Abstract
This study presents evidence of the influence of gender diversity on the pay system and the monitoring of executives in Spain. In this country/context, characterized by a few male dominant shareholders acting simultaneously as executives, there is an ongoing discussion regarding the enactment of laws to promote gender equality on the boards of directors of large listed companies. This paper presents several contributions. On the one hand, the scarce previous evidence on this topic is focused on US firms. On the other hand, this study includes the role of ownership structure as a factor that indirectly moderates the relationships between gender diversity on board and monitoring effectiveness in terms of executive directors’ compensation. Furthermore, this paper makes an important effort to control endogeneity. The sample examined includes 120 companies listed on the Spanish stock market during the period 2004–2011. The results show a positive and highly significant effect of the presence of women independent directors on the proportion of variable pay in the compensation of executive directors. Our findings also point out the negative moderating effect of ownership concentration: the more concentrated is ownership in the hands of internal majority shareholder, the less is the link between board diversity and pay-for-performance systems.
Highlights
In developed countries, the increasing presence of women in the labour market is leading to changes in corporate structures and the functioning of businesses
As predicts Hypothesis 1, the results show a positive and significant effect of the percentage of women on the board of directors on the variable pay of the executive directors
Board diversity can have a significant impact on the improvement of executive monitoring by way of the design of an appropriate compensation system linked to performance, which orients their decision-making towards maximising the value of the firm
Summary
The increasing presence of women in the labour market is leading to changes in corporate structures and the functioning of businesses. A similar change has not occurred in all of them and, nowadays, Spain is one of the countries with the lowest proportion of women directors in the European Union (Heidrick, Struggles 2011; Mateos de Cabo et al 2011). Ley Organica (2007) Igualdad Efectiva de Mujeres y Hombres [Gender Equality Act], imitating 2003 Norwegian norms, suggests – just as a recommendation – that at least 40% of directors be women by 2015. Ley Organica (2011) Economia Sostenible [Sustainable Economy Act] promote gender equality in boards of public administration, public services and public universities
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