Women and corporate boards of directors: The promise of increased, and substantive, participation in the post Sarbanes-Oxley era

Few aspects of corporate board diversity have generated the focused attention that the participation, position, and promise of women's service on the board has generated, especially in recent years. Of particular note is the extent to which women serve on large firm boards of directors (e.g., Fortune 500 firms). Increases in levels of participation have been described as glacial. While critics decry the level of participation of women on large-scale corporate boards, careful scrutiny suggests substantial progress. Concurrent with steady increases in the overall participation of women on corporate boards are increases in their presence on key board committees. Importantly, women's leadership of key board committees and their service as lead directors has improved in parallel with increases in their board memberships. These increases are particularly noteworthy in the post Sarbanes-Oxley (SOX) period. Such trends suggest the continued progress of women in assuming prominent positions in the corporate governance landscape, and provide evidence that the increasingly challenging environment in the post-SOX era has not attenuated the gains noted in the pre-SOX period.     

Why and how should SHE make her way into the family business boardroom?

The most successful and longest-enduring family firms are progressively encouraging the active presence of women on their corporate boards. Why is the presence of women on boards so important for family firms? And how can policy makers and controlling owners encourage the active presence of women on family business corporate boards? By integrating the literature on women in governance and the goals of family businesses, we take a step toward increasing shareholder awareness of the economic and noneconomic benefits that women can bring to the family business boardroom. Using theory and empirical evidence, we show that the presence of women on corporate boards can be instrumental for the controlling owners of a family business to achieve prosperity and success, to preserve family cohesion, and to improve the reputation of the family and business simultaneously. Furthermore, we discuss the socioemotional and economic ramifications of excluding women from the family business board of directors. We conclude with four practical recommendations for encouraging the active presence of women on family business boards.     

Gender Diversity in the Boardroom and Risk Management: A Case of R&D Investment

Increasing gender diversity in the boardroom has been promoted as a way to enhance corporate governance and risk management. This study empirically examines whether boards with more female directors play a role in reducing R&D risk. We first show that female directors help to reduce the positive relationship between R&D investment and future performance volatility. We then report that firms with more gender-diverse boards exhibit a lower adverse effect of R&D on the cost of debt. These results are robust to endogeneity analysis, alternative measures of gender diversity and risky investment, and other sensitivity tests. Overall, our results suggest that female directors improve board effectiveness in risk management with respect to R&D investment.     

Media visibility and board gender diversity

Despite the efforts of governments and market regulators, the under-representation of women on corporate boards continues to be a global concern. In this context, this study extends prior literature by investigating the relationship between media visibility and gender diversity on boards of directors. We examine a sample of 101 Spanish nonfinancial listed firms over the period 2003–2016. We find that media visibility positively affects board gender diversity. This finding is robust to alternative measures of media visibility and different econometric specifications. This research contributes to the existing literature on the relationship between media and board composition by suggesting the role of the media as a driver of board gender diversity. Results support the notion that the media are able to discipline managers and dominant owners by inflicting reputational costs.     

Gender Diversity in the Boardroom and Firm Financial Performance

The monitoring role performed by the board of directors is an important corporate governance control mechanism, especially in countries where external mechanisms are less well developed. The gender composition of the board can affect the quality of this monitoring role and thus the financial performance of the firm. This is part of the “business case” for female participation on boards, though arguments may also be framed in terms of ethical considerations. While the issue of board gender diversity has attracted growing research interest in recent years, most empirical results are based on U.S. data. This article adds to a growing number of non-U.S. studies by investigating the link between the gender diversity of the board and firm financial performance in Spain, a country which historically has had minimal female participation in the workforce, but which has now introduced legislation to improve equality of opportunities. We investigate the topic using panel data analysis and find that gender diversity – as measured by the percentage of women on the board and by the Blau and Shannon indices – has a positive effect on firm value and that the opposite causal relationship is not significant. Our study suggests that investors in Spain do not penalise firms which increase their female board membership and that greater gender diversity may generate economic gains.     

