From tokens to key players: The influence of board gender and ethnic diversity on corporate discrimination lawsuits

Abstract

Does the appointment of more women and ethnic minority directors on corporate boards help combat discriminatory work environments? This empirical study addresses this question by exploring the occurrence of large-scale discrimination lawsuits. Drawing from social identity theory and empathy-based perspectives, we propose that a greater presence of female and minority directors on boards reduces the likelihood of large-scale discrimination lawsuits given their propensity to advocate for underrepresented groups in the workplace. Our analysis of data from 452 US firms from 2010–2015 indicates that a higher proportion of female and minority directors on boards is associated with a lower likelihood of such lawsuits. Specifically, the likelihood of such lawsuits is lower where there are three or more (a critical mass) female and minority directors. “Token” appointments (one or two female or minority directors) do not reduce the occurrence of these lawsuits. Further, the joint presence of minority and female directors on boards significantly reduces the likelihood of such lawsuits. Finally, we found that female CEOs help in reducing the occurrence of such lawsuits when the board has two or more female directors. Overall, our findings highlight the utility of greater gender and ethnic diversity on boards in combating workplace discrimination.