How Experience and Network Ties Affect the Influence of Demographic Minorities on Corporate Boards

We examine how outside directors who are demographic minorities on corporate boards of directors can exert influence over strategic decision making. Drawing from social psychological research on minority influence and self-categorization in small groups, our theoretical framework suggests that in order to predict whether minorities will become involved in board decision making and exert influence over strategy, one must look beyond the board itself to consider the prior experience of directors in a minority role on other boards, as well as the larger, social structural context in which demographic differences are embedded. We suggest that demographic minorities can avoid out-group biases that would otherwise minimize their influence when they have prior experience on other boards or network ties to other directors that enable them to create the perception of similarity with the majority. We assess the effects of minority status according to five different demographic characteristics, including functional background, industry background and education, as well as race and gender, for a large sample of corporate outside directors at Fortune/Forbes 500 companies. The results support our theoretical framework. We find that (1) the prior experience of minority directors in a minority role on other boards can enhance their ability to exert influence on the focal board, while the prior experience of minority directors in a majority role can reduce their influence; (2) the prior experience of majority directors in a minority role on other boards can enhance the influence of minority directors on the focal board, and (3) minority directors are more influential if they have direct or indirect social network ties to majority directors through common memberships on other boards. We discuss implications for research on corporate governance, organizational demography, and intergroup relations