PALO ALTO, CALIFORNIA – Twitter made an important announcement last week: that it was adding a woman, Marjorie Scardino, to its board. This is significant because Twitter has become a poster child for the sexism and arrogance that pervades Silicon Valley. This appointment sends a signal to the corporate world that behavior that was considered acceptable in the 1950s is no longer so — that there must be diversity.
Scardino is a great choice for Twitter’s board. She is former chief executive of publishing giant Pearson and is highly accomplished. She has been an outspoken critic of the lack of diversity on boards and is likely to speak up when she sees frat-boy behavior. But we can’t let Twitter off the hook. It has garnered worldwide attention for bad corporate governance practices. So, it must now be the example of what is good. It should create a more balanced board, management team and employee base, with more women as well as African-Americans, Hispanics and Asians in the mix. It needs to do this because it is good for the company.
Adding more women as board members will improve the financial performance of the company. As research by Catalyst shows, companies with the highest proportions of female board directors outperform those with the lowest proportions by 53 percent. They have a 42 percent higher return on sales and 66 percent higher returns on invested capital.
Alison Konrad and Vicki Kramer documented in a 2006 Harvard Business Review paper that women directors also make three contributions that men are less likely to make: “They broaden boards’ discussions to better represent the concerns of a wide set of stakeholders, including employees, customers and the community at large. They can be more dogged than men in pursuing answers to difficult questions. … And they tend to bring a more collaborative approach.”
Women and minorities can also fix the groupthink that is common in companies such as Twitter in which management and boards often resemble a boys club. A 2010 study published in Science found that a “collective” intelligence factor that explained a group’s performance strongly correlated to the average social sensitivity of group members and to equality in distribution of conversational turn-taking.
Concerning the lack of women on his board, Twitter CEO Dick Costolo, wrote: “@wadhwa you’re not seeing my point. you give people an easy out by just checking a box. The issues are much bigger than checking any 1 box.” I agree. That’s why we need to have Twitter fully diversify its board and management.
Vivek Wadhwa is vice president of innovation and research at the Arthur & Toni Rembe Rock Center for Corporate Governance at Stanford University. This article reflects his opinion.