Board Gender Diversity and Equity-Based Compensation

52 Pages Posted: 26 May 2023

See all articles by Matthew Imes

Matthew Imes

Stetson University

Kose John

New York University (NYU) - Leonard N. Stern School of Business

Amir Shoham

Temple University - Department of Finance

Emma Xu

University of New Mexico - Robert O. Anderson Schools of Management

Abstract

We study the effect of board gender diversity on executive and director equity-linked incentives. The provision of equity incentives to executives is costly for shareholders. We argue theoretically that the optimal compensation given to executives by a board with superior monitoring ability will involve lower equity incentives. If gender-diverse boards are superior monitors, the executives and directors in such firms would be compensated with lower equity incentives. We find that firms with gender-diverse boards compensate their executives and directors with lower equity incentives. Our results are robust to a battery of empirical tests, including alternative measures of equity incentives (pay-performance sensitivity), equity incentives of non-board executives, and gender diversity on compensation committees. Additionally, we employ a novel instrumental variable based on the grammatical gender marking of the language demographic in the US ZIP code in which a firm is headquartered.  ‎

Keywords: corporate boards, board gender diversity, executive compensation, director compensation, grammatical gender marking, equity-based compensation.

Suggested Citation

Imes, Matthew and John, Kose and Shoham, Amir and Xu, Emma, Board Gender Diversity and Equity-Based Compensation. Available at SSRN: https://ssrn.com/abstract=4460321 or http://dx.doi.org/10.2139/ssrn.4460321

Matthew Imes

Stetson University ( email )

Gulfport, FL 33707
United States

Kose John (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

Amir Shoham

Temple University - Department of Finance ( email )

Fox School of Business and Management
Philadelphia, PA 19122
United States

Emma Xu

University of New Mexico - Robert O. Anderson Schools of Management ( email )

Albuquerque, NM 87131
United States

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