British Journal of Management, Vol. 24, 85–101 (2013) DOI: 10.1111/j.1467-8551.2011.00789.x
What Makes Better Boards? A Closer Look at Diversity and Ownership
Walid Ben-Amar, Claude Francoeur,1 Taïeb Hafsi1 and Réal Labelle1
Telfer School of Management, University of Ottawa, 55 Laurier East, Ottawa, Ontario K1N 6N5, and 1 HEC Montreal, 3000 Côte-Sainte-Catherine Road, Montreal, Quebec H3T 2A7, Canada Email: firstname.lastname@example.org, email@example.com, firstname.lastname@example.org, email@example.com
This study investigates the joint effect of corporate ownership and board of directors’ diversity conﬁgurations on the success of strategic merger and acquisition (M&A) decisions. Board diversity is deﬁned as the extent to which its demographic diversity as measured by the culture, nationality, gender and experience of its directors complements its statutory diversity. A theoretical framework linking ownership, board diversity and M&A strategic decision making is proposed and tested. Based on a sample of 289 M&A decisions undertaken by Canadian ﬁrms over the period 2000–2007, demographic diversity is found to have a clear and non-linear effect on M&A performance while statutory diversity is of limited inﬂuence. Ownership is found to inﬂuence the effect of diversity, making the relation ﬁner and more precise. This has practical implications. First, statutory diversity is not sufﬁcient for well-performing boards. Also, ownership is an important factor. The most advocated board diversity aimed at insuring the board’s independence is not valid across all ownership conﬁgurations. From a public policy perspective, results provide support for the principles-based approach in governance. Governance regimes should encourage the search for a balance between board diversity and the need for cohesion that best serves the ﬁrm’s purpose and obligations.
Board’s diversity and its effect on ﬁrm performance have been extensively studied and yet it