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.
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