Decreasing Diversity: Corporate Board Contagion

Melinda Roth

ABSTRACT

This article argues that the landmark 2023 decision by the Supreme Court in Students for Fair Admissions v. Harvard (SFFA) not only eliminated affirmative action and the use of race in college admissions decisions but has also led to a contagion effect on efforts to diversify corporate boards.

While there has been some progress on corporate board diversity over the past few years, this headway seems to be in jeopardy since the SFFA decision. Courts have invalidated both state regulations and the NASDAQ stock exchange listing requirement that both tried in different ways to mandate board diversity. Large institutional investors, which previously focused on the diversity of the board of their investee companies, have significantly shifted their policies given the current political climate and backed off from carrying the banner of improving board composition.

The trend in corporate board diversity suggests uneven and inconsistent progress. Data indicates that large U.S. companies are reversing the trend to appoint women, people of color, and those who self-identify as LGBTQ+ to their boards.

The benefits of diversity are well known, especially on corporate boards, where divergent experiences and differing backgrounds help boards avoid groupthink and better fulfill their oversight duties. With mandated quotas no longer constitutionally possible, other methods to improve diversity are needed.

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