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Women in the Boardroom: Symbols or Substance?

  • O'Reilly, Charles A., III

    (Stanford University)

  • Main, Brian G. M.

    (University Edinburgh)

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    The central argument for increasing the number of women on corporate boards of directors has been the so-called "business case for diversity" which proposes that women and minorities add valuable new perspectives that result in enhanced corporate performance. Unfortunately, the empirical evidence for this claim is mixed, leading some researchers to suggest that women outsiders are appointed for symbolic rather than substantive reasons. Using a sample of more than 2,000 firms over the period 2001-2005, we examine the effects of women outside directors on firm performance and CEO compensation. We find no evidence that adding women outsiders to the board enhances corporate performance. We do find some evidence that male CEOs with higher levels of compensation are more likely to appoint women outsiders and that boards with more women outside members are more generous in paying the CEO. We interpret these results as consistent with the appointment of women outsiders for normative rather than profit-enhancing reasons.

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    File URL: http://gsbapps.stanford.edu/researchpapers/library/RP2098.pdf
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    Paper provided by Stanford University, Graduate School of Business in its series Research Papers with number 2098.

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    Date of creation: Mar 2012
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    Handle: RePEc:ecl:stabus:2098
    Contact details of provider: Postal: Stanford University, Stanford, CA 94305-5015
    Phone: (650) 723-2146
    Fax: (650)725-6750
    Web page: http://gsbapps.stanford.edu/researchpapers/
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    1. Carola Frydman & Dirk Jenter, 2010. "CEO Compensation," NBER Working Papers 16585, National Bureau of Economic Research, Inc.
    2. Stephen Brammer & Andrew Millington & Stephen Pavelin, 2007. "Gender and Ethnic Diversity Among UK Corporate Boards," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(2), pages 393-403, 03.
    3. Claude Francoeur & Réal Labelle & Bernard Sinclair-Desgagné, 2008. "Gender Diversity in Corporate Governance and Top Management," Journal of Business Ethics, Springer, vol. 81(1), pages 83-95, August.
    4. Siri Terjesen & Val Singh, 2008. "Female Presence on Corporate Boards: A Multi-Country Study of Environmental Context," Journal of Business Ethics, Springer, vol. 83(1), pages 55-63, November.
    5. Smith, Nina & Smith, Valdemar & Verner, Mette, 2008. "Women in Top Management and Firm Performance," Working Papers 08-12, University of Aarhus, Aarhus School of Business, Department of Economics.
    6. Eckel, Catherine C & Grossman, Philip J, 1998. "Are Women Less Selfish Than Men? Evidence from Dictator Experiments," Economic Journal, Royal Economic Society, vol. 108(448), pages 726-35, May.
    7. Singh, Val & Terjesen, Siri & Vinnicombe, Susan, 2008. "Newly appointed directors in the boardroom:: How do women and men differ," European Management Journal, Elsevier, vol. 26(1), pages 48-58, February.
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