As I noted in my last post on this topic, Sotomayor,
Diversity, And Group Dynamics: Why Do We Care? What Do We Know?, the concept of diversity has over the
last generation become almost commonplace and taken-for-granted in discourses
ranging from law to education to business. In higher education, for example, it
is hard to imagine a faculty job search or a student admissions discussion that
was not heavily laden with talk of diversity, in the sense of the
representative inclusion of women and racial and ethnic minorities in a group
or organization. (For more on the definition and etymology of the term
“diversity,” see here. Only joking! See here
instead.)
Yet the Sonia Sotomayor nomination and confirmation also revealed
the many tensions and unanswered questions surrounding diversity issues. As I’ll elaborate in this series of posts
through the specific example of corporate board diversity, we seem to struggle
as a society for a generally accepted theory about whether diversity matters
and, if so, why and under what conditions.
As previously noted, the ethnic and gender make-up of
corporate boards has been the subject of intense focus in many countries,
including the United States, in recent years. At the same time, the exact
mechanisms by which female and minority board members are thought to impact
board decision-making and corporate performance are undertheorized and
understudied. What, exactly, are
the asserted benefits produced by diverse corporate boards? For whom are those benefits generated
and by what mechanisms?
In this post, I’ll begin a discussion of the theoretical
rationales offered to explain the role of board diversity, which I break down
broadly into fairness rationales and performance rationales. One rationale
offered to explain the need for board diversity is simply one of fairness: corporate boards should be more diverse
because it is the morally correct outcome. Such arguments have an obvious appeal. It seems only fair that the highest
levels of corporate America – including boards of directors – should represent
a diversity of demographic groups. Moreover, women and minorities in positions of prestige and
influence can serve as important role models for younger members of demographic
groups traditionally underrepresented in the highest levels of business
enterprises.
Such fairness-based arguments in the corporate context are
problematic, however, both practically (in the sense that they are a hard sell
within the corporate community) and theoretically. If the impact of board diversity on corporate performance is
neutral (or, even worse, negative) and entails implementation costs, then the
normative case for “doing the right thing” becomes more difficult to
justify. Why should current public
shareholders incur the costs of providing a public good in the form of greater
board diversity?
Not surprisingly then, debates about board diversity tend to
revolve around whether it enhances corporate (or, at least, stock) performance. In my next post on this topic, Money Is Diversity, Or Diversity
Is Money?, I’ll discuss some of the
performance-based rationales offered for board diversity and the related research.
Related Posts:
I. Sotomayor,
Diversity, And Group Dynamics: Why Do We Care? What Do We Know?
III. Money Is Diversity, Or Diversity Is Money?
IV. What Corporate Insiders Say About Why Diversity Matters
V. Wrapping
It Up: The Struggle To Explain Why Difference Makes a Difference