The Carrot or the Stick: Self-Regulation for Gender-Diverse Boards via Codes of Good Governance

Heike Mensi-Klarbach,Stephan Leixnering,Michael Schiffinger

doi:10.1007/s10551-019-04336-z

Heike Mensi-Klarbach, Stephan Leixnering + Show 1 more

Open Access

https://doi.org/10.1007/s10551-019-04336-z

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Abstract

Scholars have emphasized the potential of self-regulation, realized through ‘codes of good governance’, to improve gender diversity on boards. Yet, unconvinced of the effectiveness of this self-regulation, many regulators have implemented mandatory quota laws. Our study sheds light on this dilemma. Seeking to broaden our conceptual knowledge of how such ‘codes’ work in the specific case of gender diversity on boards, we ask: Under which conditions is self-regulation via voluntary principles of good governance effective? Expanding recent institutional-theory perspectives from the literature of women on boards, we show that, in the case of Austria, self-regulation via code recommendations is ineffective unless supported by additional forces. The primary reason for this, we argue, is that nominators do not expect benefits from gender-diverse boards. Furthermore, non-compliant companies face little pressure to change due to the small number of companies that have already adopted respective code recommendations. We identify two potential alternatives to boost the effectiveness of voluntary self-regulation for gender-diverse boards: First, the introduction of concrete targets for female representation and the public monitoring of fulfillment; and, second, the establishment of a credible threat that mandatory quotas will be imposed if diversity goals are not achieved. Drawing on longitudinal data from 2006 to 2016 on listed and state-owned companies in Austria, we give an empirical account of the conditions that assure effective self-regulation. Arguing that codes suffer from what we call ‘opportunity bias’, we conclude that political goals (such as gender equality) based on ethical rather than instrumental considerations are unlikely to be effectively implemented solely by codes of good governance.

Highlights

IntroductionWomen remain a minority on corporate boards (Brieger et al 2019; Carrasco et al 2015; Grosvold et al 2016)
Across the world, women remain a minority on corporate boards (Brieger et al 2019; Carrasco et al 2015; Grosvold et al 2016)
Perhaps of greatest interest, we argue that codes of good governance suffer from what we call an ‘opportunity bias’, i.e., their underlying mechanisms require a sufficient number of companies to implement a practice because of expected gains, thereby triggering pressures on non-adopters

Summary

Introduction

Women remain a minority on corporate boards (Brieger et al 2019; Carrasco et al 2015; Grosvold et al 2016). While a growing body of studies indicates some positive effects of gender-diverse boards on company performance, it cannot be denied that, overall, the empirical evidence to date is inconclusive (for overviews see Adams et al 2015; Kirsch 2017; Post and Byron 2015). Gender diversity is positioned as an ethical issue of social justice and a matter to be addressed by political decision-makers (European Commission 2016; Ferreira 2015; Stein and van der Vlies 2014; World Economic Forum 2017). Affirming that the low proportion of women in top positions clearly contradicts the democratic principle of equality, governments in various Western countries have constituted gender diversity

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