Ted Rogers: Quotas create institutionalized insult

While we are on the topic of female quotas for Boards, here is an amusing response from Ted Rogers, Head of Cypress, to a group of nuns asking for female representation on the board. I agree with Ted and wish I could have said it as eloquently:


09/03/2009Ted J. Rodgers' response follows.

A recent letter from Cypress's president and CEO Ted J. Rodgers to The Sisters of St. Francis of Philadelphia's Doris Gormley, OSF -- sent also to all Cypress shareholders -- has set the business community abuzz...so much so that, in its edition of July 15, 1996 The Wall St. Journal carried a long story on the "CEO who took on a nun in a crusade against 'political correctness'."

Dear Sister Gormley: Thank you for your letter criticizing the lack of racial and gender diversity of Cypress's Board of Directors. I received the same letter from you last year. I will reiterate the management arguments opposing your position. Then I will provide the philosophical basis behind our rejection of the operating principles espoused in your letter, which we believe to be not only unsound, but even immoral, by a definition of that term I will present. The semiconductor business is a tough one with significant competition from the Japanese, Taiwanese, and Koreans. There have been more corporate casualties than survivors. For that reason, our Board of Directors is not a ceremonial watchdog, but a critical management function. The essential criteria for Cypress board membership are as follows:

Experience as a CEO of an important technology company. Direct expertise in the semiconductor business based on education and management experience. Direct experience in the management of a company that buys from the semiconductor industry. A search based on these criteria usually yields a male who is 50-plus years old, has a Masters degree in an engineering science, and has moved up the managerial ladder to the top spot in one or more corporations. Unfortunately, there are currently few minorities and almost no women who chose to be engineering graduate students 30 years ago. (That picture will be dramatically different in 10 years, due to the greater diversification of graduate students in the '80s.) Bluntly stated, a "woman's view" on how to run our semiconductor company does not help us, unless that woman has an advanced technical degree and experience as a CEO. I do realize there are other industries in which the last statement does not hold true. We would quickly embrace the opportunity to include any woman or minority person who could help us as a director, because we pursue talent -- and we don't care in what package that talent comes. I believe that placing arbitrary racial or gender quotas on corporate boards is fundamentally wrong. Therefore, not only does Cypress not meet your requirements for boardroom diversification, but we are unlikely to, because it is very difficult to find qualified directors, let alone directors that also meet investors' racial and gender preferences. I infer that your concept of corporate "morality" contains in it the requirement to appoint a Board of Directors with, in your words, "equality of sexes, races, and ethnic groups." I am unaware of any Christian requirements for corporate boards; your views seem more accurately described as "politically correct," than "Christian." My views aside, your requirements are -- in effect -- immoral. By "immoral," I mean "causing harm to people," a fundamental wrong. Here's why: I presume you believe your organization does good work and that the people who spend their careers in its service deserve to retire with the necessities of life assured. If your investment in Cypress is intended for that purpose, I can tell you that each of the retired Sisters of St. Francis would suffer if I were forced to run Cypress on anything but a profit-making basis. The retirement plans of thousands of other people also depend on Cypress stock -- $1.2 billion worth of stock -- owned directly by investors or through mutual funds, pension funds, 401k programs, and insurance companies. Recently, a fellow 1970 Dartmouth classmate wrote to say that his son's college fund ("Dartmouth, Class of 2014," he writes) owns Cypress stock. Any choice I would make to jeopardize retirees and other investors from achieving their lifetime goals would be fundamentally wrong. Consider charitable donations. When the U.S. economy shrinks, the dollars available to charity shrink faster, including those dollars earmarked for the Sisters of St. Francis. If all companies in the U.S. were forced to operate according to some arbitrary social agenda, rather than for profit, all American companies would operate at a disadvantage to their foreign competitors, all Americans would become less well off (some laid off), and charitable giving would decline precipitously. Making Americans poorer and reducing charitable giving in order to force companies to follow an arbitrary social agenda is fundamentally wrong. A final point with which you will undoubtedly disagree: Electing people to corporate boards based on racial preferences is demeaning to the very board members placed under such conditions, and unfair to people who are qualified. A prominent friend of mine hired a partner who is a brilliant, black Ph.D. from Berkeley. The woman is constantly insulted by being asked if she got her job because of preferences; the system that creates that institutionalized insult is fundamentally wrong.

Should Canada have Quotas for Females on Boards?

Should there be quotas for the number of women on Boards? I was asked this question by The Globe and Mail - read the full article here.

Having been at a Women Directors dinner with Diane Francis where this question was raised, I was surprised by how many women liked the idea of quotas. All of the women at that prestigious dinner held at Canoe would certainly be at the front of the line to benefit from a quota. Diane Francis said she was against quotas but the other women Directors argued against her points. 

After the dinner, I read about Quebec and Norway's foray with quotas. Norway has had companies de-list from their stock exchange to avoid the quota. 

Canada is a terrific place to be a working woman. Men have been my mentors and my sponsors. Very few women have held out a helping hand to me. As a consequence of those negative experiences, I try and pull up every woman behind me.

When Rebecca Eichler posed the question about boards being forced to have females on their Boards for the Globe article, I hesitated but spoke my true mind. Women are making incredible inroads by being great at business and knowing how to make the bottom line. How do I describe the powerful women in private business who are my clients?

