Silicon Valley has a reputation for being clubby. Now we have a much better idea of exactly what that means.
A new report from Lonergan Partners, a Silicon Valley recruiting firm, takes a look at the boards of directors that oversee the 150 largest publicly-traded companies in Silicon Valley. While the report characterizes the directors at these companies as "well-connected," it also, perhaps inadvertently, highlights just how difficult it must be for those on the outside to gain a place in these networks.
The most obvious indication of the interrelatedness of this elite group comes from where they went to college. Almost a fifth of all of these directors--209 out of 1,156--had undergraduate or graduate degrees from Stanford. Harvard was the second most popular school among board members, with 132 having studied there. The University of California, Berkeley, came in third, with 38 directors.
Another measure of this clubbiness can be seen in the share of directors at the Valley's biggest public companies who sit on the boards of other companies within this same sample. One in five board seats at these companies is filled by someone who also sits on another board of one of these same 150 companies.
Women and people of color are notably underrepresented on these boards, and data about people of color is frustratingly lacking. Much of the data for this study came from companies' proxy statements, and proxy statements don't specify directors' races. The researchers, understandably, didn't want to assign a racial identity to people without their cooperation, and don't seem to have been prepared to contact all 1,156 of them.
But the researchers do cite a 2014 Rainbow PUSH Coalition survey of 20 major tech companies that shows that racial diversity among tech company boards is scarce. The research found that out of 189 directors at these 20 companies, three were black and one was Hispanic. At the Fortune 500, according to a study by the Alliance for Board Diversity, 7.4 percent of directors are black and 3.3 percent are Hispanic.
Female directors were noticeably more common at the 30 biggest companies than at the younger and smaller ones. Part of that may be because companies generally go public with smaller boards composed mostly of "insiders"--founders, very senior executives, and investors in the company--and in Silicon Valley, those tend to be overwhelmingly male. After a company is public, it's more likely to add outside directors, but it takes time for boards to turn over.
At companies that have gone public since 2010, only 12 percent of board seats are held by women, and generally, women who sit on the boards of those companies find themselves the only woman. At 13 companies that have gone public since 2010, there are no women on the board. At the largest companies--those with more than $4 billion in revenues--women hold an average of 19 percent of the board seats.
Among these 150 companies, 42 have boards without any women. Among S&P 500 companies, only 2 percent of boards have no female members, according to a Washington Post story cited by the study.
Interestingly, when a woman is the CEO of a company, there tends to be at least one other woman on the board of directors.
Being a member of this exclusive club can be quite rewarding. The average compensation for directors (including a few who receive zero compensation) is $293,961, of which 23 percent is generally cash. Another 53 percent is equity, 21 percent is options, and 3 percent is categorized as "other." Women tend to get paid more for board service than for men, but that's because they tend to be on boards of larger companies, which in general pay board members more.