Abstract
The rise of MNCs, the expansion of the EU and several M&As have exposed German boards to a variety of cultures. But does diversity in the boardrooms improve performance? Based on an empirical study on German publicly listed companies, this unique research into cultural diversity answers the question if the level of cultural variety and cultural distance on boards of directors have an influence on firm performance in Germany. The results, which show a negative, linear influence of both cultural variety and cultural distance on operating performance measures, show empirical support for the importance of contextual factors in the relationship between diversity and performance. The authors ask for careful consideration before implementing regulations on board diversity.
Highlights
Does diversity in the boardrooms improve performance? Based on an empirical study on German publicly listed companies, this unique research into cultural diversity answers the question if the level of cultural variety and cultural distance on boards of directors have an influence on firm performance in Germany
The concept of diversity has gained in popularity in Germany, and has simultaneously remained a topic of public discourse ever since: Germany pursued a controversial debate about the introduction of fixed quotas for women on corporations’ supervisory boards (Bschorr & Lorenz, 2013), an attempt to increase diversity among the gender
This focus on gender diversity was subject to legal regulation in 2015 which enforces listed companies to have a minimum of 30 percent females among their supervisory board members
Summary
The concept of diversity has gained in popularity in Germany, and has simultaneously remained a topic of public discourse ever since: Germany pursued a controversial debate about the introduction of fixed quotas for women on corporations’ supervisory boards (Bschorr & Lorenz, 2013), an attempt to increase diversity among the gender. In Germany, the corporate governance system is statutorily based on a dual board system (two-tier system) which is characterized by a strict separation of management and control It is of relevance for a supervisory board to be acquainted with the knowledge of how to best appoint the board of directors in regards to cultural diversity. With growing levels of international activities of German firms and in view of the fact that the German labor market is characterized by increasing internationalization as well, reliable scientific knowledge for the case of Germany is yet urgently required
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