The Influence of Board Diversity, Board Diversity Policies and Practices, and Board Inclusion Behaviors on Nonprofit Governance Practices

Introduction

By 2039, a majority of the U.S. workforce will identify as members of nonwhite race-based minoritized groups. Yet, despite this growing workplace diversity, these demographic shifts have not yet been reflected in the makeup of either for-profit or nonprofit boards. One study in 2013 found that across all Fortune 500 companies, board members were 73% white men, 13% white women, 10% men of color, and just 3% women of color. This disparity in representation was also prevalent among nonprofits, where 82% of board members identified as white as of 2012, and a majority also identified as men. 

Ensuring board diversity is critical to meeting the needs of diverse communities and customer segments, promoting an organizational culture of inquiry, and challenging inequities in American society. Therefore, more research is needed on the absence of diversity on nonprofit boards and how diversity policies and practices impact a board’s performance. The authors of this article add to the literature in this space by assessing how and when the performance of a board is impacted by the diversity of its members. Specifically, they study the impact of board diversity on internal governance practices like understanding the organization and the board’s roles and responsibilities, and external governance practices including fundraising, engaging with the community, and recruiting new members.

Kathleen Buse is an adjunct professor at Weatherhead School of Management. Ruth Sessler Bernstein is an Assistant Professor of Nonprofit Management at Pepperdine University. Diana Bilimoria is the KeyBank Professor and Chair of the Department of Organizational Behavior at Case Western Reserve University.

Methods and Findings

To assess the impact of diversity on a nonprofit board’s governance performance, the authors drew on data from Boardsource, an organization focused on improving organizational effectiveness by strengthening the capacity of boards. Specifically, they collected survey responses from 1,456 nonprofit chief executive officers about their board’s structure and demographics, organizational characteristics, diversity and inclusion policies, meeting practices, compliance with governance roles and responsibilities, and collaborative leadership practices. The authors also drew on the survey data to calculate a measure of relative diversity of each board, with respect to race, ethnicity, gender, and age.

The authors tested the following eight hypotheses:

• That gender, age, and racial diversity positively and directly impact (1) internal governance practices and (2) external governance practices;
• That (3) board diversity practices and (4) board inclusion behaviors positively and directly impact the internal and external governance practices of a board;
• That board diversity practices positively influence the relationship between race, age, and gender and a board’s (5) internal governance practices and (6) external governance practices;
• That board inclusion behaviors positively influence the relationship between race, age, and gender and a board’s (7) internal governance practices and (8) external governance practices. 

The authors found mixed results for these hypotheses. Gender diversity, the presence of diversity policies and practices, and board inclusion behaviors all had significant positive effects on internal and external governance practices. 

Contrastingly, racial and ethnic diversity was found to have a negative relationship with both internal and external governance practices. However, this negative relationship was partially mediated by diversity policies and inclusion behavior, such that racial diversity had a positive influence on board performance when diversity policies and inclusion behaviors increased. Age diversity was found to positively impact diversity policies and practices, but did not have a significant relationship with governance performance.

Conclusions

This study demonstrates that racial, ethnic, gender, and age diversity on a nonprofit’s board affects its governance performance. This study also provides evidence that diversity policies and practices and inclusion behaviors also have a positive impact on board performance. Finally, it also sheds light on an important nuance regarding the relationship between racial and ethnic diversity and board performance. Specifically, racial and ethnic diversity appears to have a negative relationship with governance performance, but that impact becomes positive when diversity policies and inclusive behaviors are present.  

The authors conclude that organizational leaders must draw on research related to governance effectiveness to materially improve their governing board’s performance. This study also specifically indicates that efforts to enhance board diversity must be paired with meaningful diversity policies and practices and inclusive behaviors to maximize performance improvements. 

This work may be expanded on through further investigation of other relevant factors that may impact nonprofit board effectiveness. Additionally, future research could investigate the role of diversity in other types of organizations like local government bodies or private sector boards.