In the weeks since Silicon Valley Bank’s collapse, a strain of seemingly bad-faith argument has emerged pinning the bank’s failure on an over-focus on diversity and environmental and social considerations. In particular, one Wall Street Journal column highlighted the makeup of SVB’s board of directors, noting: “The company may have been distracted by diversity demands.”

To understand what research actually says about the link between board diversity and financial performance, we reached out to Wharton assistant professor Stephanie Creary, whose scholarship on diversity, equity, and inclusion includes qualitative research on how diverse boards affect their companies’ bottom line. Here are excerpts from our conversation, lightly edited for length and clarity:

What’s your response to the accusations that SVB failed at least in part because it was too focused on diversity?

The first thing I always do is lead with science and say, what is it that we actually know when we think about the relationship of diversity to any type of performance outcomes? What we know is that the research does not typically find that diversity can harm firm performance. It’s a hypothesis that these folks who are anti-diversity have, but this has been tested. More often than not, it’s found through various mechanisms that diversity can positively impact firm performance, particularly in firms that are already doing well. For example, there’s a variety of papers that say more innovation-focused banks are more likely to benefit from diversity. Diversity is the amplifier. It’s the thing that helps to catapult the firm from a good place to an even better place. A lot of the research is about upper top management teams. Some of it is about employees, and increasingly it’s also about boards.

But we also know from the research that diversity, in many cases, is brought in when a firm is failing. We’re more likely to promote a woman to CEO or hire a Black person for the job when the firm is failing. It’s called the ‘glass cliff’ phenomenon because when the already failing entity happens to fail, who gets blamed? It’s the woman or the Black director.

So, the bank is failing. The bank has some amount of heterogeneity, though it’s still overwhelmingly a white male board. We have two things happening at the same time: We have a firm that is increasing its commitments to ESG and to diversity, and we also have a bank that has a highly risky portfolio. It’s not surprising that a bank that has a highly risky portfolio, when the economic conditions start pressuring it, would start to struggle.

I also think it’s important to understand that the average person doesn’t actually understand what a board director does. They think of board directors as the people who actually run the firm. They can advise, but it’s management’s responsibility to take that advice or not take that advice. So what’s also happening here is people are fundamentally not caring to understand what a board does in relation to a firm. Yes, it is the board’s responsibility to make sure that that firm stays healthy, but then to relegate it to a small number of underrepresented people on a board, and to pass the blame on to the fact that we focused on diversity as being the whole explanation for what happened, is just illogical. That’s the nicest way I can say it. It’s not empiric.

What are the mechanisms through which diversity can enhance performance?

One way is as a revenue-generating mechanism. Over time, what scholars have done—as opposed to just looking at the relative diversity of gender or race or educational institution of the board members or the leadership team—is looked at how diversity affects things like market access, meaning the more diversity that exists, the more access to a broader range of customers. The idea is that they would somehow know more about different markets than a non-diverse team.

The other one is a cost-lowering mechanism: turnover intent. When employees turn over, that is an operating cost, because it costs more relatively to hire and onboard new employees than to keep your employees happy. So we look at how diversity helps to convince more people, particularly people from underrepresented groups, that they should stay in that organization and not leave. It lowers their turnover intent, and lowering the turnover intent can help to enhance the firm’s financial performance.

Why would that be more pronounced in high-performing organizations?

Think about it this way: Diversity can help firms that are really focused on doing more, finding lots of opportunities, to find those opportunities. That’s what market access is. Innovation-focused means you’re actually focused on finding opportunities, and then tapping into these new markets. But if you’re not super-focused on innovating, on creating new stuff, how the heck is diversity actually going to help you access new markets?

Your research has also found that a diverse board alone doesn’t make a difference without the right board culture.

When I had collected my data in 2018, the most prominent diversity conversation on boards was gender diversity. Most of the boards I studied didn’t even have racial diversity or LGBTQ diversity on their radar. They didn’t have this understanding that there was a business case for diversity. And they weren’t yet to a place where diversity was necessarily changing the way that they made decisions. Why, you might ask? Because women get on these boards and they don’t let them talk.

One of the issues is that while we would like boards to be highly functional and effective, a lot of people have gotten on boards as their retirement gigs, and they’re kind of there signing off. So there’s not all this rich discussion and exchange happening. In many cases, it’s literally the chair of the board, who’s often the CEO, presenting hours upon hours of material to the board and saying, ‘Do you have any questions?’ I’ve talked about those as hierarchical boards. In hierarchical boards, that diversity isn’t really mattering because no one’s really talking. Inclusive boards or egalitarian boards are boards that see that bringing in diversity is important, but actually elicit ideas and suggestions and integrate the ideas and suggestions from board directors into what the board does.

Read a full transcript of our conversation.

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