Diversity Tokenism

Board gains without broad change

Key takeaways:

• We study 4,078 BLM protests across 636 U.S. counties (2014-2021) using a staggered difference-in-differences design with entropy balancing on pre-treatment county demographics. 

• After local BLM protests, firms headquartered in affected counties add Black directors, with the increase strongest where protests are larger.

• Board gains for Black directors largely offset the representation of non-Black minority directors, indicating substitution rather than net expansion of minority seats.

• These shifts do not consistently extend to executives or the general workforce. In fact, a gap opens between workforce composition and local demographics, especially for Black employees. 

• Diversity rating agencies reward top-level (board) gains, even when similar gains do not occur in the workforce, consistent with selective, high-visibility responses.

• We develop a GPT-4 + Chain-of-Thought prompting name-based classification for race/ethnicity and validate it against a manually verified sample. It improves coverage and accuracy relative to common alternatives.

• A simple cost-and-visibility framework predicts stronger incentives for high-visibility board moves than for costly, firm-wide initiatives. The evidence aligns with that mechanism.

• Download race/ethnicity data here.