Women on boards and CEO pay-performance link. Issue 7 (25th July 2019)

• Record Type: Journal Article
• Authors: Usman, Muhammad; Farooq, Muhammad Umar; Zhang, Junrui; Dong, Nanyan; Makki, Muhammad Abdul Majid
• Is Part Of: International journal of manpower. Volume 40:Issue 7(2019)
• Page Start: 1171
• Page End: 1200
• Publication Date: 2019-07-25
• Subjects: CEO pay -- Women directors -- Agency theory -- Developing country -- Gender diversity -- Managerial power theory -- Optimal contracting theory -- Pay-performance link; 331.1105
• DOI: 10.1108/IJM-04-2017-0056
• Languages: English
• ISSNs: 0143-7720

Abstract

Abstract : Purpose: The purpose of this paper is to investigate the crucial question of whether gender diversity in boardroom is associated with CEO pay and CEO pay-performance link. Design/methodology/approach: The authors used the data of companies listed on the Pakistan Stock Exchange for a sample consisting of KSE-100 index companies for the period of five years. The authors used the ordinary least square regression technique to test the developed hypotheses. The authors also used the two-step Heckman selection model, two-stage least square regression and propensity score matching method to control the problem of endogeneity. Findings: The authors find reliable evidence of a negative association between gender diversity and CEO pay and of board gender diversity's strengthening the relationship between CEO pay and firm performance. The authors also find that women director are more effective in setting the optimal contract in non-family-owned firms and firms with dispersed ownership structure as compared to family-owned firms and firms with concentrated ownership structure. Moreover, results also reflect that the influence of board diversity on both CEO pay and CEO pay-performance link is stronger when gender diversity goes beyond tokenism. Practical implications: The findings have implications in terms of providing the basis for policy makers to accord the same level of importance to gender diversity in the boardroom as well as contributing to the current debate on the desirability of mandating or recommending gender diversity on boardrooms. Originality/value: This study is among the few studies which investigate the moderating role of boardroom gender diversity on the CEO pay-performance link. In addition, this study contributes to the institutional theory by providing the empirical evidence that the effect boardroom gender diversity on CEO pay and CEO pay-performance link varies by type of ownership.