Research shows that women on boards are absent less and their presence actually improves the attendance behavior of their male counterparts. However, when weighing pros and cons, an overly diverse board can actually hurt business.
A research paper, titled “Women in the Boardroom and Their Impact on Governance and Performance,” written by Renée B. Adams of the University of Queensland and the European Corporate Governance Institute (ECGI), and Daniel Ferreira of the London School of Economics, ECGI, and the Centre for Economic Policy Research (CEPR), and published in the Journal of Financial Economics, found that:
- Women are also more likely to sit on monitoring-related committees such as audit, nominating, and corporate governance than male directors.
- Directors on gender-diverse boards receive higher equity-based compensation—though there was not a reliable relationship between gender diversity and the amount of CEO pay.
- Women appear to have a significant impact on board governance. Diverse boards are more likely to hold CEOs accountable for poor stock price performance. In fact, CEO turnover is more sensitive to stock-return performance in firms with relatively more women on boards.
- A board that is too diverse actually hurts business. This lends weight to the argument that too much board monitoring can decrease shareholder value.
- Gender diversity may have positive effects in companies with weak shareholder rights, where it is plausible that additional board monitoring can enhance value.
The study was based on a sample of U.S. companies including director-level data for S&P 500, midcaps, and smallcap firms collected by the Investor Responsibility Research Center (IRRC).