Grow The Pool: Diverse Directors Associated with Stronger Performance, but not if they are Too Busy

Vol. 21, No. 4, 2023
Mouhamadou M. Ba, Gerald T. Garvey, Brett Z. Miller and Katharina J. Schwaiger

Minority representation on US boards has grown more than 50% in the last eight years, but this reflects an increase in the number of seats for existing minority directors as much as a diversification of the director talent pool. We find that the share of minority directors only has a positive association with future returns if we restrict attention to those with less than four seats. Furthermore, there is a negative stock price reaction when a minority director obtains more than three seats on other boards. Diverse, non-busy boards are also associated with stronger employee ratings on social media.