The dearth of women and minorities in corporate boardrooms underlines these failings. For example, women are making progress, but still have a very long way to go. These walls and ceilings are utterly illogical. For example, Urban Outfitters, Inc. (NASDAQ:URBN) currently has no women on its board, despite the fact that women actually make up a huge part of its target demographic.
Facebook Inc (NASDAQ:FB) went public with much fanfare and no female directors, although thankfully, it did bring Sheryl Sandberg on board. Data showing the significant number of female “power users” of social media makes you wonder why on earth this need was overlooked to begin with. Unfortunately, since Sandberg has a high-ranking position at the company already, her appointment isn’t even a 100% satisfactory move.
Disrupt this
Let’s ponder some crazy, disruptive ideas. Can we change how supposedly “strong” and “competent” boards are defined in the first place?
One “crazy” idea is to simply be more flexible about what types of people are appropriate for boardrooms. Bloomberg recently reported that more companies are open to having women on their boards who aren’t already CEOs. These fresh candidates have relevant experience in other areas, but the stifling “CEO” check box isn’t checked. That’s an excellent start.
Could other stakeholders serve on boards with more traditional directors? Rank-and-file employees who actually see the front lines of the business could have incredibly desirable perspectives on what really goes on beyond management’s possibly skewed outlook and PowerPoint presentations.
Representatives of communities could give valuable insight into how companies are faring with surrounding factors and human cause-and-effect. Even a trusted customer or two could help raise the bar on the quality of boardroom conversation.
Take a sledgehammer to walls and ceilings
Granted, some shareholder activists already do find different ways to push for change on corporate boards. Take Carl Icahn, who has been agitating like mad recently, scaring some managements and boards to attention. Chesapeake Energy Corporation (NYSE:CHK) is a great recent example of a well-deserved company in Icahn’s crosshairs; Icahn got representatives on its board, and ultimately, CEO Aubrey McClendon left his post.
Icahn has even more recently taken a stake in Dell Inc. (NASDAQ:DELL), raising interest in what could come next and making insiders stand up and take notice, even founder Michael Dell himself.
Going forward, though, nobody ever said the world has to adhere to the mythical motto “That always worked before.” Oftentimes, these protected ideas actually aren’t working, but for some, they are awfully comforting.
We individual investors can start by more closely scrutinizing directors’ bios in our stocks’ proxy statements. Who are they? What have they done? Are they a diverse group? Have they been serving forever? How much are they compensated for their troubles? Do they attend board meetings the majority of the time, as they should? If they fall short, we can withhold votes for these individuals. You do not have to vote for everything management recommends. In many cases, you’re better off voting against.
We need to have more discussions about major changes, and vote our proxies to help nudge corporate America into less stagnant, more robust directions. Hopefully, corporate managements and boards are listening.
The article “Destructive” Changes That Could Help Your Investments originally appeared on Fool.com.
Alyce Lomax has no position in any stocks mentioned. The Motley Fool recommends Facebook and Goldman Sachs. The Motley Fool owns shares of Facebook and has the following options: Long Jan 2014 $20 Calls on Chesapeake Energy, Long Jan 2014 $30 Calls on Chesapeake Energy, and Short Jan 2014 $15 Puts on Chesapeake Energy.
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