Does Diversity Pay in the Boardroom?

Abstract

This paper examines board leadership positions held by diverse (female and minority) directors. While the percentage of diverse directors on boards of S&P 1500 firms 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 positions 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 leadership roles on the board, they earn lower director pay. Evidence suggests 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 board monitoring quality for firms with diverse directors in leadership roles.

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

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