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Signaling Through Board Diversity: Is Anyone Listening?

Lissa L. Broome

University of North Carolina (UNC) at Chapel Hill - School of Law

Kimberly D. Krawiec

Duke University School of Law

December 8, 2008

University of Cincinnati Law Review, Forthcoming
UNC Legal Studies Research Paper No. 1132884

Abstract: The ethnic and gender make-up of corporate boards has been the subject of intense public and regulatory focus in many countries, including the United States, in recent years. Of particular interest has been quantitative research on the impact, if any, of board diversity on corporate performance. This body of work leaves substantial gaps in our understanding of the precise mechanisms by which board diversity may alter the corporate environment, if indeed it does. In this Symposium, we discuss some preliminary findings from our first thirty-five of a series of confidential, semi-structured interviews of 45 to 90 minutes in length with corporate directors and other interested parties. Due to multiple board service, these interviews represent ninety-six public company board experiences at eighty-five different public companies.

We limit our discussion in this Symposium to an analysis of the rationale for board diversity that figured most prominently in interviews with our initial sample of respondents: signaling theory. Although signaling is frequently mentioned by our respondents and other researchers as a rationale supporting board diversity, we conclude that the distribution of costs and benefits of board diversity in "good" firms versus "bad" firms is unknown. We thus are unable to conclude that "bad" firms are not mimicking the signal, undermining the stability of board diversity as a meaningful signal. We, therefore, approach blanket assertions of the signaling benefits of board diversity with caution. We conclude that the signaling rationale for board diversity is at its strongest under particular conditions that may not exist in all corporations at all times.

Number of Pages in PDF File: 41

Keywords: corporations, boards of directors, diversity, women, minorities, signaling

JEL Classification: K22

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Date posted: May 13, 2008 ; Last revised: December 26, 2014

Suggested Citation

Broome, Lissa L. and Krawiec, Kimberly D., Signaling Through Board Diversity: Is Anyone Listening? (December 8, 2008). University of Cincinnati Law Review, Forthcoming; UNC Legal Studies Research Paper No. 1132884. Available at SSRN: http://ssrn.com/abstract=1132884

Contact Information

Lissa L. Broome
University of North Carolina (UNC) at Chapel Hill - School of Law ( email )
Van Hecke-Wettach Hall, 160 Ridge Road
CB #3380
Chapel Hill, NC 27599-3380
United States
919-962-7066 (Phone)
919-962-1277 (Fax)

Kimberly D. Krawiec (Contact Author)
Duke University School of Law ( email )
210 Science Drive
Box 90362
Durham, NC 27708
United States

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