Staggered Board and Sexually Diverse Policies Adoption: Benevolence Motivation or Deeper Entrenchment?

Abstract

Building sexually diverse workplaces has become increasingly crucial for corporates. To create sexually diverse workplaces, firms require a high level of commitment collectively from their stakeholders, especially from corporate leadership. Since the board of directors is critical in monitoring and guiding firms' management, corporate governance structures at the board level are vital to the success of such inclusive policies. Motivated by two opposing views on staggered boards and increasing awareness of LGBTQ+ inclusive policies globally, we investigate how staggered board status affects a firm's involvement in addressing sexual discrimination problems through sexually diverse policies adoption and how such decisions eventually affect firm performance. Based on 5241 firm-year observations over the 1996–2010 sample period, we consistently find a negative relation between staggered boards and the likelihood that firms adopt sexually diverse policies. Additionally, we find staggered boards lead to poor firm performance while firms adopting the sexually diverse policies outperform those not adopting the sexually diverse policies. The findings support the quiet life hypothesis where entrenched managers' decisions are not optimal. Furthermore, we find a strong positive association between staggered board firms adopting sexual diversity and firm value, with net effects higher than firms with annual board elections adopting sexual diversity. Consistent with the stakeholder and good management hypothesis, the latter finding exhibits strong economic benefits of the inclusive policies exceeding downsides of staggered board status, and potential synergies from the dual existence of staggered board status and the inclusive policies.