Today’s Room For Debate: Board Diversity

Following close on the heels of last week’s mini-symposium, What’s The Return On Equality?, today’s New York Times Room For Debate poses the question, “What is the effect of having more women on corporate boards?”

My contribution, What Does Corporate Boardroom Diversity Accomplish? is here.  As is common with these things, I did not pick the title – in fact, my proposed title was “What Not To Expect From Board Diversity” – the answer being higher earnings. The title used by the Times seems to me to actually minimize the extent of the debate between me and the Catalyst contributor, whose post is particularly egregious, though not in ways that will surprise those familiar with the Catalyst party line. 

Nonetheless, hopefully some Lounge readers will enjoy.

I hope to have some time later this week to expand somewhat on the points I raise in the post. 

Comments

[Derek Tokaz]

One thing that seems to be missing from the debates over board diversity and diversity in other top level management positions is the idea of institutional diversity.

While there is no reason that ALL corporate boards should be exclusively filled with white men, there may good reason that SOME corporate boards are homogeneous.

[Kim Krawiec]

Thanks for the comment, Derek. I don't think I've seen this discussed either, but am not entirely sure of your argument. Are you suggesting that there is a business advantage to homogeneity in the boardroom? If so, what would it be? The closest we've come to this issue is with respect to businesses (especially financial institutions) that serve a minority (usually exclusively latino, or exclusively African-American, for example) clientele. Although arguments in favor of homogeneity are sometimes made there (and those boards are often quite homogenous, at least in terms of race) our respondents -- in a rare example of logical consistency -- pushed back against the notion. This was especially true of minority respondents who served on such boards. Many cited "group think" or "insularity" as potential problems and explicitly stated that they'd like to see more diversity on those boards. The fact that these boards remain relatively non-diverse does suggest that the view is not universally shared, though.

[Derek Tokaz]

Kim,

Sure, I can think of a couple instances where homogeneity could end up being beneficial.

The first is in a space where there are many firms competing, and for any firm to gain a significant foothold in the market, they need to distinguish themselves. If your leadership has a different composition from the rest, you may have better odds of developing a strategy different from other firms.

I agree that group think and echo chambers are typically bad. But, it would be possible to develop group think on an industry-wide scale, where every firm keeps coming up with the same ideas. Giving your firm a different internal dynamic, even one which in other situations is generally disadvantageous, may prove useful.

The second is what I'm going to call Shark Tank Homogeneity. If you're familiar with the show, it's very common for the sharks to not make an offer simply because it's outside their expertise, they're not the target audience, and they wouldn't bring much to the table as far as skills and connections. If you have a product or service with a very niche market (such as beard oils), you may be much better served with a very homogeneous leadership. Perhaps not perfectly homogeneous, but I doubt anyone would say it's wrong for men with beards to be disproportionately represented in the leadership of Beardbrand.

[Kim Krawiec]

Got it, thanks for clarifying, Derek. You’re right, I don’t think I’ve seen this discussed much. Here’s where I think this would fit into the board diversity debate, as it relates to race and gender (which was the focus of the NY Times Room For Debate, though of course diversity could – and on a corporate board, normally is, defined in other ways as well). What you’re suggesting is that for a limited set of firms there is some benefit from a homogeneity of skill set or expertise. Diversity advocates would counter that homogeneity of skill set need not imply race or gender homogeneity. In fact, it has been hypothesized that one reason race and gender diversity in the boardroom may not produce the benefits that have been observed in other settings is because directors – regardless of their race or gender – remain so homogenous in terms of skill set, expertise, and training.

If I understand you correctly, you would counter that, although homogeneity of skill set need not imply a homogeneity of race or gender, if the number of people having that skill set is small enough, or nondiverse enough, then you would nonetheless see all white male boards – or, as you’ve put it, “men with beards to be disproportionately represented in the leadership of Beardbrand.” And that is actually kind of similar to the argument made with respect to some tech firms, who are among the least diverse boards, in terms of race and gender.

I hope I haven’t misrepresented you in all of that, but if I have feel free to correct me. These are ultimately interesting empirical questions, I suppose – both re: homogeneity of skill set and re: diversity of race and gender within those skill sets.

Thanks for the discussion, Derek! This has all been very thought-provoking.