Women Board Directors: Characteristics of the Few

Appointment as a director of a company board often represents the pinnacle of a management career. Worldwide, it has been noted that very few women are appointed to the boards of directors of companies. Blame for the low numbers of women of company boards can be partly attributed to the widely publicized "glass ceiling". However, the very low representation of women on company boards requires further examination. This article reviews the current state of women's representation on boards of directors and summarizes the reasons as to why women are needed on company boards. Given that more women on boards are desirable, the article then describes how more women could be appointed to boards, and the actions that organizations and women could take to help increase the representation of women. Finally, the characteristics of those women that have succeeded in becoming members of company boards are described from an international perspective. Unfortunately, answers to the vexing question of whether these women have gained board directorships in their own right as extremely competent managers, or whether they are mere token female appointments in a traditional male dominated culture, remains elusive.     

Interim succession: Temporary leadership in the midst of the perfect storm

The corporate governance environment has changed. The rate of CEO successions is naturally trending up, succession planning is in dire need of repair, and boards are under increasing pressure to focus on oversight. This confluence of events creates a ‘perfect storm.’ Within this new environment, interim successions are on the rise. But is it all bad news? This article explores the decision of corporate directors to use temporary chief executive officers (CEOs) and the roles served by these interim leaders. We include a typology of interim CEOs and prescribe the contexts in which organizations can strategically pursue this type of succession. We conclude with a list of recommendations for how boards can most effectively manage interim leadership in the new corporate governance environment.     

The Impact of the Dual Board Structure and Board Diversity: Evidence from Chinese Initial Public Offerings (IPOs)

Chinese listed companies have a two-tier (dual) governance structure that comprises a supervisory board/committee (SB) and the board of directors (BoD). However, as there is no hierarchical relationship between them, the two boards are independent. This is different from the governance mechanism in Continental Europe in which the SB appoints the directors of the management board; in this sense, the Chinese two-tier governance structure is unique. We investigate the impact of governance characteristics and ownership structure on gender diversity of both the BoD and the SB for a sample of 892 Chinese Initial Public Offerings floated in both the Shanghai and Shenzhen Stock Exchanges. We find that the average proportion of female directors and female SB members on the BoD and the SB are 10 and 22 %, respectively. Using both static and dynamic panel data methods, we find that there is no significant impact of board structure on gender diversity in China. However, we find a positive and significant relationship between SB size and gender diversity. We also find that the higher the state ownership, the lower the female representation on both boards. Finally, our findings show that there is a bi-directional relationship between financial performance and the proportion of female directors sitting on the BoD.     

Directors' Diversity and Board Performance: Evidence from East African Microfinance Institutions

Active board participation is one of the main challenges faced by microfinance institutions. This article sets out to explore the effect of board of directors' characteristics (age, gender, and education) on their ability to effectively perform their board roles (monitoring and resource provision). Microfinance policy makers are concerned with the role of boards in terms of the performance of the industry. This study used the agency theory and resource dependence theory to test the relationship between directors' characteristics and boards' performance. The empirical analysis is based on a survey conducted with 105 board directors representing 63 microfinance institutions from three East African countries (Kenya, Tanzania, and Uganda). The results show a positive relationship between directors' age and their ability to monitor and provide the board with resources. The study also shows that the effect of directors' level of education on boards' performance is positive, while no evidence was found with regard to the effect of female directors on boards. The findings imply that board directors need to be appointed based on their personal characteristics and their ability to perform their roles.     

Where do international board members come from? Country-level antecedents of international board member selection in European boards

In this paper, it is argued that boards internationalize by recruiting international directors in order to increase companies’ performance. However, increasing nationality diversity on a board can be costly considering that it potentially creates cooperative problems on a board due to fault-lines and separation processes. As a result, boards will prefer international candidates who are more similar to themselves on a variety of ‘distances’. Based on data collected regarding 5683 board members of 361 companies from 15 countries in 2005–2007, we discover that the greater the distance (cultural, institutional and geographical) between the candidates’ and the companies’ country-of-origin, the lower the fraction of board members of that nationality on boards. Subsequently, it is argued that historical ties between countries play a ‘distance compressing’ role and partially compensate for the effects of distance. A colonial tie between countries will make recruitment of these particular nationalities more likely than others.     

