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Why Facebook Needs Women on its Board

[fa icon="calendar'] Apr 10, 2012 6:00:00 AM / by Carol Pierson Holding

By Carol Pierson Holding

As has been widely reported, Facebook – the social media company about to go public and possibly become the world’s 5th largest company – has no female board members.  Putting aside moral objections, why is this so terrible? Because it limits the company’s profitability, curbs innovation and, scariest for investors and employees, increases the risk of a meltdown.

WomenboardMy sponsor CSRHub is adding a positive screen for companies with female board members. The company’s founders, Bahar Gidwani and Cynthia Figge believe, as do most sustainability focused consumers and investors, that female board members make for stronger companies, and they want to give consumers a method for identifying which companies satisfy this criteria.

Their premise is backed up by substantial data. In 2007, the Boston Globe reported on a Catalyst study that examined the number of female board members at Fortune 500 companies, using data from 2001 to 2004. The top quartile yielded 13.9 percent higher return on equity and a similar advantage for sales.

The EU is convinced that women must be included at the top of companies if Europe is to remain competitive. Viviane Reding, EU commissioner for justice, fundamental rights and citizenship, recommended quotas for female board membership, quoting Ernst & Young’s study of Europe’s 290 largest publicly listed companies. They found that the earnings at companies with at least one woman on the board were significantly higher than those without.

While the EU negotiates female board membership quotas, individual countries are forging ahead. Norway mandated that 40 percent of board members be women by 2008 and has since surpassed its goal. Belgium, France, Italy, the Netherlands, and Spain have all adopted legislation that introduces gender quotas for company boards, to increase competitiveness and economic return.

Another benefit of female board members: reducing group think, or the tendency to avoid questions or suggestions that go against group norms, which produces new ideas and enhances innovation and can reduce risk too. In fact, some argue that this is was the cause of the financial collapse. As the UK trade pub People Management put it “…in the aftermath of the financial crisis, is the idea that a cocktail of machismo and boardroom group-think allowed casino-style investment decisions to escape scrutiny, raising the question of whether the world would be in a better place today had Lehman Brothers and the like had a few more sisters.”

Indeed, risk reduction might be the most compelling argument, especially for those who were invested in the market in 2008 and saw their portfolios fall by 30 or 40 percent. Scores of journalists point out that there were very few women executives and board members involved in the mortgage melt down and postulate what might have happened had there been more women at the top. This has been true at least as far back as the 2002 collapse of Enron, whose culprits were male and whistleblowers all female.

Yet despite the evidence, results to date show very slow progress for women board members in corporate America. GMI Ratings, a source for CSRHub, just published its 2012 Women on Boards Survey. The average board is only 12.6 percent female; 29 percent still have no women at all. The most frightening? Between 2009 and 2011, women’s US board participation increased only .5 percent, one third of the (also low) average of 1.4 percent for developed countries.

As for Facebook, the lack of gender inclusion is also just plain bad business. As the radical group Ultraviolet points out, “Women are responsible for nearly two-thirds of the sharing that happens on (Facebook). In addition, women account for more than 70 percent daily fan activity on the site, which is a huge source of revenue for the company.” Wouldn’t a female board member be first to recognize ideas that appeal to the company’s largest group of users? To avoid behaviors that might alienate women?

I wouldn’t stop using Facebook because of its board composition. But I sure won’t invest in it.

Photo published under Creative Commons license. Courtesy of Cushing Library on Flickr

Carol Pierson Holding writes on environmental issues and social responsibility for policy and news publications, including the Carnegie Council's Policy Innovations, Harvard Business Review, San Francisco Chronicle, India Time, The Huffington Post and many other web sites. Her articles on corporate social responsibility can be found on CSRHub.com, a website that provides sustainability ratings data on 5,000 companies worldwide. Carol holds degrees from Smith College and Harvard University.

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All Aboard?

[fa icon="calendar'] Mar 14, 2012 5:00:00 AM / by Bahar Gidwani

By Bahar Gidwani

Are enough women being brought on board – that is corporate boards?  Our partners at GovernanceMetrics International (GMI) recently released a new study on this subject.

Their work is incredibly comprehensive (like the rest of their data!). They studied 4,300 companies in 45 countries. For the first time, more than 10 percent of corporate board members are women. And also for the first time, the number of companies with no female board members at all has dropped below 40 percent.

Read the study for full details. For instance, would you expect developed country corporations to be much better than those in less-developed countries? (I’ll hint that they are a bit better, but not much.)  What percent of company boards have a female chairperson? (The number is shockingly small.)

This new report is a valuable extension into an area we target on CSRHub with a special issue we call “Diverse Board.”  The many CSRHub members who care about this subject should thank GMI for bringing focused attention to the lack of women “on the bridge.”

Bahar Gidwani is a Cofounder and CEO of CSRHub. Formerly, he was the CEO of New York-based Index Stock Imagery, Inc, from 1991 through its sale in 2006. He has built and run large technology-based businesses and has experience building a multi-million visitor Web site. Bahar holds a CFA, was a partner at Kidder, Peabody & Co., and worked at McKinsey & Co. Bahar has consulted to both large companies such as Citibank, GE, and Acxiom and a number of smaller software and Web-based companies. He has an MBA (Baker Scholar) from Harvard Business School and a BS in Astronomy and Physics (magna cum laude) from Amherst College. Bahar races sailboats, plays competitive bridge, and is based in New York City.


