The impact of board size on board demographic faultlines

Abstract

Purpose

Demographic faultlines are associated with negative group processes and low performance. Little is known about the formation of faultlines in boards and how they can be weakened to capitalize on the positive effects of diversity.

Design/methodology/approach

This study draws on social identity theory and faultlines theory to provide insights into how gender and age faultlines are formed in a board. Subsequently, it proposes and tests a U-shaped board size–faultlines strength relationship. Archival data were collected on 288 organizations listed on the Australian Securities Exchange.

Findings

Hierarchical regression analyses indicate that small- and large-sized boards experience stronger faultlines than medium-sized boards.

Originality/value

This study provides pioneering evidence for a U-shaped relationship between board size and demographic faultlines strength. These findings inform practice by suggesting an optimal board size.

Citation

Ali, M. and Ayoko, O.B. (2020), "The impact of board size on board demographic faultlines", Corporate Governance, Vol. 20 No. 7, pp. 1205-1222. https://doi.org/10.1108/CG-03-2020-0100