The Sarbanes-Oxley Act Will Change the Governance of Non Profit Organizations

As a public director of a NASDAQ stock exchange listed public corporation, I have seen how quickly the reforms in corporate governance imposed by the Sarbanes-Oxley Act have changed procedures and policies in public corporations. In areas such as transparency of financial records and other financial matters including compensation of top executives and conflict of interest policies affecting both corporate boards of directors and employees of the corporation the reforms of this new federal law have quickly changed corporate practices in many corporations. Many persons who have studied this new law believe that these changes will benefit the public, shareholders, employees, and other stakeholders in the modern corporation by increasing the reputation of these organizations for integrity and transparency. Stock exchanges such as NASDAQ and the New York Stock Exchange now require all listed companies to have (after a transition time) a majority of independent directors on their boards of directors. Only independent directors may serve on the audit, nominating and compensation committees of boards in most cases. Some exceptions are made to these rules for foreign and domestic issues of companies where a majority of the voting power is held by one person. According to Morrison & Foster LLP, Corporate Board Advisory March , 2004, NASDAQ requires that the board of directors of a listed company determine that an independent director does not have a relationship that would “interfere with the exercise of independent judgment” in carrying out the responsibilities of a director. Donald Grunewald served as President of Mercy College from 1972 to 1984. He has served as a member of the board of trustees of several colleges and proprietary educational institutions and on the boards of other charitable institutions. Currently he is a member of the Board of Directors of EVCI Career Colleges, Inc., a NASDAQ listed corporation.     

Integrating agency and resource dependence theory: Firm profitability,industry regulation,and board task performance

Boards of directors are key governance mechanisms in organizations and fulfill two main tasks: monitoring managers and firm performance, and providing advice and access to resources. In spite of a wealth of research much remains unknown about how boards attend to the two tasks. This study investigates whether organizational (firm profitability) and environmental factors (industry regulation) affect board task performance. The data combine CEOs' responses to a questionnaire, and archival data from a sample of large Italian firms. Findings show that past firm performance is negatively associated with board monitoring and advice tasks; greater industry regulation enhances perceived board task performance; board monitoring and advice tasks tend to reinforce each other, despite their theoretical and practical distinction.     

The Influence Of Board Diversity On Company Performance Of South African Companies

A board of directors forms one of the pillars of a robust corporate governance framework. Board diversity can offer both challenges and opportunities for a company. In this article we investigate whether diversity of a board influences company performance as well as the change in company performance for the Top 100 South African companies listed on the Johannesburg Securities Exchange in 2013–2015. Tobin’s Q and Return on Assets are used as performance measures. Our findings show that the proportion of women on a board, the number of directors with a business qualification and board size are significantly positively related with the performance of South African companies, whereas the ethnic diversity of a board is significantly negatively related with the performance of South African companies.     

The gender composition of corporate boards and firm performance: Evidence from Russia

This paper studies economic effects of the gender composition of corporate boards, employing a novel longitudinal dataset of publicly traded Russian companies over 1998–2014. Using multiple identification approaches, alternative measures of gender diversity, and several performance indicators, we find some evidence that companies with gender-diverse boards have higher market values and better profitability. These effects are particularly pronounced when firms appoint several women directors, which is consistent with the critical mass theory. The effects appear to be stronger in bad economic times. Overall, we find some support to “the business case” for more women on corporate boards.     

Ethics Programs, Board Involvement, and Potential Conflicts of Interest in Corporate Governance

Board composition, insider participation on compensation committees, and director compensation practices can potentially cause conflicts of interest between directors and shareholders. If these corporate governance structures result in situations where actions beneficial to directors do not also benefit shareholders, then shareholders may suffer.Corporate ethics programs usually address conflicts of interest that may arise in the firm's activities. Some boards of directors take active roles in their firms' ethics programs by actively overseeing the programs. This paper empirically examines the relationship between ethics programs and potential conflicts of interest and the relationship between board involvement in a firm's ethics program and potential conflicts of interest.Evidence in this paper shows that firms with ethics programs have a lower percentage of inside directors on their compensation committees than do firms without ethics programs. Firms in which boards are actively involved in the programs have more independent boards (higher percentage of independent directors and lower percentage of inside directors) and are more likely to compensate outside directors with equity than are firms in which boards are not actively involved in the programs. Supplemental analyses show that the incidence of potential conflicts of interest is not significantly different between firms without ethics programs and firms in which boards are not actively involved in the programs. Taken together, the evidence in this paper indicates that a board actively involved in an ethics program, and not the simple existence of an ethics program, is related to the incidence of potential conflicts of interest.     

