Diverse corporate boards still have glass ceilings

Diverse representation on corporate boards does not necessarily translate into more leadership opportunities for women or minorities, research suggests.

The #MeToo era has shined a spotlight on the challenges faced by women in the workplace, from sexual misconduct to inequality in pay, and widened to include the concerns of minorities and marginalized groups.

White men were around 30% more likely to get leadership roles despite often possessing weaker qualifications.

In an analysis of 2,000 public firms, researchers found that throughout an 11-year period beginning in 2006, gender and racial diversity increased on corporate boards, but white men continued to dominate leadership roles on those boards. This leadership gap remained even when diverse candidates had greater experience.

“While we are making great strides, women and minorities are still not being put in positions of real decision-making power,” says Adam Yore, an assistant professor in the University of Missouri’s Robert J. Trulaske, Sr. College of Business. “Diverse representation is important, but this is a reminder that we have work to do. Simply adding diversity does not automatically remove the glass ceiling.”

A variety of factors made corporate boards ideal for studying workplace diversity, Yore says. Boards typically consist of nine people, including five leadership roles: the chairperson or lead director and the chairs of the four most influential subcommittees (the audit, compensation, nominating, and governance committees) who oversee various aspects of the business. In contrast to other research on leadership or pay gaps, the candidates for these roles were the board members themselves. Therefore, information about their backgrounds and qualifications was publicly available, which allowed researchers to easily compare those who attained leadership roles with those who did not.

The results were stark. White men were around 30% more likely to be given leadership roles despite often possessing weaker qualifications. While relevant experience and education boosted chances for white men, that effect was significantly diminished for women, and even more so for minorities.

Researchers also tested whether the results were due to women or minorities lacking specific experience with corporate boards or being too busy serving on multiple boards. In the end, they conclude that only race and gender explained the differences in representation.

“There have been some alternative explanations for these gaps in representation—that women choose different jobs than men or are more risk averse, for example,” Yore says. “We designed our study to address these possibilities, and none of them matched the negative impact of race and gender.”

Yore says the study does have a silver lining: Companies with formal diversity policies and those with diverse representation on their nominating committees are more likely to have diverse leadership. The results suggest that companies looking to make a meaningful impact on the diversity of their leadership can implement such policies to move beyond surface-level change, Yore says.

The study, forthcoming in the Journal of Financial Economics, is publicly available here. Coauthors are from the University of Delaware and the University of South Carolina.

Source: University of Missouri