Leadership

Women On Board: Does Forced Diversity Hurt Firm Performance?

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Executive Summary

New SEC rules will require public firms to disclose what role, if any, diversity plays in appointing members to their corporate boards, but Ross School researchers say any forced restructuring of boards in the name of equality could hurt companies. Boards are chosen in order to increase shareholder wealth. Placing restrictions on the composition of a board will reduce value. Currently, there is no SEC-mandated definition of what constitutes diversity and there are no restrictions on who companies can appoint to their boards. Corporate nominating and governance committees may consider such factors as professional experience, education, gender, race or national origin.

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