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Abstract

Ethnic minorities are significantly underrepresented on the Board of Directors of large US firms. White males comprise nearly twice the proportion of directorships of Fortune 1000 companies as they do the total US population. Ethnic diversity in corporate governance is valued as an asset per two prominent theories: Resource Dependence theory and Agency theory. However, Ethnic diversity on the Board of Directors can also impair the group process per Status theory and constraints such as tokenism and marginalization. This paper is aimed at developing both a theoretical and empirical understanding of the value of ethnic minorities on the Board of Directors of Fortune 500 Food Service and Production firms as it relates to financial performance. Analysis of Fortune 500 Food Service and Production firms finds a positive correlation between ethnic diversity on Board of Directors and market value, return on assets, and return on investment. As a result, empirical evidence suggests that future pressures aimed at increasing diversity in corporate governance may prove financially valuable.

Publication Date

2016

Keywords

Diversity, Corporate Governance, Management, Finance, Board of Directors, Human Resource, Business

Disciplines

Business Administration, Management, and Operations | Organizational Behavior and Theory

Current Academic Year

Freshman

Faculty Advisor/Mentor

Mary Boyes

Rights

© The Author(s)

Ethnic Diversity of Boards of U.S. Companies: Business Sustainability and Group Dynamics

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