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The Bottom Line on Board Diversity: A Cost-Benefit Analysis of the Business Rationales for Diversity on Corporate Boards

59 Pages Posted: 26 Oct 2005  

Lisa M. Fairfax

George Washington University - Law School

Abstract

The Bottom Line on Board Diversity: A Cost Benefit Analysis of the Business Rationales for Diversity on Corporate Boards critically examines the business rationales for diversity in order to determine whether they can or should be used to encourage greater diversity on the boards of major corporations. The Article acknowledges the validity of some of the business rationales for diversity within corporations more generally, but questions whether those rationales apply with as much force in the context of corporate boards and the obligations board members undertake. On this point, the Article concludes that such rationales promise more, and in some cases significantly more, than directors of color can realistically deliver. The Article also concludes that while there may be practical reasons for relying on business rationales to encourage corporations to diversify, many diversity advocates have failed to analyze and appreciate the costs associated with adopting business rationales. In fact, these individual and societal costs, including the costs of marginalization and commodification, may outweigh the benefits of using market and economic rationales to justify board diversity.

Keywords: corporations, corporate governance, directors, board diversity

Suggested Citation

Fairfax, Lisa M., The Bottom Line on Board Diversity: A Cost-Benefit Analysis of the Business Rationales for Diversity on Corporate Boards. Wisconsin Law Review, p. 795, 2005; U of Maryland Legal Studies Research Paper No. 2005-58. Available at SSRN: https://ssrn.com/abstract=835406

Lisa M. Fairfax (Contact Author)

George Washington University - Law School ( email )

2000 H Street, N.W.
Washington, DC 20052
United States
202-994-4630 (Phone)

HOME PAGE: http://www.law.gwu.edu/Faculty/profile.aspx?id=16144

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