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CSR Standards: Who Makes the Rules?

[fa icon="calendar'] Jan 4, 2011 9:57:21 AM / by Bahar Gidwani

By Bahar Gidwani

This post originally appeared in Triple Pundit.

In a previous post, we described the trove of corporate social responsibility (CSR) data that is available from finance-related researchers.  One of the main places these firms get their data is from company-written CSR reports.  Corporate Register offers links to more than 6,000 of these reports—from all types of companies and organizations.

How do companies decide what to report and how to report it?  Since CSR and sustainability reporting are fairly new areas, most companies look outside of their accounting and management teams for guidance and standards.  They get help from organizations such as:

Global Reporting Initiative (GRI): One of the first and most-widely used reporting standards bodies, GRI launched in the late 1990s with support from a who’s who of sustainability pioneers and backing from UNEP.  Thanks to untold hours of work from stakeholders, technical advisors, and national organizations, GRI has defined and guided CSR reporting for more than 2,500 companies and organizations.  The latest GRI standard (called G3) includes more than 160 areas for measurement and disclosure.  GRI is now working to encourage mandatory dual reporting (where companies must report both their fiscal and social performance) by 2020.

International Standards Organization (ISO): We have all benefited for years from ISO standards for product quality, health, and safety.  Now, ISO has created a standard for internal tracking and reporting social responsibility performance called ISO 26000.  This massive project has benefited from input from 450 participating experts, 210 observers, and 42 liaison organizations.  ISO26000 data can generally be “mapped” into the formats needed for other standards (such as GRI) so companies can use their internal data for external reporting.  ISO also offers the ISO 14000 standard for environmental management.  This standard helps companies track and improve their environmental performance.

Social Accountability International (SAI): The SA8000 standard is based on the UN Universal Declaration of Human Rights, Convention on the Rights of the Child and various International Labour Organization (ILO) conventions.  It applies at the facility level—so companies may have only gone through the SA8000 process on some of their plants or offices.  As of September of 2010, more than 2,300 facilities in 62 companies have received SAI certification—and many other facilities are at various stages in the process.  Of course, many of the materials gathered during this type of certification can feed into an organization’s CSR report.

Impact Reporting and Investment Standards (IRIS): The Global Impact Investing Rating System (GIIRS) was launched to give company ratings to impact investors (those who want to use their investments to generate positive change).  As part of this ambitious effort, GIIRS has helped to develop IRIS—an independent set of standards that would help mission-driven businesses measure and report their social impact.  The current IRIS taxonomy includes five spreadsheets of measurement processes and more than 90 definitions.

UL Environment: There are several emerging efforts underway to give companies a voluntary standard way of rating themselves, and obtaining third party verification. These include an exciting project by UL Environment, in partnership with Greener World Media, which is developing an organization-wide sustainability standard that will be used to assess corporate policies and practices, known as the ULE 880.

B Corporation (B Corp): More than 360 companies (including CSRHUB) have now completed the B Corp assessment process.  We answered a long list of questions about our social behavior and then were quizzed about various aspects of our performance.  We got a passing grade—plus good reminders about the social side of our mission and management approach.  B Corp reveals a list of the companies that have completed the assessment, but does not yet share most of the data it gathers.

Table: Berit Anderson

In general, there is a gap between the data companies gather and the data that they reveal, via CSR reports, regulatory filings, and other communication activities.  There may also be a gap between the data companies report and their true performance.  Most CSR standards allow for “third party verification.”  However, in many cases, the only groups with the necessary training and experience to serve as verifiers are CSR and sustainability consulting groups—with the fees for their reviews paid by the companies they are reviewing.  This leads to charges such as “greenwashing” and to a lack of the uniform reporting and transparency required to prove the effectiveness and credibility of these standards.  CSR standards groups are doing worthy and necessary work—but they need more regulatory and marketplace support to force companies and organizations to comply with both the spirit and the letter of their standards.

Bahar Gidwani is Cofounder and CEO of CSRHUB. He was the CEO of New York-based Index Stock Imagery, Inc, from 1991 through its sale in 2006. He has built and run large technology-based businesses, and has experience building a multi-million visitor Web site. Bahar holds a CFA, worked on Wall Street with Kidder, Peabody, and with McKinsey. Bahar has consulted to companies including Citibank, Banco Portuguese do Atlantico, Crane Co., Sperry, GE, General Dynamics, Computer Associates, Oracle, Microsoft, Computer Sciences, EDS, Cerner, and Acxiom. He has an MBA from Harvard Business School. Bahar is based in New York City.

CSRHUB is a corporate social responsibility ratings tool that allows managers, researchers, consultants, academics and individual activists to track the CSR performance of major companies. We aggregate data from more than 90 sources to provide our users with a comprehensive source of CSR information about 5000+ publicly traded companies in 62 countries. Browse our ratings at www.csrhub.com.

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