Current statistics show a startling lack of diversity in corporate boardrooms. In February 2014, Fortune reported that just over 4% of Fortune 500 CEOs were minorities, a classification including African Americans, Asians, and Latin Americans. This is particularly disturbing given that these classifications of minorities comprised 36% of the United States population, and that, according to The Wall Street Journal, many top business schools boast that ethnic or racial minorities comprise 25% or more of their student bodies. Affirmative action is a potential policy response to this lack of diversity. However, academic research has provided little evidence as to the efficacy of affirmative action policies aimed to increase diversity in executive hiring, perhaps due to a lack of affirmative action policies that pertain to executive hiring. Title VII of the Civil Rights Act of 1964 prohibits firms from establishing “hard” affirmative action policies that would require the direct consideration of minority status during the hiring process (e.g., quotas or inflexible goals). However, “soft” affirmative action policies that are designed to change the composition of the candidate pool, rather than criteria used during the hiring process, could be a viable option for firms seeking to increase diversity at the executive level.
Even as the news media have continually highlighted the lack of diversity, and particularly racial diversity, in the corporate suite, firms have been loath to implement affirmative action policies. That said, with the introduction of the “Rooney Rule,” the National Football League (NFL) has emerged as an unlikely candidate to provide a case study on the impact of a “soft” affirmative action policy on minority hiring in executive leadership. Established in 2003, the Rooney Rule requires NFL teams to interview at least one minority candidate for any head coaching vacancy. No quota or preference is given to minorities during the hiring decision; teams are simply required to interview at least one minority candidate.
A recent study uses econometric techniques to identify the causal impact of the Rooney Rule. More specifically, it uses a difference-in-differences approach, where NFL offensive and defensive coordinators as well as NCAA head coaches serve as comparison groups, to estimate the impact of the Rooney Rule on the probability that a minority candidate fills an NFL head coaching vacancy.
The picture below compares the percentage of minority offensive and defensive coordinators as well as NCAA head coaches to head coaches in the NFL. The blue line presents the percent of minority NFL head coaches from 1992 to 2014. The solid horizontal line in 2003 visually identifies the year the Rooney Rule was implemented. There is a notable increase in minority hires around the time of the Rooney Rule’s implementation; however, societal changes (e.g., changes in national and regional racial sentiment) over this period make it difficult to credibly identify causal inferences from this trend. If the Rooney Rule was simply implemented at a time coincident with changing social factors that would have increased the probability that a minority fills an NFL head coaching position regardless of any policy intervention, we would incorrectly attribute outcomes to the implementation of the Rooney Rule.
To circumvent these concerns, the difference-in-differences strategy compares the deviation from prior hiring trends among a “treatment group” that was subject to the Rooney Rule (i.e., NFL head coaches) with the analogous deviation for a “comparison group” (i.e., NFL coordinators and/or NCAA head coaches) that was arguably less affected by implementation of the Rooney Rule, if at all. The intuition is that the deviation from trend in the comparison group will reflect those hard-to-observe factors (e.g., changes in racial sentiment) that may have influenced the hiring decision in the absence of the Rooney Rule. The most obvious comparison group candidate is NFL coordinators. The Rooney Rule only applies to the hiring of NFL head coaches, not to the hiring of NFL coordinators. Offensive and defensive coordinators represent the second level of the football command structure after the head coach. If the head coach is the CEO of the firm, then the offensive and defensive coordinators are the top-ranking vice-presidents. To test the robustness of results, it is important to identify a second comparison group, NCAA head coaches. NCAA head coaches are also not subject to the Rooney Rule.
Although the comparison group exhibits a positive trend over time, there is no notable increase in minority hires that is analogous with the implementation of the Rooney Rule. The intuition of the difference-in-differences study design is operationalized through regression modeling. Regression analysis is a statistical process that quantifies the relationship between variables (in this case, the implementation of the Rooney Rule and the probability that a minority fills an NFL head coaching vacancy). The regression models estimate that a minority candidate is a statistically significant 19 – 21% more likely, depending on the comparison group (i.e., NFL coordinators or NCAA head coaches), to fill an NFL head coaching vacancy in the post-Rooney era than the pre-Rooney era. Estimates show surprising consistency across comparison groups as well as model specifications and tend to be statistically significant at traditional levels of confidence.
The NFL case study provides evidence that “soft” affirmative action policies may be able to influence executive hiring decisions. However, examples of firms willing to execute such policies are scarce. That said, the tide is showing signs of turning. For example, Facebook introduced their version of the Rooney Rule that will be implemented at the social network widely. The NFL also announced that they would be expanding the Rooney Rule to require the NFL league office to interview female candidates for vacant executive positions. Senate Resolution 511 encourages companies to voluntarily establish a version of the Rooney Rule. As many European countries have taken legislative action to increase diversity in corporate leadership, “soft” affirmative action policies such as the Rooney Rule offer firms a low cost policy option to address a lack of diversity at the executive level.