Does diversity in supervisory boards affect profitability and corporate social responsibility?

Abstract

This study analyses how individuals who bring diversity to the membership of supervisory boards (IDSBs) affect profitability and corporate social responsibility (CSR) by looking at their human capital, tokenistic leadership potential, and tendencies. IDSBs are females, younger people, those with PhDs, accounting experts, and foreign members. Their effect will be interpreted by utilizing resource dependence theory and tokenism theory. Additionally, their counterparts, namely board members who are male, older, who do not have PhDs, are not accounting experts, and are local nationals, were also examined. Indonesian corporations from 2017 to 2020 were analyzed using panel data. The proportion and number of IDSBs were classified as token leaders. Despite their rarity, female supervisory board members increased profitability. CSR was, however, negatively affected by women, accounting experts, and foreigners serving on supervisory boards due to their role as tokenistic leaders. Additionally, supervisory board members who are younger, have PhDs, and are accounting experts contributed to a drop in profitability. Surprisingly, supervisory board members who are younger (older) and have PhDs (non‐PhDs) did not yield empirical evidence regarding CSR, so it is beyond the scope of the perspective on tokenism. Finally, foreign board members increased profitability but this is limited to firm value.