Twitter IPO Controversy Over All-Male Board of Directors

Twitter 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