A Hidden Impediment to Boardroom Range

Last spring, Niki Christoff, a senior Salesforce executive, was given the opportunity to join the board of a publicly traded company alongside her daily work. Being a director of a public company is a token of honor for the company, and the invitation signaled that she was ready to break into a club that has long been male dominated.

Ms. Christoff, Senior Vice President of Strategy and Government Relations at Salesforce – and one of the “25 Most Powerful Women in Politics” according to Fortune Magazine – was inclined to accept the invitation. So she asked Salesforce for permission.

Then it got complicated.

“I was told that Marc Benioff’s policy is that only his direct reports should be used on for-profit bodies,” she told me, recalling her conversation with Salesforce’s General Counsel and referring to the founder and CEO of the Company, Mr. Benioff, related.

“I said, ‘Well, I’ll just go straight to him because I understand that the politics are not discriminatory at first sight, but given that few women and people of color report directly to Marc there are different implications on these groups. If I speak to him, he will surely make me an exception, ”she told the General Counsel.

Ms. Christoff sent a text message to Mr. Benioff, who publicly advocated the creation of a culture of inclusion and was one of the first Silicon Valley executives to try to close the gender pay gap.

Despite his progressive views, Mr. Benioff would not move.

He said, ‘It’s our policy – it’s our perspective that Salesforce people should focus on Salesforce. And so: “No,” she said, he told her.

Mrs. Christoff took over the board role – and was fired from Salesforce.

Mr Benioff wrote back: “I am so disappointed!” interrupted with a heart emoji when she told him she was about to take on the role.

Ms. Christoff’s story highlights one of the greatest unspoken challenges companies face in diversifying their boards of directors: Many of the largest companies in the country do not allow their employees to join external boards, especially those in the highest ranks.

With so many employees trying to overcome barriers to promotion with their own employers, there is some sort of systemic barrier to boardroom diversification.

And as companies are increasingly challenged by investors and society to diversify their boards of directors, a new line of error is uncovered in American companies: should companies let their managers spread their wings?

Ms. Christoff endeavors to draw attention to the problem. “People don’t know these policies exist, and it’s not just Salesforce that has this policy,” she said. “It is not uncommon to limit board service to senior management. So it’s important for me to highlight this topic from both an equity and a business perspective. “

State law requires all California-based public corporations to have at least one female director and one from an under-represented community. Nasdaq has proposed a rule requiring all publicly traded companies to disclose the diversity of their boards of directors and have at least one wife and director who identify themselves as an underrepresented minority, or LGBTQ Goldman Sachs has declared they will not acquire a company public, unless its board of directors has at least two directors who are not straight, white men.

Although 59 percent of new directors at S&P 500 companies last year were women or ethnic and racial minorities, revenue from boardroom seats is limited, according to recruiting firm Spencer Stuart, so progress in boardroom diversification remains slow . (The average board of directors has 11 directors with a typical tenure of eight years.)

Women now make up almost 30 percent of the directors of the largest publicly traded companies, while ethnic and racial minorities make up around 20 percent. When appointed to a board of directors, candidates from these groups are more likely to be first-time directors than white men, less current or former directors, and more likely to be younger.

Mr. Benioff’s policies at Salesforce are not uncommon. Many companies, especially technology companies, limit board memberships because they fear it could distract employees from their core responsibilities. (Businesses tend to be less restrictive of joining charities.)

“I know that all of our 57,000 employees would love to join a board of directors,” Mr. Benioff told me. “Unfortunately it is not durable.”

“It’s not easy,” he continued. “All 57,000 Salesforce employees cannot join the boards of directors of other companies at will. This is too risky and complex for a company our size and size.”

He said that while he recognized that it could prove helpful in the development of certain employees, overall “it can be very distracting.” He added, “I could get this wrong. We continue to evaluate our policies. “

Steve Jobs, Apple’s founder, didn’t believe in outside board memberships either, except in himself: he sat on the board of Disney after buying it, Pixar, which he founded. (His successor, Tim Cook, is on Nike’s board of directors.)

In Adam Lashinsky’s book, Inside Apple: How America’s Most Admired and Mysterious Company Really Works, Andy Miller, Apple’s vice president of mobile advertising, is described as visiting Mr. Jobs to inquire about joining an outside board.

Mr. Jobs gave an icy answer: “What? Barely cutting it here and want to spend your time helping someone else’s company? “

The truth is, the time it takes to work on a company board is substantial. If you count the prep time, travel, and meetings yourself, it could take 20-25 days a year or more if a crisis hits.

Only a few companies have explicit rules for external board memberships and instead decide ad hoc whether an employee is allowed to take the position or not.

However, you will find it difficult to find Amazon employees, for example, who are active in external committees.

There may be good reasons for this: One of the most commonly cited reasons why companies prevent employees from joining external bodies is that doing so can create a conflict of interest. Given the number of companies Amazon operates, this could be a particularly powerful rationale.

There is also what some CEOs refer to as a “branding problem”. Many high-profile companies fear that smaller companies will want to use the goodwill of the larger brand through board memberships. Certain companies and certain industries could also be classified as risky from a reputational perspective.

That seemed to be at least one of Salesforce’s concerns in Ms. Christoff’s case. The company that invited her to join its board of directors is MedMen, a publicly traded cannabis company.

And then there is a thorny internal performance dynamic that seems to be showing up at some companies. Inviting subordinate employees to be on the board to achieve greater diversity when their supervisors are not asked can create resentment, some executives said.

In any case, companies have to deal with the new reality that a broader spectrum of their employees is being sought for board mandates. In some cases this can actually benefit the employer and not only add diversity to the external company, but also create new perspectives and diversity of thoughts for the own company.

“Is it important for a manager’s professional development to have an external board service? For many executives, it does, ”said James Drury, a longtime corporate governance and executive search consultant who has placed many on top boards. “Because until you sit in a board member’s seat, you don’t really understand the kind of questions that are asked in your own boardroom.”

Comments are closed.