Boardroom Composition Scrutinized
It is no secret that shareholders increasingly expect a more vocal role in setting boardroom composition. This week, it was reported that two notable companies had been challenged on their director choices. On Tuesday, the California State Teachers’ Retirement System (CalSTRS) filed a letter of complaint in light of the highly publicized Facebook IPO. In the pension fund’s letter addressed to CEO Mark Zuckerberg, Director of Corporate Governance Anne Sheehan wrote that CalSTRS was “disappointed that the Facebook board will not have any women members.”
Investors are not alone in their disappointment over the current Facebook boardroom composition. Anne Mulcahy, former CEO/Chairman of Xerox Corp. and director at Johnson & Johnson Co., Target Corp., and Washington Post Co., remarked “it’s unfortunate when companies with a large percent of women constituents don’t reflect that in their boardrooms.” Notably, more than half, 58 percent, of Facebook’s users are women. According the 2011 NACD Public Company Governance Survey, 67.4 percent of boards have at least one female director. In the last three years, however, just 22.3 percent of companies have increased the number of female directors serving their board.
Also under shareholder pressure is struggling technology company Yahoo! Inc., which announced this week that it would reshuffle its board. One month after CEO Jerry Yang submitted his resignation, chairman Roy Bostock and three other board directors announced they would not stand for re-election at the upcoming annual meeting. Currently in the midst of a strategic restructuring, Yahoo! has been flogged for failing to stay up-to-speed with the constantly changing technology environment.
With the 2012 proxy season fast approaching, directors should be prepared for increased scrutiny from shareholders. While 2011 was a relatively easy proxy season for the boardroom—according to some governance experts—Facebook and Yahoo provide valuable lessons. Regardless of a company’s success, shareholders want to see a boardroom that not only reflects long-term strategic goals, but also diversity of thought and experience.