Boardroom Racial Diversity: Evidence from the Black Lives Matter Protests

46 Pages Posted: 28 Sep 2021 Last revised: 20 Jul 2022

See all articles by Maksims Dzabarovs

Maksims Dzabarovs

affiliation not provided to SSRN

Romans Madesovs

Stockholm School of Economics, Riga

Anete Pajuste

Stockholm School of Economics, Riga; European Gorporate Governance Institute (ECGI); Harvard University - Harvard Law School

Date Written: September 20, 2021

Abstract

This paper provides evidence that the Black Lives Matter (BLM) protests that followed the killing of George Floyd on May 25, 2020 brought long-lasting changes to the US corporate boards. Using a sample of S&P 500 index companies, we find that companies with higher representation of black directors are associated with higher stock returns during the mass BLM protests. Before the BLM protests, black directors held on average 8.2% of the board seats, with each black director holding on average 1.34 board seats, which is significantly higher than for directors of other ethnic origins. Within one year after the BLM protests, 10.7% of the sample firms hired at least one black director (compared to having no black representation on the board before the protests), and 31% of the newly appointed directors were black. We find that companies typically add new diverse directors by increasing the board size, but there is no evidence of negative value effect or decreasing director quality. The finding that racial diversity can be increase at an unprecedented speed without a loss in value supports the view that a boost in boardroom diversity is possible under strong multichannel pressure from investors, consumers, employees, and regulators.

Keywords: Boardroom diversity, corporate governance, mass protests, Environmental, Social and Governance (ESG)

JEL Classification: G12, G14, G30

Suggested Citation

Dzabarovs, Maksims and Madesovs, Romans and Pajuste, Anete, Boardroom Racial Diversity: Evidence from the Black Lives Matter Protests (September 20, 2021). European Corporate Governance Institute – Finance Working Paper No. 789/2021, Available at SSRN: https://ssrn.com/abstract=3931332 or http://dx.doi.org/10.2139/ssrn.3931332

Maksims Dzabarovs

affiliation not provided to SSRN

Romans Madesovs

Stockholm School of Economics, Riga ( email )

Strelnieku iela 4a
Riga, LV 1010
Latvia

Anete Pajuste (Contact Author)

Stockholm School of Economics, Riga ( email )

Strelnieku iela 4a
Riga, LV 1010
Latvia

European Gorporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Harvard University - Harvard Law School ( email )

1563 Massachusetts Avenue
Cambridge, MA 02138
United States

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