Diversity, equity and inclusion have become top of mind for many businesses and their leadership. Some states, like California, have even begun to outline requirements that boards of publicly held companies be diverse — in terms of gender, race and sexual orientation — by 2022.
The problem? Diversity is being treated like it can simply be checked off a list, rather than being pursued with intentionality.
“Companies often elect women or minorities to their board but then place them on committees that don’t matter — they’ll be on non-SEC-mandated committees like HR or community relations,” Quinetta Roberson, John A. Hannah Distinguished Professor of management, said.
Roberson has two go-to questions when she is asked to be on a board of directors: “What do you think that I bring to your board?” and “Where do you see my involvement on the board in terms of committees?” She said that how the company answers will indicate whether they’ve thought about how to actually utilize her skillset and not just include her for reputational purposes.
“At a general level people say diversity drives firm performance, but a lot of the research doesn’t show causality, it only shows a relationship. What I know from my research is diversity can drive performance, but we don’t know the how.”
Research showing the value of diversity in corporate governance has been lacking until now. Led by Roberson, in collaboration with professor Mo Wang and associate professor Aaron Hill from the University of Florida, a new project funded by the National Science Foundation will delve into the diversity–performance relationship. The team was awarded a three-year, $350,000 grant from NSF’s Science of Organizations program, which kicked off Oct. 1.
“Board diversity and performance is in a black box. We’re focusing on that black box and, in particular, what different board members with different identities bring to the board through their experiences and background and how that translates into performance.”
The team will examine five publicly available datasets with information on roughly 1,500 firms from 2007 to 2017. The different datasets house information on board makeup, organization firm performance, experiential characteristics and more to build a comprehensive picture. Veering away from a limited view on surface-level diversity — like gender, race and age — the team will study experience-based diversity, which captures deeper elements such as a person’s school background, tenure and role or function at the organization.
At the culmination of the project, Roberson says the team will have a shareable database for others to replicate or run additional analyses from. The team hopes to create a website to house the data and results — embracing NSF’s emphases on open science and creating a broad impact.
“We want to get our results in front of organizations that focus directly on boards and board composition and service,” Roberson said. “We want to produce a report housed on the website and develop a benchmarking report to be able to coach organizations on how to better leverage their board diversity. We also talked about having a webinar to do outreach to organizations to present findings with industry partners like CEO Action for Diversity and Inclusion or the African American Directors Forum.
“It’s not about how to get diversity, but really it’s about how to put it in place to actually make a difference and help to drive performance.”
When it comes to showcasing the Broad College, Associate Dean for Research and University Distinguished Professor John Hollenbeck noted that “the themes of diversity, equity and inclusion are central to the recently released MSU Strategic Plan, as well as the college’s Strategic Plan, making this project perfectly in line with the goals of our institution.”
The project team will also help junior researchers and students gain valuable hands-on experience. Roberson said the team will work with doctoral and undergraduate students to conduct the research, as well as making data available to students from underrepresented groups at historically black colleges and universities, for example, who might not have the access to the same resources that we do at MSU.
“A lot of people do great research, but they don’t necessarily think about implications beyond journal publication.” Roberson said. “NSF wants to fund projects that consider how society benefits from this work. So, we tried to be very thoughtful about the implications beyond our work, beyond just the organizations and their boards, but really what are the different stakeholders that we could positively impact along the way.”
In terms of the reactions elicited by the NSF review team, one reviewer noted, “I review approximately 10 proposals a year in this area of research and judge this to be amongst the top 1–2. This research will lead to new and insightful contributions.” Another reviewer remarked, “This is a proposal with tremendous potential to make a contribution to science and potential to make a contribution to practice. The research team is outstanding and the research plan is solid. This has all the makings of a highly successful and impactful project.”
Ultimately, Roberson is hoping to illuminate how and why board diversity matters and give business leaders the tools to make the right decisions.
“I want to be able to leap beyond what we have now, which is just saying that board diversity matters, to be able to say you have to give some thought to how it matters and why it matters. I want companies to think about what they are trying to achieve because you can’t just plug and play diversity; you need to think about how it can really work strategically.”
Hear more from Quinetta Roberson on the Broad Matters podcast. In Season 4, Roberson discussed her work and the strategic advantage of DEI when businesses invest authentically.