How Much Does the Board Composition Matter? The Impact of Board Gender Diversity on CEO Compensation

Abstract

The notion that female directors are better disposed to protect shareholders’ interests has brought boardroom gender diversity into the limelight. Echoing these emerging trends, this paper analyzes the relationship between board gender diversity, i.e., proportion of female directors on the corporate board, and Chief Executive Officer’s (CEO) compensation. Consistent with conjecture, the analysis suggests that large and diversified corporate boards are the main determinants of CEO compensation. Furthermore, longer-tenured CEOs who also serve as board chairperson receive higher total compensation and bonuses than their counterparts do. Into the bargain are corporate performance proxied by return of assets (ROA) and firm attributes, i.e., firm size and institutional ownership, which have divergent but direct implications for CEO compensation.

Board Diversity and Corporate Sustainability Performance: Do CEO Power and Firm Environmental Sensitivity Matter?

“…The socialization make-up of men and women is different, and such differences are noted to provide boards with valuable resources to function effectively [14,70,79]. Gender-diverse boards are noted to promote responsible business practices and effective governance performance as "women are more committed and involved, more diligent and ultimately create a good atmosphere in the board" [22,78,80,81]. This has significantly grown to be accepted as an important dimension of corporate governance [80] and is linked to advancing board monitoring power for effective and transparent reporting, including issues of sustainability reporting [22,79,80,82].…”

Factors Influencing CEO Compensation in Companies Listed on The LQ-45 Index of The Indonesia Stock Exchange 2016-2020

“…Market policymakers and legislators around the world are trying to increase the number of women on boards of directors through persuasion and legislative quotas (Deloitte, 2014). Networking and mentoring programs are used to increase the number of women on the board of directors (Nawaz, 2022;Nadeem, 2022). The lack of women on the board of directors is a global problem, motivating legislators and policymakers to introduce quotas for women in various countries.…”