This paper provides the first comprehensive description of board diversity within venture-backed privately held companies and draws comparisons with publicly traded firms. In it, the authors leverage the large sociological shift triggered by the 2020 George Floyd social justice movement (GF) to test whether listing status has a causal effect on how firms respond to calls for more diverse representation. They also present evidence that helps identify the potential mechanisms driving the differences in response between public and private firms. Finally, they test whether and to what extent the initial degree of board diversity persists after a firm goes public.
While we have documented that boards are less diverse at private firms than public ones, pinning down why is hard. There are several potential causes, including differences in shareholder monitoring, the financial motivations of management and incumbent shareholders, the level of media and public scrutiny, the degree of discrimination during the director recruitment process, and the level of institutional constraints. While a comprehensive exploration of these factors is beyond the scope of our paper, we present evidence suggesting that institutional constraints contribute to the diversity gap between public and private firms.