Thirty-one year old Chelsea Clinton has been named to Barry Diller’s board at IAC/InterActive (IACI).  I think it’s a terrible choice – not because she’s not smart, not because she’s young, not because of possible favoritism or cronyism, but because she doesn’t have any industry experience or skin in the game.  About ten years ago, I wrote a dissertation on what types of directors’ backgrounds lead to a big IPO valuation and what backgrounds lead to subsequent long-term operating results and increased stock performance. If you want to slog through it, the thesis is here and some other relevant research is here. I’ll summarize.  It turns out that a lot of commonly corporate governance prescriptions that get thrown around – things like separate Chairman and CEO, diverse boards, and younger boards – have no impact on company performance.  Here’s what did matter. Having a bunch on “window dressing type” directors on your board – big names, Fortune 500 affiliations in their backgrounds, Ivy League schools, politicians – did have an impact on an IPO firm’s valuation when it went public. In other words, having a bunch of big names on your board did give you an initial pop at IPO; they gave you credibility. However, they had no predictive value on subsequent increased sales, profits, or stock price. They didn’t matter.  On the other hand, if you had loads of people with industry experience from companies that were very successful in that industry on either the board or management team and/or if you had a lot of non-executive directors who dug into their own pockets to buy stock in the company, that didn’t mean anything for the IPO company. However, all that stuff was a whopping predictor of higher sales, profits and stock price two years out.  If you know more stuff about an industry, you will make more informed comments.  Chelsea has a great pedigree. Stanford, Oxford, McKinsey, Avenue Capital, smart parents. This isn’t a knock on her. She just doesn’t have experience in the consumer Internet space.  John Carney defended her selection as being in the age demographic that IAC properties – Daily Beast, CollegeHumor, Match.com, & Newsweek — appeal to. To me, that’s kind of like saying she has visited those websites, so she’s qualified.
Chelsea Clinton is young, smart, and capable - but not qualified to be on IAC's board. She needs industry experience and skin in the game.