"The most powerful argument for board diversity is that diversity is a social good. The most powerful argument against a board diversity requirement is that if it were manifestly good for companies, there would be no need for it in the first place. Successful companies can’t keep secrets quiet for long; if one could reliably increase its market capitalization by, say, 5% through the appointment of a diverse board, every company on Nasdaq would already meet that standard.
"The problem of board diversity is compounded by the nomination process. Searches for directors are formally structured, but in the end they depend on informal social networks where friends recommend each other. In my experience, many such searches are closer to a social-club recruitment process than a serious contemplation of someone’s task-specific skills. And as has been shown by the National Football League’s Rooney Rule, which since 2003 has required that teams interview at least one ethnic-minority candidate for all head-coaching positions, formal requirements for effort don’t necessarily lead to results.
"Since neither Nasdaq nor the SEC can reliably say that more diverse boards produce better results than homogeneous ones, the SEC should lead."
