin has a whopping four females on its board of directors, including CEO Marillyn Hewson. In the grand scheme of America's mostly white male boards, Lockheed is a major anomaly.

Although General Dynamics has only one woman other than CEO Phebe Novakovic, the aforementioned Barra happens to be the other female director.

A Bloomberg article covering Barra's ascent at GM points out an interesting fact: About 20 women with science backgrounds are heading up companies in the S&P 500. While that's still a low number, it's another one of those steps in the right direction. After all, 10 years ago only nine women, regardless of fields and backgrounds, served as CEOs of S&P 500 companies.

Applying scientific method
In just one example, last year a Credit Suisse report, "Gender Diversity and Corporate Performance," showed that over the previous six years, the shares of large-cap companies with female board participants outperformed their counterpart companies with 100% male boards of directors by 26%. Small and mid caps enjoyed 17% outperformance.

This was no tiny, insignificant sample, either. The research group examined 2,360 public companies.

This outperformance reached beyond the vagaries of stock-price fluctuations, too. These companies exhibited stronger fundamental factors, such as higher returns on equity, lower leverage, and higher valuations.

Tech has disrupted many industries over decades. Why can't it disrupt old, anachronistic assumptions that just don't make sense -- and according to a lot of research, won't even work? Good corporate management strategy is about far more than short-term stock price hinged on old ways. When considering potential investments, long-term investors should consider intangible but essential factors -- like common-sense inclusion and the intelligence of diverse groups.

Check back at Fool.com for more of Alyce Lomax's columns on environmental, social, and governance issues.


Read/Post Comments (13) | Recommend This Article (11)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 13, 2013, at 5:40 PM, KBOKSOFT wrote:

    I admit, in the past I have been pretty critical of Ms. Lomax's work, but I rather liked this article.

    It had a premise (need more female execs and board members); it had lots of good, empirical support; its conclusion was a cogent and relevant call-to-action.

    I liked that the article included positive examples (like GM's Mary Barra appointment) to balance the finger-wagging. It didn't feel so much like another "Corporate America is evil" rant.

    I thought the "applying scientific method" portion nicely addressed investors' essential question: "How does this affect my returns and why should I care?"

    Thanks for a good read.

    (I'm still having a "huh?" moment with: "We can always examine our own hearts and ask ourselves if we're making unconscious assumptions we weren't even previously aware of." It seems like a zen koan -- like pondering the sound of one hand clapping. Maybe I'll understand sitting cross-legged...)

  • Report this Comment On December 13, 2013, at 6:04 PM, gskinner75006 wrote:

    I passed out during the first sentence. Looks like the debate of which hormone is better will not end during my lifetime.

  • Report this Comment On December 14, 2013, at 9:41 AM, gskinner75006 wrote:

    After hearing about SNL last night, it made me think about this article (and those like it) again. If Lorne Michaels had committed his life to the oppression of the black female comedian, then it's good he's been called out. My guess however is that no female black comedians, that showed up to any of the auditions, stood about above all others present. So what now remains to be seen, is SNL going to be a top notch show with the best cast possible or a mediocre cast that bowed to the PC whiner for the sake of diversity. Only time will tell. It does not do gender or race any justice to advance to pacify the PC whiner. It will only continue to further the perception that gender or race is only there as a token.

  • Report this Comment On December 14, 2013, at 3:47 PM, taloft wrote:

    While I found the article interesting, I can't help but wonder about the Credit Suisse report sited. Are there enough Female board members within those 2360 companies to make a statistically significant finding? How about including some hard numbers. After all, isn't the whole tenor of this article about the lack of Female board members in tech companies?

    I'm thinking that the answer is no. it strikes me as a fallacy of causation. I would think the numbers are just not there to draw a substantive conclusion. I'd have to see the report and the methodology behind the study before I'd accept its findings. Also, how did they come to the conclusion that those companies did better because they had Female board members? It seems that it would be very difficult to show how their contributions as board members directly resulted in better performance. Maybe it wasn't their input but, the fact that the company has the type of corporate culture that would be inclusive of Female board members that resulted in better performance. It appears to me that too many pieces are missing to make such a definitive statement.

    I agree whole heartedly that diversity on a board is important. You don't get good ideas from shouting into an echo chamber. You need people who don't all think alike. A bunch of yes men playing follow the leader will eventually follow him right off a cliff.

    In my opinion, Female board members have a lot to offer a company beyond basic business qualifications. Women in general tend to be much more open minded and adept socially than Men. This is critically important when dealing with clients. Men can be very myopic when considering certain subjects. Unlike most men, Women have a better understanding of how other Women think. That alone makes them invaluable business partners. When over half you're customers are Female, it's nice to know what appeals to them. This is above and beyond the other qualifications needed to hold such a position. That said, I'd like to see the best qualified candidate holding the position regardless of their gender.

    It's my belief that the glass ceiling has been crumbling for some time. Many women who majored in business when I was in college are now starting to reach that stage in their careers where they will transition into dominant positions in industry. The percentages are on the rise and I'm betting that time will show them continuing to climb.

    The whole unconscious bias statement just fell flat with me. I'm not buying that argument at all.

    OTOH, the "brogrammer" statement was a gem. That actually had me laughing.

    Thanks for a thought provoking article.

  • Report this Comment On December 15, 2013, at 10:43 AM, taloft wrote:

    *Sorry, that should be of your. Not you're.

  • Report this Comment On December 16, 2013, at 7:19 AM, NOTvuffett wrote:

    Maybe our supreme leader should issue an executive order on quotas dictating the composition of corporate management by gender/ race/ sexual orientation.

