Corporate Law and Organizational Design: The Case of Board Gender Diversity

Abstract

Corporate law research has traditionally centered on the role of board governance in generating positive business outcomes. This focus is somewhat unexpected since value is more often a product of the entire organization rather than just its governing entities. Despite frequent scholarly discussions on the financial impacts of corporate law, the organization's broader contribution is sometimes undervalued. This Article delves into how corporate law intersects with organization science to yield diverse business results, placing particular emphasis on board gender diversity as a crucial legal mechanism to enhance firm performance, innovation, growth, and sustainability. To illustrate this, the paper takes an in-depth look at the Silicon Valley Bank (SVB) collapse as a case study, highlighting the intricate relationship between corporate law and the pivotal role of organizational dynamics in assessing the effectiveness of board gender governance. The Article argues that the success of diversity initiatives at the board level depends on organizational frameworks and communication systems that emphasize inclusivity and fair representation. In pursuit of this, it proposes three major reforms: (1) implementing a mandatory stakeholder disclosure system under a 'comply or explain' framework, (2) instituting contextualized gender quotas for mid-level managers in hierarchical decision-making structures, and (3) initiating specific strategies to enhance gender diversity among executive teams. These recommendations aim to maximize the effectiveness of diverse boards, calling on legislators to integrate organizational factors more deeply into the making of corporate law and governance policies.