Board Composition and Its Heterogeneity

In this chapter, I analyze the relation between board composition (with a focus on the role of heterogeneity) and performance. Specifically, I introduce the two main theories that support this relation: the agency theory and the resource dependency theory [In the following chapters, other theories are investigated, i.e., stewardship theory, entrenchment theory, and upper echelons theory (UET)]. I also highlight the potential benefits and costs associated with the heterogeneity in the composition of the board. In the final part of this chapter, I introduce an innovative approach to studying heterogeneity and I create a three-dimensional approach for measuring it. Precisely, I identify as the previous research on this topic can be classified on the basis of three levels of heterogeneity studied, namely, “gender,” “social,” and “global” heterogeneity. The global heterogeneity can be split into three parts. First, the “social heterogeneity” that considers three elements: gender, age, and ethnicity. Second, the “occupational heterogeneity” that is composed of all the elements that characterize the professional and educational experiences of the board members, such as work experiences in particular sectors. Third, the “global heterogeneity” that merges both social and professional elements, usually by using multidimensional indexes.