Here is my response:

Jacoline Loewen, director of Loewen & Partners in Toronto, which sources capital for growing companies, has served on a range of boards and believes a quota would dilute the competitive, aggressive behaviour required to drive strong business results.

“I got to my position through hard work and would hate to be seen as a token appointee,” she said. “Men have to pay a price to get on a board, and the women I know on boards have worked hard to get there too.”

The article was posted and quickly attracted over 200 comments. As I read them, there really was an anger about affirmative action. With more women at university and entering the medical and legal professions, the playing fields seem to be open for all. 

Here are some of the comments. 

What do you think?

Where do you stop this quota foolishness? Government is to provice service, not employ minorities to fulfill quotas to look good on someones anual review. Private industry has an obligation to it's shareholders, if the shareholders are willing to risk finacial loss due to some silly poltically correct machination, it is their money. Under no circumstance whould quotas of any kind be legislated into law.

In Argentina they passed a law some 15 years ago that 30% of the MPs have to be women. What did that achieve? Most MP's wives are now MPs.

As a shareholder, I only want folks who make me money. I hold Corby's stock, a decade ago we had a lady as chairman, she made me a ton of money and her salary requests had my total approval. Now she has gone and corby's is a mess. I cant fire the male aholio who runs the place and special dividends have disappeared. Why quota up employment equity deadheads? If you cant make money for the shareholders, I dont care how big your breasts are or how small your penis is. It is all about return on investment.

How Mary Meeker Earned Back Her Reputation

Mary Meaker was the darling of tech investors back in the 1990's and with the dreadful crash, her reputation also took a hammering.
I do admire her as she got back up and has worked fearlessly to gain back trust. In the finance industry, this is very difficult to do once you have advised the fund investors and cost them a great deal of money and business.
Mary's detailed analysis was what built her status. Fund managers clamoured to see her latest presentations.
Twelve years late, Mary is back as an authority. Check out her overview of the Web today and in the next few years.
See the latest Mary Meecker PowerPoint Presentation on Web 0.2

After the show - BNN The Pitch with Jacoline Loewen and Derek Smith, Bridgescale

Brave entrepreneurs face the panel of private equity experts on The Pitch, brought to you by BNN. I am on the panel of experts. Andrew Bell hosts the panel and after the show, we often chat with the entrepreneurs to give them feedback. Then the private equity panel tends to review the presentations and have a quick gossip about business and what is on the radar screen.
This week, Robert Gold and Andrew Brown did an "after the show" podcast and I must say, they asked great questions. Hear what Derek Smith of Bridgescale had to say about RIM - oddly prophetic.

Listen to the Podcast 
If you have problems use Robert Gold's directions below:

This week on the BusinessCast we go behind the scenes of BNN's 'The Pitch' and debrief three of their top investors - right after they've turned down the entrepreneurs.  Hear what the investors really think, with this unique opportunity to be inside their heads - and pitch better yourself.


Listen or Subscribe to the BusinessCast for free in iTunes.


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Canadian Government R&D Benefits the US

This month, we are looking at how to move Canada beyond its weak financial support for early stage and technology firms.We will be discussing ideas about how to get beyond this problem of being the little market for American Private Equity to cherry pick our winners.
Canada is among the most generous countries in the world in its financial support of R and D for its emerging technology companies. Canadian government support for business R and D as a percentage of GDP is the second highest of any OECD country and ahead of that of the US.
But Canada is facing a dire shortage of the highly-specialized financing source, venture capital, that is dedicated to commercializing that R&D. In 2010, the Canadian venture capital industry experienced its worst fundraising in 16 years and is virtually moribund.
In the absence of venture capital, the R&D of emerging technology companies cannot be commercialized into products and services to be sold in the global market to create jobs, revenues and exports. Much of that R&D is going to waste. The Canadian government’s billions of dollars in annual support for R&D of its emerging technology companies is effectively a vast program for creating advanced aircraft when there is no fuel to fly them.
When Canadian emerging technology companies do obtain VC financing, it is often insufficient, and many find themselves at a serious competitive disadvantage. Canadian VC backed emerging technology companies currently receive on average only 36% of the funding of their VC-backed direct US competitors.
This underfunding of Canada’s emerging technology companies is a recipe for decline, as these undercapitalized companies must compete in the same fast-moving global market with their far-better financed US competitors (not to mention those from other countries). Hobbled by having only a fraction of the capital of their competitors, these Canadian companies also have little prospect of achieving VC follow-on financing when needed, which is in especially short supply in Canada. As a result, many promising Canadian emerging technology companies fail, or are sold early in their lifecycles long before they obtain industry leadership. These sales are frequently to large US companies, and often at low prices.
The Canadian government’s support for R and D of its emerging technology companies has become, in effect, a subsidy to US businesses which acquire the most promising of these capital-starved but R&D-rich Canadian companies cheaply, then reap the financial rewards by commercializing that R&D and bringing those companies to industry leadership. Worse still, these companies are often moved to the US, resulting in the loss of Canadian jobs, revenues and exports. The bottom line: Canada is losing much of the benefit of its billions of dollars in R&D funding for its emerging technology companies.