Facebook's About-Face


Facebook's (NAS: FB) short history as a public company has included ample public relations problems. Maybe that's why the company has decided to make at least one thing right: It's appointed its own chief operating officer, Sheryl Sandberg, a woman, to serve on its board of directors.

Granted, this is only a small step for many reasons, but sometimes you've got to give credit for any step in the right direction.

A great first step
The awareness that American companies could use more diverse boards of directors has been gaining attention recently. For many years, boards of directors tended to be sadly homogenous; corporate governance expert and GMI Ratings founder Nell Minow describes this tendency as "male, pale, and stale."

Groups that contain too many similar people tend to fall into groupthink, and this doesn't bode well for the corporate need for robust discussions, innovative insights, or boards that can push back when management needs some restraint.

Although there has been someprogress -- many more boards have at least one woman than was customary years ago -- there are still few companies with more than a single female director (less than 10% have more than three).

Given Sandberg's COO role, it seemed like a pretty glaring oversight when the lack of women on Facebook's board came to light. After all, she's a competent executive who truly understands the business, her resume includes a stint at Facebook rival Google, and the "humble" beginnings of her career included time as an economist for the World Bank. She should have been a shoo-in from the very beginning.

Still, Sandberg is anything but an independent director. She's absolutely an insider. Her appointment is a correction of what seemed like an oversight and maybe even a slight, but it's just one step toward building a robust board that incorporates many points of view. Moreover, it does nothing to build outside pressure for anything close to shareholder rights, since Mark Zuckerberg maintains a tight grip on control even post-IPO.

Social media's antisocial secret
Regardless, publicly traded social media companies could use some lessons in playing a little nicer with others. Their corporate governance policies have tended to have some old-school, shareholder unfriendly elements like classified boards and multiple classes of stock that give management tight control through their oversized voting power, leaving shareholders with little voice or sway.

In March, I dubbed the social media stocks "antisocial" due to their overall lack of female directors. Zynga (NAS: ZNGA) and Angie's List were noteworthy for their lack of even one female director.

LinkedIn (NYS: LNKD) , Yelp (NYS: YELP) , and Groupon (NAS: GRPN) narrowly escaped the "zero female directors" stigma by including one woman on each of their boards.

Boys' club 2.0?
For Web 2.0 companies that are supposedly so forward thinking, this sounds too much like old-school, boys' club nonsense. It's also counterproductive, given how many women are actually power-users of social media services. An ample amount of female insight would be an excellent addition to these boardrooms.

I'll give Facebook credit for adding a female when an obviously competent candidate was right there in the management suite. Hopefully it can forge a path ahead, though, in including more females on its board.

Seeing how most of Facebook's 901 million users actually are women, I have a funny feeling both users and shareholders would find a lot to "like" about some forward-thinking composition in social media's boardrooms.

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The article Facebook's About-Face originally appeared on Fool.com.

Alyce Lomax does not own shares of any of the companies mentioned. The Motley Fool owns shares of LinkedIn, Google, and Facebook. Motley Fool newsletter services have recommended buying shares of Google and LinkedIn. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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