Are corporate boards ready for change?

A corporate board is a group of managers representing the owners of a company. They are responsible for shaping the corporation`s strategy and are one of the highest decision-making bodies alongside the shareholders` meeting. The decisions made by corporate boards not only impact the company itself but can also have effects on the economy and society at large. Their strategies regarding profitability, sustainability, and social responsibility are publicly observed and can influence the behavior of other managers and decision-makers in both private and public sectors. As such, corporate board members often serve as role models for future generations of leaders. While the general composition of corporate boards has been studied extensively, the factors influencing diversity within these boards and its effects remain unclear. We know that diversity generally enhances decision-making in groups, but its specific impact on corporate boards is less understood. In our project we will therefore mainly focus on two questions. We want to find out which mechanisms influence the amount of diversity on corporate boards over time. This involves examining the networks of corporate boards and their members, as previous research indicates that these networks play a crucial role in board member recruitment. We also want to find out how diversity influences the governance of the board with respect to decisions that influence profitability, sustainability and social responsibility. This means that we have to evaluate in how far quantitative measures of these goals are related to diversity. Hence, there are two key reasons why diversity on corporate boards is important. First, diverse boards tend to make better decisions. Second, diversity ensures that different societal perspectives are represented, which can enhance opportunities for future generations in top- level decision-making roles. In our research we will analyze diversity based on two different data sources. Together with our collaborator at Keio University we will analyze data on corporate boards in Japan. In this part of the project, we will focus on the time-evolution of the composition of corporate boards, as well as interaction effects in the boards networks. Additionally, we will analyze diversity among firms in the EU, investigating how board diversity relates to company strategies regarding profitability, sustainability, and social responsibility.