Female Presence on Corporate Boards: A Multi-Country Study of Environmental Context

A growing body of ethics research investigates gender diversity and governance on corporate boards, at individual and firm levels, in single country studies. In this study, we explore the environmental context of female representation on corporate boards of directors, using data from 43 countries. We suggest that women’s representation on corporate boards may be shaped by the larger environment, including the social, political and economic structures of individual countries. We use logit regression to conduct our analysis. Our results indicate that countries with higher representation of women on boards are more likely to have women in senior management and more equal ratios of male to female pay. However, we find that countries with a longer tradition of women’s political representation are less likely to have high levels of female board representation.     

Gender Diversity in the Governance of Sport Associations: The Sydney Scoreboard Global Index of Participation

This paper examines gender diversity in sport governance globally. Theoretically, the study draws on gender dynamics in organisations, in particular on Kanter’s concepts of gender ratios and critical mass. An audit of the gender ratio on boards of National Sport Organisations (n = 1,600) was conducted in 45 countries. Data were collected through the Sydney Scoreboard, an interactive website that tracks women’s presence on sport boards internationally. Findings show that women remain under-represented on three key indicators: as board directors (global mean 19.7 %), board chairs (10.8 %) and chief executives (16.3 %). Few countries have achieved a critical mass of 30 % representation and no continent has achieved the critical mass on any of the three indicators. Women’s under-representation in sport governance is due to complex gender dynamics. Gender diversity on sport boards is associated with four interwoven dimensions of gender relations: production, power, emotion and symbolism. The combination of the four dimensions produces an environment that may or may not be conducive to gender diversity.     

The Gender Quota and Female Leadership: Effects of the Norwegian Gender Quota on Board Chairs and CEOs

In this article, we use a sample of Norwegian quoted companies in the period of 2001–2010 to explore whether the gender quota requiring 40 % female directors on corporate boards changes the likelihood of women being appointed to top leadership roles as board chairs or corporate CEOs. Our empirical results indicate that the gender quota and the resulting increased representation of female directors provide a fertile ground for women to take top leadership positions. The presence of female board chairs is positively associated with female directors’ independence status, age and qualification, whilst the presence of female CEOs is positively related to the average qualification of female directors. Firms with older and better educated female directors are more likely to appoint female board chairs. The likelihood of female CEOs’ appointment increases with the percentage of independent directors and directors’ qualifications, especially those for female directors. Furthermore, the gender gaps with respect to qualification, board interlocks and nationality between female and male board chairs vanishes after Norwegian companies’ full compliance to the quota in January 2008. However, the gender quota has no significant impact on the gender gaps between female and male directors after its full compliance. Our article thereby contributes to understanding how gender quotas, presence of female directors, percentage of female directors on boards and other board characteristics can determine the gender of top leaders of organizations.     

Gender diversity on boards for organizational impression management: An empirical study of Japanese firms

The literature on gender diversity on corporate boards is growing, yet firms' motivation for achieving such diversity remains underexplored. This study examines the potential objective behind appointing female directors that could be driven by organizational impression management based on the hypothesis that firms strategically propose to nominate female directors when they need to form a favorable impression to their stakeholders, especially in relation to executive compensation. This study analyzed annual shareholders meeting agendas for 3585 listed Japanese firms between 2011 and 2020 and found that firms placed female director appointments on the meeting agenda when they needed approval for the revision of executive compensation. This tendency was strengthened for firms with more outside directors. This study's approach and findings contribute to the literature on corporate board gender diversity by suggesting organizational impression management as a potential strategic motivation behind the appointment of female directors.     

Women’s Roles on U.S. Fortune 500 Boards: Director Expertise and Committee Memberships

This study examines the presence and roles of female directors of U.S. Fortune 500 firms, focusing on committee assignments and director background. Prior work from almost two decades ago concludes that there is a systematic bias against females in assignment to top board committees. Examining a recent data set with a logistic regression model that controls for director and firm characteristics, director resource-dependence roles and interaction between director gender and director characteristics, we find that female directors are less likely than male directors to sit on executive committees and more likely than male directors to sit on public affairs committees. There is little if any evidence of systematic gender bias in director assignment to other board committees. We find some evidence that boards evaluate resource dependence differently for women than men. Craig A. Peterson Western Michigan University, Grand Rapios, MI 49503, USA Craig A. Peterson is associate professor of finance at Western Michigan University, Grand Rapids Regional Center. In addition to corporate governance, his research interests include investment management and corporate finance. James Philpot is assistant professor of finance and general business at Missouri State University. His research interests include corporate governance, financial planning and financial education.