Can Shareholder Activism Improve Gender Diversity on Corporate Boards?

Abstract

We empirically examine the antecedents of shareholder activism related to increasing the gender diversity of corporate boards of directors (BOD) and whether such activism is an effective mechanism for achieving this goal. Because both ethical and economic considerations may drive campaigns for increased gender diversity, we condition our analysis on activists’ motivations for achieving their objectives. Based on a sample of S&P 1500 firms over 1997-2011, we find that female board representation and board independence are negatively associated the likelihood of being targeted by a shareholder proposal related to gender diversity while firm size and profitability are positively associated. We further document that financially-motivated activists are more likely to target firms with extremely low female board representation than are socially-motivated activists. Targeted firms significantly increase their female board representation in the two-year period following proposal initiation, relative to that of a matched sample of non-targeted firms, with no differences observed across activist motivations. We conclude that shareholder proposals are an effective means of improving the gender diversity of corporate BODs in U.S. firms.