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:
Text
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.