Journal of Law, Finance, and Accounting > Vol 7 > Issue 2

Diversity through Turnover: How to Overcome the Glacial Pace toward Board Diversity?

Wei Jiang, Asa Griggs Candler Professor of Finance, Goizueta Business School, Emory University, USA, wei.jiang@emory.edu
 
Suggested Citation
Wei Jiang (2023), "Diversity through Turnover: How to Overcome the Glacial Pace toward Board Diversity?", Journal of Law, Finance, and Accounting: Vol. 7: No. 2, pp 165-190. http://dx.doi.org/10.1561/108.00000062

Publication Date: 17 May 2023
© 2023 W. Jiang
 
Subjects
Corporate finance,  Organizational behavior
 
Keywords
JEL Codes: G34
Board diversityBoard turnoverproxy contest
 

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In this article:
Introduction 
Data and Sample Overview 
Determinants of Board Gender Diversity 
Why Is the Progress Slow? 
Conclusion 
References 

Abstract

Based on a comprehensive database of corporate board directors, this study provides an overview of recent developments in the gender diversity of US corporate boards. Prior to 2009, women made up about 8% of the directors of US corporate boards. As of 2019, that proportion has since risen to 18% among public firms, while private firms have not witnessed notable improvement. This study highlights the general lack of board turnover—that is, board inertia resulting in incumbents enjoying long tenure—as a key factor in the slow adjustment. Proxy contests resulting from shareholder activism increase the odds that the boards will gain female directors by 32%, despite activist directors themselves being no more gender-diverse compared to new directors added in the absence of contests. This is because firms targeted by proxy contests double board turnover rates, allowing them to tap into a fresh pool of director candidates which is significantly more diverse than the incumbents.

DOI:10.1561/108.00000062