The ethnic and gender make-up of corporate boards has been the subject of intense public and regulatory focus in many countries, including the United States, in recent years. Of particular interest has been quantitative research on the impact, if any, of board diversity on corporate performance. This body of work leaves substantial gaps in our understanding of the precise mechanisms by which board diversity may alter the corporate environment, if indeed it does. In this Symposium, we discuss some preliminary findings from our first thirty-five of a series of confidential, semi-structured interviews of 45 to 90 minutes in length with corporate directors and other interested parties. Due to multiple board service, these interviews represent ninety-six public company board experiences at eighty-five different public companies. We limit our discussion in this Symposium to an analysis of the rationale for board diversity that figured most prominently in interviews with our initial sample of respondents: signaling theory. Although signaling is frequently mentioned by our respondents and other researchers as a rationale supporting board diversity, we conclude that the distribution of costs and benefits of board diversity in "good" firms versus "bad" firms is unknown. We thus are unable to conclude that "bad" firms are not mimicking the signal, undermining the stability of board diversity as a meaningful signal. We, therefore, approach blanket assertions of the signaling benefits of board diversity with caution. We conclude that the signaling rationale for board diversity is at its strongest under particular conditions that may not exist in all corporations at all times.
Kimberly D. Krawiec & Lissa L. Broome, Signaling Through Board Diversity: Is Anyone Listening?, 77 University of Cincinnati Law Review 431-464 (2008)