Going Beyond What’s Expected: Cognitively-Diverse Boards of Directors and Their Impact on Firm Sustainability Initiatives

Abstract

While institutional pressure and shareholder action have increased board of director accountability for overseeing the operational needs of the firm to maintain legitimacy, there has been a push to increase diversity. The increased focus on operational performance coupled with changes to the board can have a serious impact on the ability to reach consensus on discretionary activities. I propose to study whether diversity reduces the number and type of sustainability initiatives. The hypotheses are tested through an analysis of disclosures and director profiles. This paper demonstrates that higher levels of cognitive diversity impact the ability to engage in discretionary initiatives.