Appointment Thresholds, Human Capital Investments, and Top Management Diversity

We study how systematic biases in recruitment affect top management diversity. Individuals differ in talent and invest in human capital before appointment. When appointment thresholds differ systematically across groups, a higher threshold lowers entry-level representation but can raise representation at the top. Intuitively, higher thresholds motivate more talented individuals to invest more, which generates a thicker upper tail of the ability distribution. The model challenges the "pipeline argument": a diversity initiative or an algorithmic bias correction that lowers the appointment threshold for a group raises its entry-level representation but can lower its representation at the top in meritocratic firms.