Faultline theory suggests that negative effects of team diversity are better understood by considering the influence of different dimensions of diversity in conjunction, rather than for each dimension separately. We develop and extend the social categorization analysis that lies at the heart of faultline theory to identify a factor that attenuates the negative influence of faultlines: the extent to which the team has shared objectives. The hypothesized moderating role of shared objectives received support in a study of faultlines formed by differences in gender, tenure, and functional background in 42 top management teams. The focus on top management teams has the additional benefit of providing the first test of the relationship between diversity faultlines and objective indicators of organizational performance. We discuss how these findings. © The Author(s) 2010.