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Twitter IPO Controversy Over All-Male Board of Directors

Bill Roth | Tuesday October 8th, 2013 | 6 Comments

Board RoomTwitter is about to launch their initial public offering. This public event has brought new focus to the fact that Twitter’s Board of Directors is all male. When Twitter CEO Dick Costolo was challenged on this issue by Vivek Wadhwa, a Fellow at the Stanford University Arthur & Toni Rembe Rock Center for Corporate Governance, Mr. Costolo responded by calling Wadhwa the “Carrot Top” of academic resources. Carrot Top is of course a cringe-worthy red-headed comedian no one wants to listen to. At the risk of being called the “Don Rickles of economists,” I’ll share four documented business reasons (in addition to the obvious ethical argument) for CEO Costolo to have women serving on Twitter’s Board of Directors:

1. Women are the world’s largest consumers

Women control America’s purse strings. They have responsibility for 80 percent of all consumer purchases. Their annual buying power of $8+ trillion per year is larger than the gross domestic production of every country in the world. Women are also the world’s largest investment group. They control 60 percent of the wealth in the U.S. Women are growing in numbers as business leaders and entrepreneurs. There are over 10 million women-owned or partially-owned businesses in the U.S. These businesses employ over 27 million people. Latinas are the fastest growing segment of U.S. entrepreneurs. No business can afford to ignore women as customers. And they cannot afford to deny them their role in business leadership and governance.

2. Women’s activism

Women are leaders in social and environmental activism. They do more than tweet. They vote in numbers far exceeding men voters. They also donate more than men. And they volunteer more than men with one estimate that women volunteer nearly 8 billion hours annually. A fast track to losing customers is to gain the negative activism attention of women. Or as demonstrated by such companies as TOMS Shoes, engagement with female customers can be a best practice for building product and company loyalty.

3. “Irresponsible behavior” will damage revenues

Cone Communication’s research has found that 42 percent of consumers have boycotted a product and company due to “irresponsible behavior.” Their study points to the revenue opportunity and revenue danger linked to a company’s success in fulfilling the corporate social responsibility expectations of customers. This growing trend, ironically for Twitter CEO Costolo, is being fueled by real time digital social networks like Twitter (it was on Twitter that I became aware of this issue). Tellingly for Twitter CEO Costolo, the majority of his company’s users are women.

4. Companies with female board members have higher profits

Research by Catalyst found that companies with women on their Board of Directors have higher financial performance. They also act more sustainably. Research by Kellie McElhaney, the Whitehead Faculty Fellow in Corporate Sustainability for the Haas School of Business at University of California, Berkeley and PhD Sanaz Mobasserir, found that corporations with women on the Board of Directors act more sustainably to reduce financial risks by:

  • Investing in renewable power generation and proactively take steps to improve operational energy efficiency
  • Integrating climate change into their actuarial models and developing products that help customers manage climate change risk
  • Measuring and reducing carbon emissions of their products
  • Having supplier programs to reduce their supply chain carbon footprint
  • Reducing the environmental impacts of their packaging
  • Addressing environmental risks in their financial decisions
  • Protecting large and/or fragile areas of biodiversity.

The bottom line for Twitter

CEO Costolo’s public response to the controversy was that he wants a woman candidate that would contribute more than a checked box for gender diversity.  This argument – that there are no suitable candidates – will sound familiar to those familiar with the civil rights and women movements. The same argument was used then to deny jobs to women and people of color.  Unfortunately, this response indicates an institutional bias not exclusive to Twitter. Sadly, for a company facing its initial public offering, the decision probably represents sound business advice. Investment houses expect Boards of Directors to be “highly experienced” CEOs and CFOs. Because women have historically confronted barriers to winning CEO and CFO positions, the number of women CEOs and CFOs is disproportionately low, which limits the pool of women candidates for Board of Directors seats. And so the lack of “qualified” candidates continues.

It’s time for companies like Twitter to step up and take a chance on non-traditional candidates for Board seats, who can provide business value by meeting customer needs.

Bill Roth is an economist and the Founder of Earth 2017. He coaches business owners and leaders on proven best practices in pricing, marketing and operations that make money and create a positive difference. His book, The Secret Green Sauce, profiles business case studies of pioneering best practices that are proven to win customers and grow product revenues. Follow him on Twitter: @earth2017


▼▼▼      6 Comments     ▼▼▼

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  • VJ

    I agree with Don Rickles, the economist.

  • seriously

    First off do you really think any of the people using twitter and I am talking actual users of the site, not investors even know who runs the company let alone who sits on the board of directors?