    Nobody cares about that crap. Every investor just wants to have the people in place that will make them money. To attribute the paucity of females in top management to "unconscious" bias is insulting.

    By all accounts, Mary Barra is highly competent. Only time will tell if she is a good CEO. It has nothing to do with a "glass ceiling" or genitalia or whatever else you want to throw in the mix.

    OK, the brogrammer comment had me laughing. The next thing I knew was watching a computer science professor trying to teach his students algorithms/ logic using machine level stuff on a really, really ancient microprocessor, lol. (TI-4003)

  • Report this Comment On December 16, 2013, at 7:32 PM, cmalek wrote:

    "Maybe what women really aren't interested in is fighting their way in and struggling for recognition."

    Why compete when everything will be given to you in the name of diversity and political correctness?

  • Report this Comment On December 16, 2013, at 8:45 PM, Sketch71 wrote:

    Anyone not living in an intellectual vacuum should be familiar with the concept of unconscious bias by now -- it's basically the cognitive bias equivalent of "not knowing what you don't know."

    Suggesting that successful women succeed because of "diversity and political correctness" handouts probably isn't a sign of unconscious bias, however; I suspect it's just good, old-fashioned bigotry. Not trying to be disrespectful; we should always call things what they are.

  • Report this Comment On December 16, 2013, at 9:58 PM, jlclayton wrote:

    I was hired into a company by a woman who had started out as an engineer and worked her way up to superintendent of our department. I was one of 2 women in the unit hired into a company that was 95% male and experienced firsthand how difficult it was sometimes in a male dominated industry. I had a huge respect for my superintendent, who was a strong woman with a lot of common sense in her management decisions. Many of my co-workers didn't like having to answer to a woman and pushed back hard at times for no reason other than because it was her making the decision.

    This woman rose up in the ranks to eventually answer directly to the CEO and was in charge of all overseas operations. She was back in our community speaking at a local chamber meeting recently and told of attending manager's meetings in Europe where she was the only woman and some members actually refused to speak to her.

    The very fact that someone can say that women don't have to compete because everything is given to them in the name of diversity and political correctness shows how threatened many men are by the idea of a strong woman in the workplace. Those companies who have the leadership in place to give women the same chances to move into management positions as their male counterparts will always have an advantage IMO. From an investing standpoint, that is something I would consider when choosing where to put my money.

  • Report this Comment On December 18, 2013, at 12:00 PM, DaytonaDan wrote:

    I normally do not read such articles, I find them full of self serving hype, and this one was no different. Even when certain companies complied with your point, you were not satisfied, I suspect you would not be under any circumstances. You clearly have an agenda, a very biased one.

    I am under the impression that this is a business website and publication, to help others conduct business in the stock market. This mantra I read about having "social responsibilities" in business and your obvious pro female agenda is out of place. By whose standards are we to judge these "social standards", The Fools, yours Ms. Lomax ? I think not, stick to business Motley Fool, there are many publications for social ranting !

  • Report this Comment On December 18, 2013, at 1:36 PM, talotu wrote:

    I find the "I told you so Twitter" opening a bit laughable.

    To summarize:

    FB had an IPO flop, and had no women on the board, and TWTR chose to ignore this and forge on with their IPO despite making the same mistake. Now they are seeing the error of their ways

    There's only one problem with this argument, TWTR seemed to do ok with an IPO that had an all-male board.

  • Report this Comment On December 20, 2013, at 3:44 PM, HoosierRube wrote:

    Maybe, just maybe, these women have succeeded on their own intellectual merit?

    I suspect that if you were to interview these women they would argue that being female has no bearing on their success.

    This isn't the 70's and this isn't Ms. magazine. Please save the print space for articles of value to the investor.

    If the idea is to invest in companies based on the cultural and gender composition of the board, you must also argue for religious, sexual preference, age, type of diet and any other characteristic or leaning you can think of.

    After all, its not about the talents of an individual here is it? Its about 'everybody wins a trophy'.

  • Report this Comment On December 20, 2013, at 6:50 PM, cmalek wrote:

    @Sketch71 & jlclayton:

    You two have set up and knocked down a straw man. "Successful women" have proven and are proving their qualifications for the job/position.

    What Ms. Lomax is advocating is analogous to what took place 20-30 years ago with the hiring of blacks (excuse me, I should have used the Politically Correct term - African-Americans). In the name of DIVERSITY, corporations were falling all over themselves in hiring "token blacks" with no real regard as to their qualifications. Many succeeded inspite of prejudice but many were quietly fired because their lack of qualifications.

    Sketch71, you are right. I am bigoted; bigoted against the idiocy of hiring/appointing/promoting a member of a particular demographic group only because that demographic group is underrepresented in a particular cohort.

    I was attending college when the Open Enrollment Movement was sweeping college campuses. Hundreds of minority students were admitted to my college without regard to whether they were prepared for college or not. A few of them graduated but most were gone in a semester or two, reenforcing the perception that minorities cannot succeed in college. Instead of expending the effort to force colleges to admit minorities, the activists and do-gooders should have expended it to make sure that the minorities are ready to apply and enter college on their own merits.

    "Open Enrollment Movement" - in the early and mid 1970s it was determined by Civil Rights leaders and activists that certain minorities were woefully underrepresented in the US college population. To remedy the situation, it was demanded that college administrations admit any and all minority students that desired to attend college. After an initial surge in minority applications, the numbers decreased over the next few years.

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