<p>This research investigates how board diversity relates to firm performance in Indian family-owned businesses, with particular attention to BRSR compliance quality as a moderator. We used a sequential explanatory mixed-methods design, combining panel data analysis of 250 family businesses from 2018 to 2024 with qualitative interviews with 30 governance professionals. Our findings indicate that gender diversity has a critical mass threshold, with performance positively associated only beyond three women directors; the estimated β is 0.27, p &lt; 0.01. Board expertise diversity is more strongly associated with performance (β = 0.32, p &lt; 0.01) than educational diversity (β = 0.19, p &lt; 0.05). Most importantly, high-quality BRSR compliance significantly enhances diversity benefits through interaction effects β = 0.26–0.28, p &lt; 0.01. We identified that such benefits operate through three mechanisms, namely structural accountability, external pressure amplification, and data-driven legitimacy. These relationships are substantially stronger in family businesses with lower ownership concentration and for later-generation leadership. Our integrated framework extends agency theory and resource dependency theory by specifying thresholds and moderating conditions under which diversity is effective in family contexts. For practitioners, our findings show that critical mass diversity, along with high-quality BRSR compliance, embeds nonlinear performance benefits. For regulators, such findings point toward a shift from minimum compliance mandates to incentive structures that encourage substantive diversity. There is also a timeliness to this guidance, as India and other emerging economies navigate governance reforms that balance the imperative of family control with professional standards of governance.</p>