Wednesday, February 10, 2016

Who Calls the Shots in Silicon Valley?

Of all the board members of the top 150 Silicon Valley public companies, 87% are male.
Silicon Valley, some will argue, has grabbed the heart of American commerce.  It's the unabashed global seat of technical innovation and creativity. Other regions in the country and around the world wish they could replicate at least a small portion of its entrepreneurial successes and its contributions to value in global markets and consumer satisfaction.

It's the home base of companies like Facebook, Apple, HP, Oracle, Alphabet/Google, Intel, Dropbox, Salesforce and eBay.  It's where the next new things are dreamed, groomed and designed.

But the Valley has fallen flat on its face when it comes to diversity.  And to its credit, it knows it.

The statistics tell the story, and so do casual glimpses of its board rooms, its venture financiers, and its popular tech-crunch conferences, where technology good-'ol-boys hang out, trade industry stories, and promote glistening new products.

Lonergan Partners, an executive-search and talent firm based in the Bay Area, recently presented its findings from a research project to determine who's who in Silicon Valley and who runs all the shows that make Silicon Valley soar. It focused on board membership at major Silicon Valley companies, what it calls the "Silicon Valley 150." With help from nearby Stanford Business School, it compiled statistics, summarized its findings, and made careful attempts to draw conclusions.

Its findings reaffirmed what most already suspected, what most had already observed.

The SV150, a moniker to rival the S&P 500 or Fortune 500, includes the top 150 publicly traded companies headquartered in Silicon Valley. It includes many companies with familiar names that went public within the past decade (Facebook, Twitter, LinkedIn, e.g.). It includes, also, companies that helped give birth to the region as a technology center of the universe (HP, e.g.).

It includes companies in assorted industries: IT, Internet, semiconductor, biotechnology, clean technology and consumer products.

It doesn't include recent start-ups and the dozens of companies classified as "unicorns," private companies that have been valued at $1 billion or more, but haven't yet decided to leap across the private-public divide into IPO land.

Apparently it would have included the best-known unicorns (Uber and AirBnB come to mind), if it could.  But for survey and research purposes, Lonergan wanted reliable, updated data, information that can more easily be obtained from public companies or at least from their annual reports and public filings (information public companies can't hide or camouflage).

It also doesn't include much of the finance sector, the venture capitalists who surround the industry prominently with promises of rounds of funding and who set the agenda for which companies will have the best chances to thrust themselves toward billion-dollar market valuations.

Nonetheless, the reliable results from a data pool of 150 public companies are informative and meaningful.  By examining the make-up and membership of the boards of directors of these companies, it could determine, based on data and not hearsay or hunches,

a) Who are the people who run the big Silicon Valley companies?

b) Who are the people who have influence at many companies in an industry?

c) What are the backgrounds, experiences and education of people who run these companies?

d) Are women represented in board rooms and in senior-management positions in meaningful numbers?

e) Are there board members in significant numbers from under-represented minority groups?

What did it find? And did it recommend solutions and next steps for an industry that sells products and services to the masses around the globes, but for which its core of leaders tend to be a cozy neighborhood of well-connected men?

Men run the show, for certain--as founders, as visionaries who get their projects funded, as private investors, as senior engineers and designers, as founder-CEO's, and as board members.

The SV150 tally shows an astounding number of male board members.  That's not shocking; the numbers reinforce what we already knew.

Of the 1,156 board members of the top 150 companies, 87% (as of August, 2015) are male, who at an average age of 59 are not as young as fables suggest and who tend to have had established business and board experience (about 7 years of board involvement). Board chairs are 97% male.

Not surprisingly, board memberships are interlocking, where members are typically selected from those already established within the network.  About 20% of the board members serve on other SV150 boards.

Over a quarter of the boards (42 or 28%) have no women.  How much does Silicon Valley trail all other top global companies? The Valley's 13% women board composition lags the S&P 500 (19%).

Well, what about new, young companies, more recently founded and perhaps more likely to be conscientious and progressive about board representation.  Lonergan research shows for companies that have gone public within the past five years, only 12% of board composition are women. Hardly any different from older, established companies.

The results aren't too sour. Some companies deserve applause.  Google, Symantec, Netflix and Cisco are among the nine companies with at least three women board members. The number of women CEO's is now up to eight.

