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While institutional pressure and shareholder action has increased board of director accountability with regard to overseeing the operational needs of the firm to maintain both legitimacy and good legal standing, as an individual and as a board; there has been a simultaneous push to increase the cognitive diversity of boards of directors. The increased focus on operational performance measures coupled with changes to the composition of the board can have a serious impact on the ability for boards to communicate and reach consensus on discretionary activities. We propose to study whether cognitive diversity reduces the number and type of sustainability initiatives. While tenure and time together on the board have positive impacts on the ability of boards to initiate action, cognitive diversity actually serves to reduce the number of initiatives firms undertake and appears to reduce financial performance of the firms studied. These hypotheses are tested through an analysis of almost 150,000 voluntary disclosures, in the form of press releases, from non-financial firms in the Fortune 500, a sample which also includes an analysis of the profiles of 3,833 individual board directors using traditional and newly-developed measures of cognitive diversity. This paper demonstrates that while higher levels of cognitive diversity do not affect the ability for boards to reach consensus on operational initiatives, these higher levels of cognitive diversity do impact the ability to engage in discretionary initiatives.

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