    I mean seriously.

    Considering that the majority of all social media accounts are fake i.e. accounts used to send spam and porn, then how does Twitter even know how many REAL people let alone men vs women use the site? Assuming there are already more women than men using the site, then obviously the make up of the board of directors has had no impact on this so its a moot point.

    1. Women are the world’s largest consumers

    So what? Twitter is FREE what does this have to do with it?

    The only way Twitter makes money is from PAID advertising i.e. promoted tweets

    They’re going to take money from anyone who pays for advertising so how is having a different mix of people on the board going to change that?

    2. Women’s activism

    And your point? If more women are already using Twitter than men, then clearly not having a woman on the Board has impacted this.

    3. “Irresponsible behavior” will damage revenues

    What does this even have to do with your argument?

    4. Companies with female board members have higher profits

    Investing in renewable power generation and proactively take steps to improve operational energy efficiency

    Integrating climate change into their actuarial models and developing products that help customers manage climate change risk

    Measuring and reducing carbon emissions of their products

    Having supplier programs to reduce their supply chain carbon footprint

    Reducing the environmental impacts of their packaging

    Addressing environmental risks in their financial decisions

    Protecting large and/or fragile areas of biodiversity.

    You do realize that Twitter makes an app right? And that app is used to send messages? What the hell do any of these bullets have to do with a team of developers keeping the code updated? Or the server farm that’s need to host the app?

    NONE OF THESE POINTS ARE VALID.

    How is an app impacting the climate?

    How does an app have carbon emissions?

    THERE IS NO SUPPLY CHAIN, the app is downloaded, there is no carbon footprint

    THERE IS NO PACKAGING ITS AN APP!

    Protecting areas of bio diversity, WTF are you even talking about????

    What do you just copy an paste this from a previous article because the Twitter IPO is in the news? Do you even know that Twitter is a social media company… NOT A CONSUMER PRODUCT/MANUFACTURING COMPANY

    • Carlon

      Why so defensive? I think you’re illustrating the problem

    • Nicholas Gower

      1.) Twitter gets paid more by advertisers when they have more users (more people see their advertising) so not having people on the board that think like a substantial portion of their potential customers, could be a missed opportunity for revenue.

      2.) I think you may have misread the second point. He is not stating that more women use Twitter than men, but that they are more engaged consumers and activists. The point is that by actively brushing off Mr. Wadwa’s inquiry, Mr. Costolo is not only missing the opportunity to engage half of the population in this discussion, but potentially alienating a portion of the population that doesn’t take well to that behavior, and more often than the other gender, “put’s their money where their mouth is”.

      3.) I believe, speaks to the idea that the world is getting more and more connected. Consumers are more informed, and are demanding more information (GMO / nutrition labeling, ESG Data) and act more often on that information. Apps like Boycott and GoodGuide are good examples of this. These are just examples to say that more people everyday consciously decide not to use or consume a product or service from a company they know to be a bad “corporate citizen”.

      4. & I would consider this to be the most pertinent point here, since we are talking about an IPO. There have been several examples of reports showing a high correlation between women on the board and financial performance:

      “A new Credit Suisse study (https://www.credit-suisse.com/ch/en/news-and-expertise/research/credit-suisse-research-institute/news-and-videos.article.html/article/pwp/news-and-expertise/2012/07/en/does-gender-diversity-improve-performance.html) of almost 2,400 companies suggests that boardroom diversity improves corporate performance. In fact, companies with more than one woman on their board performed 26% better over the past 6 years than those with no female directors. ”

      “Critical Mass on Corporate Boards: Why Three or More Women Enhance Governance (http://vkramerassociates.com/writings/NACD%20article.pdf).” Based on interviews and discussions with 50 women directors, 12 CEOs, and seven corporate secretaries fromFortune 1000 companies, Kramer et al showed that a critical mass of three or more women can cause a fundamental change in the boardroom and enhance corporate governance.”

      http://www.sustainablebrands.com/news_and_views/new-metrics/corporate-boards-more-women-enhance-governance

      You obviously seem very passionate about you stance here, so hopefully this scientific research will help you take a step back and take a more objective approach.

  • Ricardo Aguilera

    Companies with women in the boardrooms don’t do any better…it’s a myth that is derieved from a misunderstood study that actually suggest the opposite occurs.

  • Betty Thinkagain

    No women on Earth could stand to spend time around a table with the douchecopters that run Twitter. Thanks for sparing the women of the world your presence, you twits! We don’t actually want to be everywhere. Only boardrooms that are worthy of us.

    Love, Women