Recategorization into the In-Group: The Appointment of Demographically Different New Directors and Their Subsequent Positions on Corporate Boards

Abstract

This study advances a recategorization perspective to explain how an increasing number of directors have successfully obtained major board appointments and played important roles on boards despite their demographic differences from incumbent directors. We theorize and show that existing directors tend to select a demographically different new director who can be recategorized as an in-group member based on his or her similarities to them on other shared demographic characteristics. We further explain how a new director’s prior social ties to existing directors strengthen this recategorization process and posit that recategorization increases demographically different directors’ tenures and likelihood of becoming board committee members and chairs. Results from analyses of Fortune 500 boards from 1994 to 2006 provide strong support for our theory. This study suggests that increased board diversity on some demographic characteristics is associated with reduced diversity on others. It also suggests that some demographic characteristics, such as gender and ethnicity, would be more salient during the recategorization process than other characteristics. As a result, female and ethnic minority directors would need to be more similar to incumbents along shared dimensions than other demographically different directors (such as a young director) for them to be recategorized into the in-group.

Keywords: recategorization, directors, board committees, demographic differences, diversity, female, gender, ethnic minority, social ties