Is Board Gender Diversity a Driver of CEO Compensation? : Examining the Leadership Style of Institutional Women Directors

Abstract

In this investigation, we aim at examining the influence of institutional female directors on CEO compensation. Concretely, we investigate the impact of institutional female directors as a whole, differentiating also whether institutional female directors have business ties with the firm where they sit on boards (pressure-sensitive female directors) and do not have business links (pressure-resistant female directors). We hypothesize that there is a nonlinear association, concretely quadratic, between institutional, pressure-resistant and pressuresensitive female directors on boards and CEO compensation. Our findings show that CEO compensation decreases at low levels of institutional female directors and pressure-resistant female directors on boards, but when their presence on boards increases, CEO compensation also increases. We also find that CEO compensation is not affected by pressure-sensitive female directors on boards. Hence, these findings support the premise that institutional female directors on boards cannot be considered a homogeneous group and play an important role in managerial monitoring and remuneration policies, affecting the corporate governance system.

Does Board Gender Diversity Bring Better Financial and Governance Performances? An Empirical Investigation of Cases in Taiwan

“…However, the greater inclusion of female directors may exacerbate difficulties in achieving consensus, reducing team decision-making effectiveness and thus reducing performance [13]. The majority of previous studies have established a positive relationship between female directors and governance performance [29,37,41]. This study therefore hypothesizes: Hypothesis 2.…”

“…Authors of References [3,29] believe that female directors are good supervisors, allowing them to compensate for shortcomings in external governance. Institutional female directors on boards play an important role in managerial monitoring and remuneration policies, thus affecting the corporate governance system [37]. The presence of female directors on boards also reduces the level of fraudulent financial reporting and enhances sustainability accounting practices [38,39].…”

Political connections and remuneration of bank boards’ members: moderating effect of gender diversity

“…Thus, García-Meca (2016) states that directors, being more cautious in remuneration policies, reduce the remuneration of the board members, given their ethical behavior, risk aversion and better ability to identify unethical conduct. Thus, the presence of the women on the Boards of Directors reduces opportunistic behaviors, leading to greater control of the salaries of the members of these boards (Pucheta-Martínez et al 2017). However, some studies show a positive relationship between the presence of the female gender and the remuneration of the Boards' members.…”

“…With regard to PC, recent literature (e.g., Abdul et al 2018;Ding et al 2015;Fralich and Fan 2018;Fung and Pecha 2019;García-Meca 2016;Wu et al 2018) has shown that the effects of PC on the remuneration of board members and/or CEO are positive, negative or simply non-existent. In what concerns the effect of GD, while some studies in the literature have suggested that the latter increases the remuneration of Boards of Directors' members (e.g., Abdul et al 2018;O'Reilly and Main 2010), other studies either point to the contrary conclusion (e.g., Westphal and Zajac 1995), simply suggest that the effect, if any, is not significant (Fralich and Fan 2018;Fung and Pecha 2019;García-Meca 2016;Wu et al 2018) or detect a non-linear relationship (e.g., Owen and Temesvary 2019;Pucheta-Martínez et al 2017). It should be noted that studies devoted to the banking sector are scarce.…”

“…It should be noted that studies devoted to the banking sector are scarce. Of the above mentioned literature, only the study by García-Meca (2016), for Spain, and Owen and Temesvary (2019), for the United States of America, concern the banking sector; all the remaining papers address listed non-financial and financial companies (e.g., Ding et al 2015;Fralich and Fan 2018;Fung and Pecha 2019;Pucheta-Martínez et al 2017;Wu et al 2018).…”