HR on board! The implications of human resource expertise on boards of directors for diversity management

• Published date: 01 September 2018
• Date: 01 September 2018
• DOI: http://doi.org/10.1002/hrm.21896
• Author: Frank Mullins

ORIGINAL ARTICLE

HR on board! The implications of human resource expertise

on boards of directors for diversity management

Frank Mullins

College of Business, University of Alabama in

Huntsville, Huntsville, Alabama

Correspondence

Frank Mullins, College of Business, University

of Alabama in Huntsville, 301 Sparkman Drive,

Huntsville, AL 35899.

Email: frank.mullins@uah.edu

While prior board of director studies have considered the role of director occupational exper-

tise in areas such as law and finance on the strategic actions of the firm, little consideration has

been given to understanding the value that human resource expertise on boards of directors,

or board HR expertise, can provide. Drawing upon agency and resource dependence theories,

this study investigates the relationship between board HR expertise and the extent to which

firms engage in diversity management. Furthermore, the moderating role of two organizational

context factors—capital intensity and firm age—are considered, as these can highlight the

degree to which firms strategically depend upon human capital. With a sample of 423 U.S. firms

listed on the S&P 500 from 2002 to 2006, the findings indicate that firms with board HR

expertise have stronger diversity management in comparison to firms lacking board HR exper-

tise. Moreover, the positive effects of board HR expertise on diversity management decreases

when firms’capital intensity or age rises. This highlights the value that HR practitioners can

provide in serving on boards of directors, and suggests that the magnitude of board HR

experts’influence hinges upon the firm’s level of strategic dependence on human capital.

KEYWORDS

board of directors, corporate governance, diversity, human capital, human resource

profession

1|INTRODUCTION

While prior empirical studies on boards of directors have investigated

the implications of director occupational expertise in areas such as

finance, government, and law on the strategic activities of the firm

(e.g., de Villiers, Naiker, & van Staden, 2011; Stearns & Mizruchi,

1993; Tian, Haleblian, & Rajagopalan, 2011), relatively little attention

has been given to understanding the implications of human resource

(HR) expertise on the board, or board HR expertise. This is surprising

given that the number of current and former HR managers serving on

boards of directors in publicly traded firms has been steadily increas-

ing (Lublin, 2009). Although HR scholars have established a relation-

ship between the HR expertise on corporate staffs and the firm’sHR

practices and outcomes (e.g., Huselid, Jackson, & Schuler, 1997; Mur-

phy & Southey, 2003), it is imperative for the field to understand

how board HR expertise can influence the firm’s strategic activities in

a number of areas including diversity management.

Because diversity

1

can be a source of competitive advantage for

the firm (e.g., Miller & Triana, 2009; Richard, 2000; Richard,

McMillan, Chadwick, & Dwyer, 2003; Richard, Su, Peng, & Miller,

2014; Roberson, Holmes, & Perry, 2017), diversity management can

be of strategic importance (Kochan, Bezrukova, Ely, Jackson, Joshi,

Jen, Leonard, Levine & Thomas, 2003). Following Yang and Konrad

(2011), this study defines diversity management in terms of the

formal activities used by the firm to “enhance stakeholder diversity,

create a positive working relationship among diverse sets of stake-

holders, and create value from diversity”(p. 9). This emphasis on

stakeholder diversity extends beyond the workforce to include other

stakeholders such as boards of directors and contractors. Firms with

strong diversity management possess better learning, innovating, and

problem-solving capabilities, thereby realizing the strategic advan-

tages associated with leveraging stakeholder diversity (Davidson,

2011; Kochan et al., 2003; Yang & Konrad, 2011). Consequently,

stronger diversity management is positively associated with firm per-

formance (e.g., Armstrong et al., 2010; Richard & Johnson, 2001).

While prior research on diversity management has examined a

number of antecedents, including the role of racial and ethnic minor-

ity board members (e.g., Cook & Glass, 2015a), the occupational

DOI: 10.1002/hrm.21896

Hum Resour Manage. 2018;57:1127–1143. wileyonlinelibrary.com/journal/hrm © 2018 Wiley Periodicals, Inc. 1127

background of board directors has been overlooked. This is unfortu-

nate, as the occupational expertise represented on boards of direc-

tors can help shape the firm’s strategic activities (see Johnson,

Schnatterly, & Hill, 2013). To address this gap in the literature, this

study draws upon agency and resource dependence theories to

investigate the effect of board HR expertise on the extent to which

firms engage in diversity management. Essentially, I contend that

board HR experts with their keen understanding of stakeholder diver-

sity will seek to influence the firm’s level of engagement in diversity

management, given its strategic advantages. Furthermore, the bound-

aries of this relationship are explored by considering the role of

organizational context—namely, capital intensity and firm age—for

determining the level of influence that board HR experts can have

when advocating for stronger diversity management. Hence, the pri-

mary research questions for this study are:

What is the relationship between board HR expertise

and the extent to which firms engage in diversity

management?

Do contextual factors such as capital intensity and firm

age moderate this relationship?

