Takeaway: A more diverse boardroom can improve firm performance. In this study, researchers found that more racially diverse boardrooms were associated with higher levels of innovation and a better corporate reputation, as well as with better overall performance. In addition, they observed a relationship between gender diversity in the boardroom and corporate innovation.
Suggested Audience: Top leadership, institutional investors, board members, private investors
Researchers looked at 326 Fortune 500 firms, consulting the 2004 Fortune Corporate Reputation Survey to gauge reputation, and measuring innovation as R&D expenditure divided by sales. They measured corporate performance as returns on investment and sales.
A breakdown of boardroom membership revealed that boards in the sample tended to be more gender diverse than racially diverse. Also, more diverse boardrooms tended to be found in larger firms.
Researchers discovered a positive link between racial boardroom diversity and firm innovation, firm reputation, and overall firm performance. In addition, they found a link between gender boardroom diversity and firm innovation. There was no relationship observed between gender diversity and either firm reputation or firm performance.
Keywords: Boardroom diversity, racial diversity, gender diversity, firm performance, reputation, innovation
If citing, please refer to the original article: “Demographic diversity in the boardroom: mediators of the board diversity-firm performance relationship”, Journal of Management Studies, July 2009, Toyah Miller, University of Oklahoma, and María del Carmen Triana, University of Wisconsin-Madison