A vicious cycle of symbolic tokenism: The gendered effects of external board memberships on chief executive officer compensation

Abstract

Integrating theoretical perspectives on tokenism and perceived preferential selection, we explore whether the relationship between chief executive officers' (CEOs') external board memberships and CEO compensation is gendered. Based on recent pressures to diversify corporate boards, we theorize that female CEOs' memberships on external boards will result in less monetary compensation relative to male CEOs due to concerns of organizational decision-makers that female CEOs generally inhabit token or "symbolic" positions of limited value. Additionally, we present competing hypotheses (i.e., mitigation vs. exacerbation) regarding how this devaluation will be affected by female representation on the board of directors and compensation committee, respectively. Using a panel sample of 12,464 firm-year observations comprising of 1,805 unique firms and 2,782 unique CEOs, the relationship between CEO external board memberships and compensation is indeed weaker for female compared to male CEOs. Furthermore, this devaluation primarily occurred in organizations where there was stronger (vs. weaker) female representation on the board of directors or compensation committee. However, supplemental analyses revealed that this differential devaluation was mitigated when female executives on the board held greater power (i.e., chaired important committees), highlighting the importance of moving beyond mere representation to ensuring influence on boards for female directors. K E Y W O R D Sboard gender composition, board networks, chief executive officer compensation, chief executive officer gender, tokenism | INTRODUCTIONAlthough women continue to be underrepresented at the upper echelons of major firms, there is evidence of slow progress. Specifically, over the past three decades, the percentage of female chief executive officers (CEOs) has tripled, such that women now constitute 6% of CEOs in the S&P 500 (Catalyst, 2020). Thus, although women still face significant barriers to attaining top leadership roles, a subset of women have been successful in reaching the pinnacle of organizations. Unfortunately, emerging research indicates that becoming the CEO is not a panacea against gender-based biases for women.Research reveals that relative to male CEOs, female CEOs are more likely to be dismissed (Gupta, Mortal, Silveri, Sun, & Turban, 2020), become targets of shareholder activism (Gupta, Han, Mortal, Silveri, & Turban, 2018), and treated in a sexist manner by their board chairs

Examining the boundary conditions of tokenism: within-occupation gender wage gaps and female representation in the Canadian labor market

“…, 2019; Knippen et al. , 2019; Malhotra et al. , 2021), such commitments should go beyond simple impression management.…”

“…In terms of practical implications, the findings of the study provide valuable insights for organizations, human resource professionals and policymakers alike. While it is possible that many organizations improve wage equity in response to external social pressures about gender bias (Chang et al, 2019;Knippen et al, 2019;Malhotra et al, 2021), such commitments should go beyond simple impression management. Ultimately, organizations can be more active in ensuring that efforts to improve the wage gap persist beyond when representation of women in the occupational category is at or past token status.…”

The COVID-19, a crossroads for female directors

“…In addition to this seemingly circumstantial situation, it is well known that even today there is a gender gap at the corporate level that harms and discriminates against women and is reflected, amongst other things, in biases in selection processes (Bodenhausen et al ., 2012; McDonald and Westphal, 2013; Westphal and Stern, 2006, 2007; Zhu et al ., 2014), lower pay (Malhotra et al ., 2021), higher risk of dismissal (Gupta et al ., 2020), sexist treatment (Oliver et al ., 2018), shareholder activism (Gupta et al ., 2018) and the glass ceiling phenomenon (Khalid and Aftab, 2023).…”