Why Does Board Gender Diversity Matter and How Do We Get There? The Role of Shareholder Activism in Deinstitutionalizing Old Boys' Networks

This essay bridges together social network and institutional perspectives to examine how women on boards, by breaking up directors' homophilous (e.g., all-male) networks, contribute to board effectiveness. It proposes that through real and symbolic representations, women enhance perceptions of the board's instrumental, relational, and moral legitimacy, leading to increased perceptions of the board's trustworthiness which in turn fosters shareholders' trust in the firm. Envisioning the gender diversification of boards as an event of institutional change, this article considers the critical role of shareholder activists and legislative support from the SEC in the deinstitutionalization of old boys' networks and the reinstitutionalization of gender diverse boards. This work is substantiated with evidence obtained through 34 semi-structured interviews, archival and documentary evidence.