Female Directors on Corporate Boards Provide Legitimacy to a Company: A Resource Dependency Perspective

Abstract

This study addresses the research question why some companies do and others do not have women on their boards. This study provides evidence on the organizational characteristics that affect the likelihood of women being appointed. The results show that in The Netherlands company size, board size, industry and the exchange segment the company is traded on, significantly impact the female representation on board of directors. This study supports resource dependence theory that boards of directors serve as a linking mechanism between companies and their stakeholders, and that they provide legitimacy to different stakeholders or groups within our society. While societal pressure to appoint female directors to corporate boards has increased in the past decade, this is more likely to have influenced companies which are more inclined to conform to societal expectations. Moreover, the presence of female directors on company boards provides legitimacy to the outside world regarding the company's values on diversity. These results add new evidence to the existing literature whether corporate boards act as a linking mechanism to society. Any comprehensive investigation of the impact of providing legitimacy by female board members on corporate performance should not be limited to profitability (which is mostly concerned with shareholders profit), but should include, for example, social and market performance and the satisfaction of relevant stakeholders.

Keywords: gender-diversity, corporate governance, resource dependency theory