What Makes Better Boards? A Closer Look at Diversity and Ownership


  • Claude Francoeur and Réal Labelle gratefully acknowledge financial support from the Social Sciences and Humanities Research Council of Canada (Grant 410-2011-2639), the Stephen A. Jarislowsky Chair in governance and the CGA Professorship in Strategic Financial Information. Taïeb Hafsi acknowledges support from the Montreal Interuniversity Institute of Governance (IGOPP), from the Rebrab, and from the Somers families.

Email: benamar@telfer.uottawa.ca, claude.francoeur@hec.ca, taieb.2.hafsi@hec.ca, real.labelle@hec.ca


This study investigates the joint effect of corporate ownership and board of directors' diversity configurations on the success of strategic merger and acquisition (M&A) decisions. Board diversity is defined as the extent to which its demographic diversity as measured by the culture, nationality, gender and experience of its directors complements its statutory diversity. A theoretical framework linking ownership, board diversity and M&A strategic decision making is proposed and tested. Based on a sample of 289 M&A decisions undertaken by Canadian firms over the period 2000–2007, demographic diversity is found to have a clear and non-linear effect on M&A performance while statutory diversity is of limited influence. Ownership is found to influence the effect of diversity, making the relation finer and more precise. This has practical implications. First, statutory diversity is not sufficient for well-performing boards. Also, ownership is an important factor. The most advocated board diversity aimed at insuring the board's independence is not valid across all ownership configurations. From a public policy perspective, results provide support for the principles-based approach in governance. Governance regimes should encourage the search for a balance between board diversity and the need for cohesion that best serves the firm's purpose and obligations.