Researchers tried to compile trends and numbers for minorities. They acknowledged challenges because they couldn't determine with certainty who fell into which groups, because they were not relying on (and likely couldn't rely) on companies self-reporting information by race and ethnicity.

As best as possible, they were able to conclude that among total employees, minorities (blacks, Latinos, and Asians) account for about 35% of the total.  Among board members, minorities comprised only 5%, most of whom were Asians (South and Pacific Asians).

The lists of reasons why the numbers are abysmal in 2016 are long and have been analyzed relentlessly. Solutions aren't always implemented well or aren't prioritized. Technology companies, especially those struggling to remain solvent or respond to pressing demands from venture investors, dance around or neglect the topic. Often they just aren't motivated to ensure leadership is as diverse as the users of their products.

The usual "excuses" include a scarcity of women and minorities in the "pipeline" for leadership roles and the low numbers of women and non-Asian minorities interested in or pursuing engineering. The real reasons are often tied to a lack of urgency or emphasis on the issues and tied to the tendency for busy people to appoint whom they know or hang around with or hire those with degrees or experiences they share.

Hewlitt-Packard is one company deserving a pat on the back, even if financial analysts have criticized the company's financial performance almost non-stop the past decade. In the midst of making a strategic decision to split up a company whose founders are often called pioneers of the Valley, HP announced the two new companies would have a set number of women and minority directors.  And it came through.

That it already had a woman CEO (Meg Whitman) might have been why it took bold, immediate steps.  The company now exists as two independent public companies (HP and HPE), but their boards now include at least three African-American women:  Pam Carter, a former Cummins executive, Stacey Mobley of DuPont, and Stacy Brown-Philpot, the COO of TaskRabbit.

In a club whose members can likely be counted on one hand (and maybe half of another), black board members among the 150 include James Bell at Apple and Robin Washington and Colin Powell at Salesforce.  Hector Garcia-Molina at Oracle is the only confirmed Mexican-born board member in a state where Latinos are at least 38% of the population (20% of the Bay Area).

Take a look at Facebook, whose hundreds of millions of daily users include huge numbers of women, blacks, Latinos and Asians.  Its board is small (only eight members).  Its membership includes, besides CEO Mark Zuckerman and COO Sheryl Sandberg, a predictable small club of Silicon Valley legends, (Marc Andreesen, Reed Hastings, and Peter Thiel).

If one reason for the lack of women and under-represented minorities in senior roles or positions in Silicon Valley is the tendency to appoint those who share the same degrees and schools, statistics prove it.  Over 20% of SV150 board members have a degree of some kind from Stanford.

There is indeed a core of favorite schools from which companies hire to populate the pipelines that eventually lead to appointments as senior managers and board members.  The Lonergan research showed that most board members and company senior managers (CEO's, CFO's, COO's) were graduates of just a handful of top schools:  Stanford, Harvard, Princeton, Berkeley, Yale and Michigan (undergraduate) and Stanford, Harvard, Berkeley, Penn, UCLA, Carnegie Mellon, and Cornell (graduate, including MBA's and including degrees from Consortium schools).

(Consortium business schools in California include USC-Marshall, UC-Berkeley-Haas, and UCLA-Anderson.)

Over 50% of the 150 women board members have an MBA, most from the list of top, favored schools.

The Valley has a long way to go. A long, long way.

Statistical research helps because it shows trends (and progress, where it might exist) and confirms notions we already have had.

However laudable such findings and research may be, they don't offer solutions or a game plan that would force board leaders and senior managers (including the clubs of founders, visionaries, and highly networked, well-contacted people that decide what's next in the Valley) to act now instead of "when the time is right."

Tracy Williams

See also:

CFN:  Venture Capital and the Pao Lawsuit, 2015
CFN:  Harvard Business School and Gender Diversity, 2013
CFN:  Horowitz and His Latest Venture, 2014
CFN:  Venture Capital Diversity Update, 2011
CFN:  Sally Krawchek's Pivot Move, 2014
CFN:  Muriel Siebert, Wall Street Pioneer, 2013
CFN:  Knocking Down Doors in Venture Capital, 2012

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