United States: Board Diversity Issues Don't Fade Away After 8 Seconds (Or An IPO, Apparently)

When Snap, Inc., parent company to the popular social media app, Snapchat, completed its much-anticipated IPO last week, investors were quick to question whether the company was overvalued. Despite half a billion dollars in losses last year, the stock closed its first day of trading at an eye-watering $28 billion valuation. By close of trading the following Monday, the stock had fallen to below its opening price. But other market watchers were distracted by a sense of déjà vu as yet another lauded tech company went public with overwhelmingly white and male corporate leadership.

In spite of the company’s largely female user and revenue base, Snap’s public filings revealed that only one of its nine directors, Hearst Magazines chief content officer Joanna Coles, is a woman. We note that one director, Intel Security Group senior vice president Christopher Young, is African American, and that Ms. Coles and Mr. Young are two of the Board’s three lowest-paid directors, with Ms. Coles’ total 2016 compensation clocking in at about one tenth of Mr. Young’s. Since Ms. Coles’ stock options were less than 20% of the average annual stock awarded to the board’s highest paid director, the company’s IPO would have multiplied that gap. Snap claims that its SEC filings did not reflect a grant that Ms. Coles received in January 2017, but makes no claim about whether the grant brought Ms. Coles’ compensation in line with that of other directors.

Snap is not alone. Even before Twitter’s financial performance began to slip, its IPO was marred by disappointment about its entirely white, male board. Women hold only 20% of board seats at the largest U.S. public companies, including the last 100 technology companies to file for an IPO. Total women and minority board membership was only 31% in 2016 (a modest increase from prior years), and Deloitte estimates that women and minorities will not reach 40% representation on corporate boards until 2026. The Government Accountability Office calculates that it could take more than 40 years for men and women to have equal representation on corporate boards. This delay may be partly institutional, but it is also the result of overt bias among existing board members: a recent PWC study of Fortune 500 companies found that most of the men who make up those boards do not believe that board diversity improves company performance or board effectiveness. More than half believe that women should take fewer than 50% of board seats, and over a third believe that there are not enough qualified female candidates to fill those seats.

We have published on the importance of diversity in corporate boards before, addressing topics such as      how to get more women on corporate boards, increasing global public pressure on companies diversify their boards and recommendations for SEC diversity disclosure rules. And the link between diversity in corporate leadership and financial performance is increasingly clear. In 2015, McKinsey & Company found that boards in the top quartile for gender diversity were 15% more likely to outperform those in the bottom quartile, and boards in the top quartile for ethnic diversity were 35% more likely to outperform those in the bottom quartile. Among U.S. companies, every 10% increase in racial and ethnic diversity on senior executive teams correlates with a 0.8% rise in earnings before interest and taxes (EBIT). McKinsey attributes the improvement in performance to diverse companies’ ability to attract top talent, improve customer orientation, keep employees happy and make better strategic decisions. The Harvard Business Review notes that gender diversity among corporate boards leads to a professionalization of corporate board membership and a more formal approach to board succession planning.

As the business case for diversity becomes stronger, some countries have legislated the issue, mandating that women fill at least 30-40% of board seats. Norway, Spain, France, Iceland and Germany have made significant progress toward their markers, but other indicators of gender equality in business have lagged behind, including gender pay equality and women in executive roles. Still, the raw numbers make a compelling case for quotas: a 2016 study found that countries with mandated quotas had nearly double the average percentage of women on corporate boards. In contrast, the U.S. favors sunlight as the best disinfectant for leadership-level homogeneity: in June 2016, in response to public statements by Chair White, the SEC staff published a recommendation that the Commission strengthen its disclosure rules to require specific disclosure of corporate diversity policies and disclosure of the gender and ethnic make-up of boards and executives.

Independently, U.S. investors are making their own push for board diversity. State Street Global Advisors (SSGA), a money management firm with stakes in more than 3,500 companies, issued a statement this week promising to use its voting power to hold corporate boards accountable for improving gender diversity among their ranks. SSGA publicized its new policy with an art installation on Wall Street, where the iconic Charging Bull now faces an equally fierce and “Fearless Girl”. Several other leading funds, including Morgan Stanley Investment Management Inc. and T. Rowe Price Associates, Inc., support diversity proxy proposals that would ask companies to specifically commit to seeking board diversity; others avoid an explicit vote but push for diversity behind the scenes. Many U.S. companies are taking note of investor pressure and voluntarily adopting a 30% target for female board participation.

Ultimately, though, increasing diversity among corporate boards will require increasing diversity at every level of corporate leadership. A survey of Fortune 500 boards reported that nominating committees typically look to former CEOs for potential board candidates; a group that includes only 4% women and 1% African Americans. The Economist’s glass-ceiling index reports that women occupy just over a third of well-paid and high-status jobs and still make, as a group, only 85% of men’s earnings. To build diversity at the executive and board levels, companies must make diversity a priority at every level.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Hughes Hubbard & Reed LLP
Fredrikson & Byron, P.A.
Akin Gump Strauss Hauer & Feld LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Hughes Hubbard & Reed LLP
Fredrikson & Byron, P.A.
Akin Gump Strauss Hauer & Feld LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions