Existing racial and ethnic representation on top management teams predicts subsequent top management team appointments that preserve the demographic status quo.

Abstract

Top management teams (TMTs) are considerably less diverse than employees at other levels and the general population. Using over 48,000 firm-year observations of executives across 3,807 firms from 1992 to 2017, we find robust evidence that the existing racioethnic composition of TMTs predicts subsequent TMT appointments that preserve the racioethnic status quo. Specifically, having a racioethnic minority group member on a TMT has a negative association with appointing another member of the same group, and the departure of a racioethnic minority group member from a TMT has a strong positive association with an appointment of a member of that group. However, having a CEO from a racioethnic minority group has a positive association with an appointment from the CEO's racioethnic group. Moreover, the associations with departures and CEO racioethnicity appear stronger in more recent years (2005-2017) than in the past (1992-2004). Theories of diversity in the upper echelon of firms that focus on the role of stereotypes cannot fully explain these effects. The results are consistent with a status uncertainty account we derive from theories of intergroup dynamics. The results also show that TMT appointment decisions hinge on finer-grained distinctions among racioethnic categories than typically used by researchers and the US Census.