Boardroom racial diversity: Evidence from the Black Lives Matter protests

Research Question/Issue

This paper provides evidence that the Black Lives Matter (BLM) protests that followed the killing of George Floyd on May 25, 2020, brought immediate changes to the US corporate boards.

Research Findings/Insights

Using a sample of S&P 500 index companies, we find that companies with higher representation of Black directors are associated with higher stock returns during the mass BLM protests. Within 1 year after the BLM protests, 10.7% of the sample firms hired at least one Black director (compared to having no Black representation on the board before the protests), and 31% of the newly appointed directors were Black. We find that companies typically add new diverse directors by increasing the board size, but there is no evidence of negative value effect or decreasing director quality.

Theoretical/Academic Implications

We have observed increased disclosures of racial equity topics in the proxy statements, as well as significant increase of Black director representation in the boards. In the meantime, we do not find any valuation or stock performance effects related to boardroom racial diversity 1 year after the BLM protests.

Practitioner/Policy Implications

Mass protests play an important role in shaping corporate governance responses. The finding that racial diversity can be increased at an unprecedented speed without loss in value is consistent with the view that a boost in boardroom diversity is possible under strong multichannel pressure from investors, consumers, employees, and regulators.