Giving Compass' Take:

• Harvard Business Review conducted a study that revealed the importance of diverse networks for business leaders: The more connections to people of different demographic backgrounds and skill sets, the higher the firm value.

• What does your own network look like and what are you doing to make sure it's as diverse as possible? This creates a richer, more successful corporate culture both in the for-profit and nonprofit worlds.

• Here's why hiding diversity data keeps philanthropy from growing.

Leaders today hear a lot about the importance of having good networks. For example, firms with better-connected CEOs can obtain cheaper financing, and firms with well-connected board directors see better performance. We wanted to explore whether the diversity of CEOs’ networks might affect their firms.

Our study, published in the Journal of Corporate Finance, found that CEOs with strong connections to people of different demographic backgrounds and skill sets create higher firm value. We also found that this greater firm value comes from better corporate innovations and successful diversified M&As. Our work suggests that the diversity of leaders’ social networks is a key ingredient in how they grow their companies.

Using BoardEx data provided by the Center for Corporate Performance, we examined a sample of 1,212 CEOs who led S&P 1500 firms between 2000 and 2010. We analyzed each CEO’s network by documenting their school ties, work ties, and leisure social ties (for example, clubs and charities) in the past. These connections had to be at least senior managers or higher positions to be considered.

Read the full article about diverse networks for CEOs translating to success by Yiwei Fang, Bill Francis and Iftekhar Hasan at Harvard Business Review.