Just Diverse Among Themselves: How Does Negative Performance Feedback Affect Boards’ Expertise vs. Ascriptive Diversity?

We investigate how negative performance feedback affects board diversity, which is instrumental in shaping a firm’s strategic change. When firm underperforms compared with its aspiration, motivated to promptly address the underperformance. The needs not only help search for alternatives but also quickly build consensus around reorientation. These two motivations lead value dimensions of diversity among members differently. On one hand, understand problem underperformance and find solution, seek new expertise, avoiding redundancy pool expertise already represented boardroom. This results higher level director expertise. other urgent need prompts trust solidarity avoid potential conflict directors. Because people perceive others similar ascriptive backgrounds as trustworthy, changes an underperforming are likely yield lower members’ backgrounds. affected by committee chairs whose power influence significant Analyses boards 733 U.S. listed manufacturing firms show that when aspirations, it increases decreases diversity. on gender or racial minorities, association between weakened. Supplemental Material: e-companion available at https://doi.org/10.1287/orsc.2022.1595 .