Does Diversity Pay in the Boardroom?

59 Pages Posted: 19 Jul 2016 Last revised: 18 Nov 2016

Laura Casares Field

University of Delaware - Alfred Lerner College of Business and Economics

Matthew E. Souther

University of Missouri at Columbia - Department of Finance

Adam S. Yore

University of Missouri at Columbia - Department of Finance

Date Written: November 15, 2016

Abstract

Minority and female (“diverse”) directors earn significantly higher compensation than non-diverse directors. The difference is due to their increased likelihood of being appointed to the boards of larger, more visible firms which tend to pay more. However, within these same firms, diverse directors earn lower compensation than their peers despite having superior qualifications and receiving higher vote totals in director elections. This lower compensation is partially a function of board responsibilities. Although diverse directors are more likely to serve on certain committees (except the compensation committee), they are less likely to serve in key leadership positions associated with greater pay. Moreover, they earn less income beyond the formulaic components of director compensation. Female and minority representation on the director compensation committee and the existence of a board diversity policy attenuates this effect.

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 E. and Yore, Adam S., Does Diversity Pay in the Boardroom? (November 15, 2016). 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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