Social activists and government agencies seek greater diversity on corporate boards without any considerations of firm or governance characteristics. Using a comprehensive dataset on over 8000 firms from 1996 through 2005, we explore the potential determinants of socially homogeneous boards based on the advisory and monitoring needs of a firm. We find that director-homogeneity is associated with lower advertising intensity, lower R&D intensity but greater firm risk. Director-homogeneity is also positively associated with measures of CEO influence such as CEO ownership, CEO tenure, non-independence of nominating committee and director ownership. Overall, the empirical evidence implies that firms choose social diversity on the board of directors based on the economic needs and existing governance structures.
