Abstract

What drives racial diversity on startup boards? We provide the first evidence on this question by exploiting the demand shock from the 2020 George Floyd (GF) protests. Using facial recognition technology to measure race, we find that Black director appointments nearly doubled (from 1.6% to 3.1%) post-GF. Access to diverse candidates shaped startups’ ability to respond: appointments increased most in areas with more Black professionals and in executive and independent director roles, while venture capital firms showed no increase in Black appointees. Capital market incentives drove these responses: startups planning to raise capital in public or private markets were three times more likely to add Black directors. Following the DEI backlash, we find divergent career trajectories: Black directors appointed to public boards during 2020-2021 were significantly less likely to secure new board seats compared to those appointed before George Floyd, while startup directors showed no such negative pattern. This divergence reflects our finding that public firms rapidly increased first-time Black director appointments under intense scrutiny, whereas startups maintained more consistent appointment patterns throughout this period. Despite the sudden increase in demand, Black directors had comparable qualifications to other directors, and startups adding Black directors showed no change in performance. Our findings reveal that concentrated ownership, combined with institutional constraints, can entrench traditional networks that limit board diversity.

Authors

Johan Cassel, Vanderbilt University
James P. Weston, Rice University
Emmanuel Yimfor, Columbia University