Diversity on Corporate Boards: How Much Difference Does Difference Make?

Deborah L. Rhode & Amanda K. Packel

This article seeks to evaluate the case for racial, ethnic, and gender diversity on corporate boards of directors in light of competing research findings. The analysis provides a comprehensive overview of recent studies on board diversity and explores whether diversity has been shown to improve corporate financial performance, reputation, governance, and board decision making. After exploring the strengths and limitations of various methodological approaches and survey findings, the article concludes that the relationship between diversity and financial performance has not been convincingly established. The review does, however, find some theoretical and empirical basis for believing that when diversity is well managed, it can improve decision making and can enhance a corporation’s public image by conveying commitments to equal opportunity and inclusion. To achieve such benefits, diversity must ultimately extend beyond tokenism, and corporations must be held more accountable for their progress. Discussion also focuses on the barriers to achieving diversity and suggests strategies for boards, policy makers, institutional investors, and corporate social responsibility organizations to promote more inclusive boards.