We seek to help solve the puzzle of why top-level leaders are disproportionately white men. We suggest that this race- and sex-based status and power gap persists, in part, because ethnic minority and women leaders are discouraged from engaging in diversity-valuing behavior. We hypothesize and test in both field and laboratory samples that ethnic minority or female leaders who engage in diversity-valuing behavior are penalized with worse performance ratings; whereas white or male leaders who engage in diversity-valuing behavior are not penalized for doing so. We find that this divergent effect results from traditional negative race and sex stereotypes (i.e. lower competence judgments) placed upon diversity-valuing ethnic minority and women leaders. We discuss how our findings extend and enrich the vast literatures on the glass ceiling, tokenism, and workplace discrimination.