Board Faultlines and Resource Allocation: Effects on Women's Professional Development

Abstract

Research Question/Issue This paper examines how board faultlines, which divide boards into homogeneous subgroups based on multiple diversity attributes, impact the resources devoted to the professional development of women at lower levels of the firm.Research Findings/Insights Analyzing data from Belgian listed firms from 2009 to 2019, we investigate how disparity-based faultlines-divisions within boards arising from diversity attributes related to status and power-can significantly increase the proportion of the firm's education budget allocated to women. Disparity-based faultlines are linked to the formation of resource-based subgroups. When women directors form such cohesive subgroups, they can act as a unified bloc to gain greater decision-making power, thereby reshaping resource distribution within the organization to better benefit women. We indeed find empirical support for this end. Next, the resource dependency of a firm could strengthen a subgroup's ability to advocate for greater resource investment, amplifying the impact of disparity-based faultlines on resource allocation toward women. Our further analysis indicates that the main effect is indeed more pronounced in firms that are knowledge intensive, exhibit lower employment productivity, or have higher employment intensity.Theoretical/Academic Implications Our study contributes to the understanding of how board composition in terms of faultlines influences organizational strategies, specifically in the context of gender diversity and professional development. It highlights the importance of subgroup dynamics within boards and their role in shaping resource allocation decisions, thereby enriching the literature on board diversity, corporate governance, and organizational behavior.Practitioner/Policy Implications For practitioners and policymakers, these findings underscore the importance of recognizing and managing board faultlines to foster a more inclusive and supportive environment for women's professional growth. By acknowledging the positive impact of diverse subgroups on investment in women's education, firms can adopt strategies to enhance diversity and inclusion, ultimately benefiting from a more skilled and qualified female workforce.