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Facebook's All-Male Board Draws Investor Scrutiny -- But Don't Count On Change

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Though Facebook's chief operating officer Sheryl Sandberg is one of the most outspoken advocates of increasing the number of female leaders in tech and the majority of the social network's 845 million users are women, Facebook still doesn't have a single woman on its seven-person board.

The matter isn't just a source of bad press: It has now drawn public criticism from a Facebook investor, the California State Teachers Retirement System, or CalSTRS. The country’s second-largest pension fund, meanwhile, is pressuring Facebook to diversify its board ahead of its public offering.

"We are disappointed that the Facebook board will not have any woman members,” wrote Anne Sheehan, CalSTRS’ Director of Corporate Governance in a letter to Facebook. “This is particularly glaring at a time when there is clear evidence that companies with diverse boards perform far better than the companies with more homogenous boards.”

“[A] diverse board makes good business sense,” Sheehan wrote.

Facebook did not reply to requests for comment on the composition of its board.

The letter underscores the new scrutiny Facebook is facing in the wake of filing for an initial public offering, bringing a fresh set of challenges for a company that has preferred to keep its cards close to its chest but now finds its inner workings exposed. For Facebook, the conversation has shifted from wide-eyed wonder at its impressive growth to tougher questions about the sustainability of its business, the prudence of trusting Mark Zuckerberg with so much power and now, the lack of diversity on its board.

“It’s about time someone started asking these questions,” said Vivek Wadhwa, director of research at Duke University's Center for Entrepreneurship and Research. “Look at the venture capital world -- it's the same. It’s all white males, it's an old boy's club. Publicly embarrassing companies is a good start, but you can’t force them to do anything.”

The current members of Facebook's board are Washington Post Company CEO Donald Graham, Netflix CEO Reed Hastings, PayPal co-founder and venture capitalist Peter Thiel, former University of North Carolina president Erskine Bowles, Breyer Capital CEO James Breyer, Netscape co-founder and venture capitalist Marc Andreessen, and Zuckerberg.

When the New Yorker’s Ken Auletta asked Zuckerberg why there were no women on his company’s board of directors, he replied, "I’m going to find people who are helpful, and I don’t particularly care what gender they are or what company they are. I’m not filling the board with check boxes."

Experts doubt CalSTRS’ letter alone will bring changes in the near term. Greater public pressure and more vocal criticism of the company may be the only way to get Facebook to shake up its board, they say.

“Boards add people of color and women in order to respond to outside pressures and to manage the external environment in which they operate,” said Clayton Rose, a professor of management practice at Harvard Business School. “If they're at zero women and have no one of color, and stakeholders push the issue they'll generally find someone.”

Wadhwa added, "At this stage in the process, for them to change the board would be very disruptive because they're in the midst of an IPO filing. I'd guess they won't do anything. Unless there's a SOPA-like protest against them, I think'll stay away from it."

CalSTRS’ stake in Facebook was worth around $30 million as of last summer, according to the Wall Street Journal. CalSTRS invested in the company through a private equity allocation and Sheehan wrote in her letter that the pension fund would “most likely” purchase shares of company following its public offering.

CalSTRS has a history of initiatives aimed at increasing the diversity of the firms in which they invest. Last year, CalSTRS, together with the California Public Employees’ Retirement System, created a database that aims to help companies find “diverse talent” to sit on their boards.

Executives in high-stakes situations have a tendency to surround themselves with people who resemble them, said Rose, who posited that this might help explain the lack of diversity among Facebook's directors.

“Considering all the pressures Facebook will be under and scrutiny it will face, it's not surprising to me that they would choose a group of people that make them feel comfortable,” he said.

While Facebook's directors are all male, 58 percent of the site's users are female. Moreover, women are among the most active users on the social networking site, posting an average of 11 updates per month, compared to six by men. They also "like" content, send private messages, comment, and tag photos more frequently than their male counterparts.

Rose notes there is a rich talent pool of women and people of color who may be able to contribute in meaningful ways to the company’s strategy and vision.

"Some argue there are not enough people of color or women who have the skill sets to be able to adequately participate on boards," said Rose. "I've looked at this and there's nothing to that case. Boards are not management. You do not need everyone on a board to have technical skills. Boards should consist of people with very diverse backgrounds that can bring different perspectives to problems and engage in governance, not management."

Facebook is one of numerous Silicon Valley companies with a "boy's club" board. Some of the tech industry’s most buzzed-about companies have no female directors, including Twitter, PayPal, Zynga and Foursquare. Groupon, Apple, and Amazon have only a single woman each on their eight-person boards. Three of Google’s ten directors are female.

Susan Stautberg, who founded Women Corporate Directors, an organization that seeks to increase the number of women on boards, said Facebook hasn't yet picked up the phone to ask for help finding female directors.

But if investors and reporters focus more on the issue, she said, “maybe they'll wake up and realize that if they want to reach the market, they should make the call.”

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