Does Diversity Pay in the Boardroom?

64 Pages Posted: 19 Jul 2016 Last revised: 26 Apr 2018

Laura Casares Field

University of Delaware - Alfred Lerner College of Business and Economics

Matthew Souther

University of Missouri at Columbia - Department of Finance

Adam S. Yore

University of Missouri at Columbia - Department of Finance

Date Written: March 14, 2018

Abstract

This paper examines diverse (female and minority) director appointments to board leadership positions. While diverse representation on S&P 1,500 boards has doubled over the past twenty years and diverse directors possess at least the same professional qualifications as their peers, many board leadership positions allude them. Controlling for qualifications and experience, we find that diverse directors are significantly less likely to hold the titles of chairman of the board, lead director, audit, or compensation committee chair than their non-diverse counterparts. Because diverse directors do not frequently serve in these compensated leadership roles, they earn lower pay. Our tests show that diverse directors perform their duties as well as other directors: diverse directors receive higher shareholder support during director elections and we find no evidence of lower monitoring quality for firms with diverse directors in leadership roles. The evidence suggests that failing to obtain predicted leadership roles on the board results in attrition for diverse directors.

Keywords: director compensation, boards of directors, diversity, gender, women, minorities

JEL Classification: J15, J16, J31, J71, G34, M14

Suggested Citation

Field, Laura Casares and Souther, Matthew and Yore, Adam S., Does Diversity Pay in the Boardroom? (March 14, 2018). 2nd Annual Financial Institutions, Regulation and Corporate Governance Conference. Available at SSRN: https://ssrn.com/abstract=2810543 or http://dx.doi.org/10.2139/ssrn.2810543

Laura Casares Field

University of Delaware - Alfred Lerner College of Business and Economics ( email )

419 Purnell Hall
Newark, DE 19716
United States
302-831-3810 (Phone)

Matthew Souther (Contact Author)

University of Missouri at Columbia - Department of Finance ( email )

Trulaske College of Business
University of Missouri
Columbia, MO 65211
United States

Adam S. Yore

University of Missouri at Columbia - Department of Finance ( email )

403 Cornell Hall
Columbia, MO 65211
United States
573-884-1446 (Phone)

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