board of directors

Women: Not Present on IPO Company Boards

For years we have heard that men largely populate the boards of IPO companies. We decided to test that precept. 2020 Women on Boards looked at the gender composition of the boards of directors for the 25 largest IPOs[1] in 2014, 2015, and 2016 and the results are worse than expected. It is widely accepted that IPO company boards are populated by venture capital appointees who are mostly white men, but we hoped that at the point of going public, companies would recognize that board diversity is essential to success. Not so. Of the 75 largest IPOs from 2014 to 2016, nearly half, or 37 companies, went public with no women on their boards. Another 25%, or 19 companies, had only one woman. In other words, between 2014-2016, three fourths of companies with the largest IPOs went public with one or no women on their boards.

 

The optimists among us might assume that these companies would correct this judgement error in the first year or two of operating in the public eye—and in fact, several of them did. The number of Zero ‘Z’ Companies with no women on their boards dropped from 37 to 22, or 30%, and the number of Token ‘T’ Companies with one (token) woman rose from 19 to 27, or 37%, as ‘Z’ companies added a woman. Additionally, two all-male IPO companies that failed to diversify were no longer trading by May 2017. Nevertheless, even after a year or two of being public, two thirds of the companies still had one or no female directors.

 

Every year 2020 Women on Boards publishes the Gender Diversity Index (GDI). In 2016, the percentage of women on the boards of GDI companies rose to 19.7% and the percentage of women on the 2016 Fortune 1000 list was 18.8%. When we compare this progress to the recent IPOs where the percentage of women on these boards is 9.4%, we see how far we need to go.

 

Fitbit Not Fit for Women

Fitbit, the colorful bracelet seen on the wrists of the fit and wanna-be fit, is not fit for women. The company that is dedicated to health and fitness of the masses is going public with no women on its five-member board – another technology company taking the lead from its male investors. We say it’s time that the VC community pay attention to stakeholders who want to see the boards of companies where they work, shop and invest reflect the population, more than half of which is women.
 
Of the ten biggest tech IPOs of 2015 (Wall Street Journal, 6/17) three are Zero 'Z' Companies with no women directors (Black Knight Financial Services, Shopify and Apigee) and five are Token 'T' Companies with one woman director (Innovation Holdings, GoDaddy, Evolent Health, Baozun and MaxPoint Interactive). Two of the companies are Winning 'W' Companies, with 20% or more board seats held by women (Etsy and Box).
 
We all know that women make up a huge number of Fitbit customers - maybe the majority. The same can be said of most of the companies on the 2015 technology IPO list. To imply that there are no women qualified to serve on the Fitbit board is ludicrous. At best it's a gross oversight. At worst, it's discrimination, plain and simple. Discriminating against your customer base is just bad business.
 
We implore Fitbit to put women on its board.

Diversity and Meritocracy

A few weeks ago a campaign supporter suggested that our messaging was off. He said we are alienating half of our audience by insisting on boardroom diversity. Instead, he said, board directors should be chosen by meritocracy, based on ability and skill. If we selected our leaders based on meritocracy, he was sure that women would find their place on boards and in executive suites. Problem solved.
 
The word diversity has been bantered around for decades in discussions about corporate leadership. We’re told that diversity is a business imperative, that it’s good for business. In 2009 the SEC required companies to disclose their approach to diversity, without ever defining it. Diversity could mean anything. It was for the company to define, and the term can take on an empty ring.
 
2020 Women on Boards was the first organization to put a stake in the ground and define diversity to mean a minimum of 20% women on public company boards. Other groups added their own definitions and there are now diversity initiatives that call for 25%, 30%, 40% and parity for women on boards, many of these initiatives coming from European countries where strict quotas are enforced by law.
 
Those who talk about meritocracy when it comes to board service are perpetuating the myth that boards are chosen based on a specific set of criteria. It is not like applying to college. Each board has a unique set of challenges that are best addressed by a diverse group that brings a vast range of skills and experiences to the table. Most board members are selected because other board members know them or know of them. There’s nothing meritocratic about it.
 
Speak out against all male boards. Vote your proxies and send a message to companies that gender diversity is a priority!

Syndicate content