Rethinking board diversity with the behavioural theory of corporate governance: opportunities and challenges for advances in theorising

In this study, a cross-theoretical hybridization between diversity archetypes and the behavioural theory of corporate governance is proposed. Within an integrative theoretical framework, I discuss three variants of the board’s social setting: diversity as variety; separation; and disparity. Their influence on the mechanisms of the socially-situated and socially-constituted agency, and in consequence the socially-constructed boardroom reality, is considered. The model stipulates what kind of impact individual agency perception, associated with each diversity archetype, can be expected to have on board task effectiveness (monitoring/control, resource-provision, and strategy-making/consulting). There are altogether six theoretical propositions made in this paper. The study represents an application of the behavioural theory of corporate governance in the theory-building paper. I utilise the notion of diversity and the theory of subgroups from existing group effectiveness literature. The proposed theoretical framework strongly benefits from recent taxonomically-systematizing efforts in the area of diversity research. The proposed model also allows for due consideration of behavioural patterns in the boardroom. This framework scores high on its generalisability to a wider population and realism of context, but low on its precision of measurement. A discussion of the model’s limitations unfolds in the wider context of the challenges and paradoxes/conundrums with which the community of corporate governance scholars is invariably confronted. The model suffers from a limited translatability of findings into actionable managerial implications and recommendations of the regulator, as expressed in corporate governance codes.