Authors Link Board Diversity with Corporate Success

By Brus, Brian | THE JOURNAL RECORD, August 14, 2015 | Go to article overview

Authors Link Board Diversity with Corporate Success


Brus, Brian, THE JOURNAL RECORD


OKLAHOMA CITY - The bottom line when it comes to diversity on corporate boards is that executive-level management in Oklahoma could be doing better, local business leaders said.

The bottom line can actually be improved by diversity, according to research by Utah State University researchers Allison Cook and Christy Glass. In the latest edition of the quarterly Strategic Organization academic magazine the women found that a greater array of racial and cultural diversity in Fortune 500 boardrooms correlated to more innovative product developments and efficient operations.

"An interactive effect occurs between a diverse board and the race/ethnicity of the CEO, in that corporate governance strengths and product innovation for the firm are increased when a white CEO operates with a diverse board," Glass and Cook wrote. "Thus, while promoting individual minority leaders is important, board diversity is paramount for achieving corporate benefits."

Steve Agee, dean of Oklahoma City University's business school, said his experience in the business community and academia confirms what the researchers concluded.

"I've served on numerous boards, and it's always good to have diversity at the top level," Agee said. "I've served at different management levels at various organizations as well. ... Diversity at every level is good, especially because it provides you with creative thoughts from people who approach things differently.

"Just hiring one person, whether they're black or white or male or female or whatever, isn't necessarily going to drive successful outcomes for an entity," he said. "At the board level, to foster independence, you typically need diversity, and that usually results in a more successful outcome."

Cook and Glass compiled a list of companies that were included in the Fortune 500 over a decade and studied the demographics of their chief executives and directors, as well as their governance structures, research and development spending, and financial performance.

What they found was counterintuitive to popular management theory. Glass and Cook said individual minority CEOs lacked the authority to significantly sway policy and governance - they actually faced pressure to conform - but influence increased with the number of minority directors and led to broader perspectives that engendered product improvements. They referred to it as the power-in-numbers thesis.

"There is growing evidence that (boards of directors) also play a critical role in shaping firm outcomes," they wrote. "Boards serve as a critical intermediary between investors and other stakeholders and the executives charged with running the organization. …

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