This report was written by Emily Hite.
On March 5 Stanford’s Rock Center for Corporate Governance and the venture capital firm Andreessen Horowitz co-hosted a new program that invited some of Silicon Valley’s top talent to Stanford Law School to prepare and educate more women and minority candidates for venture-backed board service.
Tristan Walker, CEO and co-founder of Walker & Co., asks a question during “A Guide to VC-Backed Board Membership.” Photo by Misha Bruk.
Participants at “A Guide to VC-Backed Board Membership” gathered inside Paul Brest Hall to learn the nuts and bolts of corporate governance from senior faculty of Stanford Law School, network with peers and participate in frank discussions with key players in Silicon Valley about what really goes on in boardrooms. They were invited to attend the second annual Stanford Directors’ College for Venture-Backed Company Directors the next day for further education on board membership.
Closing the diversity gap
The lack of diversity in corporate and venture-backed company leadership in the region has received increasing attention recently. Across U.S. stock index companies, the majority of board members are white and male, disproportionate to the populations they serve, despite longstanding statements of intent to recruit more women and minorities.
Diversity is further inhibited if CEOs and board members subconsciously select candidates like themselves when filling open seats. As recent research by Stanford’s Deborah Rhode, the Ernest W. McFarland Professor of Law, and Amanda Packel, deputy director of the Rock Center, explains, the pattern of “in-group” bias, showing preference for people similar to you in terms such as race, ethnicity and gender, “is particularly likely in contexts where selection criteria are highly subjective, as is often true in board appointments.”
In their Delaware Journal of Corporate Law article, Rhode and Packel write that although the empirical evidence on the link between board diversity and financial performance is inconclusive, diversity on boards can improve decision making and monitoring, reduce the tendency toward groupthink and enhance corporate reputation by signaling commitments to equal opportunity and inclusion.
So, how can companies bring more diversity to their boards? “I would say just being more open – talking to all sorts of different people – will probably progress things quite a bit,” said Miriam Warren, vice president of new markets at Yelp. Warren was one of 40 attendees at the March 5 event.
“Yelp is quite a diverse place – we have a number of women at the executive level,” Warren said. “But as you go into the larger tech scene in Silicon Valley and San Francisco, there are fewer and fewer women and fewer and fewer people of color. And it starts to look like everyone came from the same club.”
Corporate governance basics
The day opened with an introduction to principles of corporate governance. Led by Evan Epstein, executive director of the Rock Center, the session covered dual-class share structures and other issues relevant to publicly traded and venture-backed company boards.
Robert Daines, the Pritzker Professor of Law and Business, delivered a primer on legal and fiduciary duties of directors. He noted the difficulty of telling “good” from “bad” corporate governance and walked participants through case studies illustrating the primary fiduciary duties of loyalty and care.
In a session on best practices for boards, Joseph A. Grundfest, the W. A. Franke Professor of Law and Business and founder of Directors’ College, and Nicki Locker, partner at Wilson Sonsini Goodrich & Rosati LLP, explored practical advice for directors to stay out of trouble while getting necessary business done. Grundfest acknowledged that conflicts of interest in the boardroom are inevitable. However, he said, “A conflict is not a problem unless it’s badly managed.”
Nicki Locker, partner at Wilson Sonsini Goodrich & Rosati LLP, and Stanford Law Professor Joseph A. Grundfest discuss best practices for boards. Photo by Misha Bruk.
Marc Andreessen, co-founder and general partner of Andreessen Horowitz, and Diane Greene, co-founder and former CEO of VMware and current board member at Google and Intuit, discussed practical, problem-solving considerations for boards. Their conversation included strategies to resolve management problems – employing an effective, impartial coach, for example – and how to handle a crisis, such as a C-level coup. They covered various roles board members might play and when, if ever, directors should offer their expertise to operating executives outside of the formal CEO-board relationship.
The value of board members
While not overseeing the day-to-day processes of a company, board members do make essential contributions to the organizations they serve, as many panelists and participants at the event mentioned.
Varsha Rao, head of global operations at Airbnb, said of her motivation to attend, “I wanted to come and learn more about how to be a great contributor.” Previously, Rao was a founder of a cosmetics startup, Eve.com. “We had a great board,” she said. “They were really instrumental in helping us navigate, especially since it was my first startup, and so I definitely would love to be able to provide a similar kind of guidance that I got earlier on in my career.”
Louis Jordan, most recently SVP of corporate finance at Starbucks and previously CFO of Nike’s global retail and digital commerce business, serves on two not-for-profit boards in the education space. He noted, as the first in his family to graduate from college, that “education was my path to success” and the natural way for him to give back. He came to Stanford to better understand how corporate board responsibilities compare to those of not-for-profits, with the goal of eventually sitting on one or more public boards. Contributing his extensive financial and business professional experience through public board service would mean “basically the beginning of [adding] more voice to the diverse community that I’m part of,” he said.
Other sessions detailed the process of raising money and the board’s role in the financing process, mergers and acquisitions involving venture-backed companies, the CEO’s perspective on board functions, and indemnification and directors and officers liability insurance.
Reflecting on the program’s content, Rao said she found useful “understanding why other people have chosen to take on board roles and what it takes to be a good board member.” Jordan found “more clarity as to what the role [of a board member] could be.”
Commenting on the day’s focus on diversity, Warren said, “I think diversity can take a lot of different forms, and it’s nice to see several of those forms exhibited in this room.” She observed, “I haven’t been in a room in Silicon Valley that’s this diverse, maybe ever, and it’s really quite a nice feeling to not feel alone.”
Emily Hite is the content and communications manager for the Rock Center for Corporate Governance and the Steyer-Taylor Center for Energy Policy and Finance.