Governance Theory and Board Diversity, Where Do the Rationales for Board Diversity and Governance Theories Converge?

Extensive previous research has discussed the merits of corporate board diversity, but less has been written about whether there exist points of convergence between the merits of board diversity and governance theories.In this paper, in order to investigate the existence of points of intersection, we first review in their historical context four of the most influential governance theories-agency theory, stakeholder theory, stewardship theory, and resource dependency theory-and then we discuss points of articulation between these theories and governance diversity literature.We then discuss whether board diversity rationales are supported in these governance frameworks.That is, we present a theoretical discussion viewing board diversity through the lens of various governance models: agency theory, stakeholder theory, stewardship theory, and resource dependency theory; it will perhaps provide further support for its merits.Agency theory primarily focuses on board oversite and principal versus agent problems.We discuss why board diversity presents a possible deterrent to self-serving behavior by enhancing firm oversite.Stakeholder theory focuses on the representation of all stakeholders, and it appears to provide a robust theoretical basis for board diversity.Our discussion of stewardship theory focuses on issues of trust, altruism, and board competency to exercise its own shared mission with management.Our discussion of resource dependence theory presents literature on how diverse board members' resources are thought to improve board resources and span diverse networks.We conclude with a summary discussion and table where we present the significant objectives of governance theory as it relates to board diversity.We define objectives as 1.)Control of managers by the board, 2) Control of managers by incentives, 3) Inclusion of all affected parties in decision making, and 4) Control social and financial environment.We conclude that stakeholder theory followed closely by resource dependency theory presents obvious articulation points to diversity theory that arises from their own theoretical frameworks.In contrast, agency and stewardship theories seem to have a more tenuous relationship to diversity theory, though not antithetical to it.