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Why Does Board Gender Diversity Matter and How Do We Get There? The Role of Shareholder Activism in Deinstitutionalizing Old Boys’ Networks

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Abstract

This essay bridges together social network and institutional perspectives to examine how women on boards, by breaking up directors’ homophilous (e.g., all-male) networks, contribute to board effectiveness. It proposes that through real and symbolic representations, women enhance perceptions of the board’s instrumental, relational, and moral legitimacy, leading to increased perceptions of the board’s trustworthiness which in turn fosters shareholders’ trust in the firm. Envisioning the gender diversification of boards as an event of institutional change, this article considers the critical role of shareholder activists and legislative support from the SEC in the deinstitutionalization of old boys’ networks and the reinstitutionalization of gender diverse boards. This work is substantiated with evidence obtained through 34 semi-structured interviews, archival and documentary evidence.

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Notes

  1. It could be argued that boards’ role is to generate trust among a broader array of stakeholders than shareholders alone. This paper focuses on the board-shareholder relationship because of the legal description of the board as a governance mechanism in place for the benefit of shareholders, whereas conceptually, firm performance may be expected to vary with perceptions of the firm’s trust from other stakeholders as well.

  2. The increasing role of professional agencies in directors’ recruiting is slightly altering this dynamic, although it is still common for boards to first attempt to fill board seats through personal contacts and references and then, failing success, to resort to the expensive services of recruiting agencies.

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Acknowledgments

The author wishes to thank two anonymous reviewers for their helpful comments on this manuscript and the financial support of the Center for Women in Business at Bentley University. The author also thanks Cynthia Clark for access to shareholder resolutions data.

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  1. School of Business, College of Charleston, 5 Liberty Street, Suite 328, Charleston, SC, 29424, USA

    Elise Perrault

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Perrault, E. Why Does Board Gender Diversity Matter and How Do We Get There? The Role of Shareholder Activism in Deinstitutionalizing Old Boys’ Networks. J Bus Ethics 128, 149–165 (2015). https://doi.org/10.1007/s10551-014-2092-0

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