There are several contributions that this study attempts to make

to the extant literature. First, to the author’s knowledge, this study is

among the first to investigate the implications of board HR expertise

for strategic firm actions, namely diversity management. In doing so,

it seeks to extend the board composition literature that focuses on

the effects of director occupational expertise (e.g., de Villiers et al.,

2011; Stearns & Mizruchi, 1993) by highlighting board HR expertise.

Second, to further advance resource dependence theory with respect

to boards of directors (Hillman, Withers, & Collins, 2009; Pfeffer &

Salancik, 2003), this study examines the role of two contextual fac-

tors in order to understand the boundary conditions of the relation-

ship between board HR expertise and diversity management. Third,

this study extends the literature on HR expertise within corporate

staffs (e.g., Huselid, Jackson, & Schuler, 1997) to that of the board of

directors, thereby expanding our view of the value and impact that

the HR profession has on the firm. Fourth, this study contributes to

the literature on the antecedents of diversity management

(e.g., Brammer, Millington, & Pavelin, 2007; Ng & Sears, 2012) by

emphasizing the strategic leadership that board directors with HR

expertise can provide for enabling stronger diversity management.

2|OVERVIEW OF DIVERSITY

MANAGEMENT

In the United States, diversity management is an outgrowth of equal

employment opportunity (EEO) and affirmative action (AA) legislation

from the 1960s (Kelly & Dobbin, 1998). According to Edelman

(1992), firms demonstrated legal compliance by instituting EEO/AA

rules and offices; however, during the 1980s, limited enforcement of

EEO/AA laws by the federal government caused EEO/AA advocates

to introduce a more economic rationale for EEO/AA rather than rely-

ing solely on the morality argument (Kelly & Dobbin, 1998; Kochan

et al., 2003). Essentially, diversity management, which included

EEO/AA activities, emerged and was touted as being critical to

realizing the strategic benefits associated with having a more diverse

workforce (Thomas & Ely, 1996). For instance, with customer markets

becoming more diverse, the business case for diversity management

entailed the need for firms to leverage the cultural expertise of

diverse workforces to better meet growing customer demands

(Kelly & Dobbin, 1998; Robinson & Dechant, 1997). Moreover, firms

can become more innovative as workforce diversity is associated with

better creativity and problem solving (Kochan et al., 2003; Robinson &

Dechant, 1997). Hence, the goal of diversity management is to foster

inclusive environments to help facilitate these benefits (Gilbert,

Stead, & Ivancevich, 1999; Kelly & Dobbin, 1998).

Prior research provides evidence of the effectiveness of diversity

management from increasing the representation of women and

racioethnic minority employees to enhancing firm outcomes including

employee attitudes, corporate reputation, and firm financial perfor-

mance (e.g., Armstrong et al., 2010; Konrad & Linnehan, 1995; Kon-

rad, Yang, & Maurer, 2016; Richard, Roh, & Pieper, 2013; Wright,

Ferris, Hiller, & Kroll, 1995). Yet a majority of the diversity manage-

ment literature centers exclusively on workforce diversity, primarily

women and racioethnic minorities, rather than taking a broader view

that simultaneously accounts for other historically disenfranchised

employee groups such as people with disabilities as well as key stake-

holders like contractors (Yang & Konrad, 2011). Hence, our under-

standing of diversity management can be expanded given the

strategic benefits associated with these other diverse groups. For

example, Wang and Schwarz (2010) found a positive relationship

between gay, lesbian, bisexual, and transgender (GLBT) policies and

the stock market value of the firm. Furthermore, beyond workforce

diversity, previous empirical studies have demonstrated the positive

effects associated with stakeholder diversity, including boards of

directors (e.g., Miller & Triana, 2009) and contractors (e.g., Richard

et al., 2014), for firm-level outcomes. Hence, a more encompassing

approach to diversity management places the focus broadly on stake-

holder diversity, which coincides with having a stronger culture based

on inclusiveness (Davidson, 2011; Risberg, Beauregard, & Sander,

2012; Yang & Konrad, 2011).

Because of these advantages, there have been a number of stud-

ies that have examined the external and internal determinants of

diversity management, primarily focused on workforce diversity, for

the firm. Externally, the legal context has played a critical role as anti-

discrimination legislation with respect to employment has led to the

use of diversity management in both the United States and Canada

(e.g., Everly & Schwarz, 2015; Kelly & Dobbin, 1998; Konrad & Linne-

han, 1995; Konrad, Yang, & Maurer, 2016). Additionally, Everly and

Schwarz (2015) find support for industry effects regarding the adop-

tion of LGBT-friendly policies. Taking a look at internal factors, Kon-

rad, Yang, and Maurer (2016) found that having a diversity expert on

the corporate staff is associated with firms engaging in diversity man-

agement. With regard to the firm’s leadership, top management team

support has been found to be critical for diversity management

(e.g., Buttner, Lowe, & Billings-Harris, 2006; Konrad & Linnehan,

1995). Moreover, boards of directors play an important role for firms’

use of diversity management. Specifically, the number of women

serving on the board of directors is positively related to firms adopt-

ing LGBT-friendly policies (Everly & Schwarz, 2014). Cook and Glass

(2015a) found that having more racioethnic minorities serving on the

1128 MULLINS