Critics of initiatives to diversify corporate boards frequently rely on efficiency arguments. Diversity opponents marshal four principal claims. First, they contend that if diversity were efficient, firms would have adopted it by now. Second, they posit that there is a lack of supply of qualified minority candidates, and thus, mandates will lower the quality of board members. Third, they point to evidence that arguably shows that board diversity and, in particular, mandated quotas harm firm value and performance. Fourth, they maintain that the campaign to diversify is motivated by populist ideology. The debate about board diversity, thus, pits fairness and equality, on the one hand, against efficiency, on the other. In this Article, we argue there is neither theoretical nor empirical basis for the position that the current trend to diversify boards is inefficient. We posit that inefficient discrimination in board nominations entrenched itself in American corporations due to a lack of information, network effects, and agency costs. Furthermore, we argue that board diversity could improve board performance by tapping into a hitherto unused talent pool, thereby increasing directors’ quality. In addition, the inclusion of members of currently underrepresented groups could improve board oversight of management. Consistent with the hypothesis of inefficient discrimination on American boards, recent studies find that minority directors were not less, and even more qualified than non-minority directors. Our analysis has far-reaching normative implications. We contend that in light of our theoretical analysis and recent empirical studies, courts should have shifted the burden to diversity opponents to show that the striking under-representation of females and minorities on corporate boards does not result from discrimination. Doing so would have probably led the courts to uphold the California legislation, and as importantly, would have enabled the individual members of under-represented groups to sue corporations that unjustifiably passed them up.

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