In my last post, I discussed the Yellen-Summers Fed Chair debate and noted that the discussion bore many similarities to the corporate board diversity debate. Let me outline just a few of those similarities here. For example, many critics point to the “insular” and “clubby” nature of the Obama White House and to its economic policy positions, in particular, which are held by “a small, close-knit group of men who have known one another since the Clinton administration, if not before.” This, according to sources quoted in the New York Times leaves Janet Yellen (along with other women) “on the outside looking in.”
It probably will not surprise most readers to learn that the corporate boardroom is frequently described in similar terms, even by those who are a part of the club. Indeed, countering this very insularity is a common rationale put forward in favor of boardroom diversity. As Lissa Broome, John Conley, and I discuss in our article recently posted to SSRN -- The Danger of Difference: Tensions in Directors’ Views of Corporate Board Diversity -- our respondents frequently asserted both the avoidance of group- think and an ability to facilitate board independence as rationales in favor of race and gender diversity. Yet, as we note in the article, these rationales are in some tension with our respondents’ even more frequently asserted contentions that boards must get along with both each other and senior management, be collegial, and avoid confrontation.
For example, one respondent, a proxy advisor with substantial experience in board and corporate governance issues, told us that most of the investors whom his company advised did not take board diversity seriously, as they did not believe it improved shareholder value. Among those that did, however, the most important reason was likely the avoidance of groupthink:
A: I think people know especially on the risk side that whenever you get anything involving sort of groupthink, everybody in the room having the same background, group of experiences and so forth that that is an absolute breeding ground for risk, for problems to occur. . . . and I think by and large the folks that believe that diversity is important put a very high value on it for that exact reason that they think this creates greater, frankly, psychological independence in the board room. It creates more viewpoints in the board room and that leads to better decision making I think, and I think that’s a change from certainly fifteen or twenty years ago— when I think it was purely viewed in terms of sort of social equity issues about increasing participation by women and minority group members on boards of directors—and I don’t see that as much today.
I think the arguments in favor of board diversity are much more sophisticated today, and that we’re really talking about trying to help boards to provide stronger oversight. We’re trying to help boards to eliminate the possibility of groupthink I think.
Yet, this supposed role of diverse directors is in some tension with two other strong narratives that emerge from our interviews: (1) the importance of collegiality and getting along in the boardroom and (2) the efforts undertaken by female and minority directors to fit in and conform to the prevailing boardroom culture – in short, to behave like, and be accepted on the same terms as, any other board member. This “fitting in” is a task on which many of our respondents report spending substantial time and effort.
In my next post, I’ll describe those efforts in more detail.