Corporations perform better in every way when they have LGBTQ+ board members
Tim Cook at the 96th Oscars at the Dolby Theatre at Ovation Hollywood in Los Angeles on Sunday, March 10, 2024.
Despite the clear advantages shown in the data, only a miniscule number of board seats are held by out LGBTQ+ people.
By Greg Owen, LGBTQ Nation
A new study from Northeastern University in Boston reveals companies with LGBTQ+ board members outperform their rivals that don’t have the same representation.
Fortune 500 companies with LGBTQ+ board members outperform their peers in both financial and non-financial metrics, according to research from Northeastern’s D’Amore-McKim School of Business.
“These companies tend to do better in sustainability performance measures, better on financial performance and long-term risk and some organizational outcomes,” Ruth Aguilera, one of the study authors, told the university’s Northeastern Global News.
“Having diverse points of view can mitigate risk and can offer new solutions, as long as they are integrated in the board,” she said.
But while more than 25 million Americans identify as LGBTQ+, or about 7.6% of the country’s population, the number of LGBTQ+ board members doesn’t come close to reflecting that percentage.
Directors who are open about their LGBTQ+ identity hold less than 1% of board seats, and in Fortune 1000 firms, out LGBTQ+ individuals held only 74 of more than 7,700 available board seats at the end of 2024, according to the authors.
Aguilera and co-author Ryan Federo of the Universitat Autònoma de Barcelona looked at 441 American corporations and their board membership and board diversity policies in 2021 and 2022 to determine the impact of LGBTQ+ board representation.
The researchers evaluated firm performance in two areas: environmental, social, and governance (ESG) scores; and enterprise value.
ESG scores were accrued based on an examination of over 900 criteria, ranging from green product innovation to community initiatives and management compensation.
Enterprise value is the value of a firm if it were sold on the current open market and includes parameters like a firm’s debt, long-term risks, and future value.
“We’re looking at the performance of the firm in a holistic way,” Aguilera said.
Firms with LGBTQ+ board members have higher ESG performance than firms without them, the researchers found. Higher ESG performance, in turn, leads to higher enterprise value in firms, they said.
The positive correlation may be explained by the “viewpoint diversity” offered by out LGBTQ+ board members, Aguilera and Federo suggested.
“One of the worst things that can happen on a board is that there is group thinking,” said Aguilera. “That happens when everybody has very homogeneous views or when there is no psychological safety for different individuals to voice their opinions.”
The study offers a new dimension to diversity studies by examining types of diversity that might not be readily identifiable, among them veteran status, neurodiversity, or disability.
“A lot of research up to now has looked at these diversity metrics that are more obvious, like race or gender,” Aguilera said. “Now we are in a new space, which is more about cognitive diversity.”
Last fall, the Association of LGBTQ+ Corporate Directors released its Board Monitor Report, which found similar numbers reflecting the underrepresentation of LGBTQ+ people in the boardrooms of Fortune 500 and NASDAQ companies.
The nonprofit revealed that only 1.3% of board seats are occupied by openly LGBTQ+ people at Nasdaq-listed companies. Similarly, just 0.9% of Fortune 500 seats are held by LGBTQ+ individuals, while only one in 10 Fortune 500 and Nasdaq-listed companies have an LGBTQ+ board director.
One suspected cause of underrepresentation, according to the group: “Bottlenecks in the selection and nomination process, including a ‘network gap’ signaling potential unconscious bias against admitting LGBTQ+ talent into certain key access pipelines and platforms.”
