The Effect of Gender Diversity on Remuneration Packages in Saudi Arabia

Abstract

Gender diversity among corporate directors has garnered increased appeal in recent times. Current studies have shown increased female representations in boardrooms is capable of enhancing performance, governance, and effectiveness. Thus, regulating bodies such as the Organization for Economic Cooperation and Development has been promoting such initiative, especially among developing countries such as Saudi Arabia, where such representation is still low. Therefore, this study seeks to investigate the level of gender-diversity’s representation among listed Saudi corporations’ boardrooms viz. directors’ remuneration packages. The descriptive analysis reveals that only 12% of the 136 Saudi corporations sampled have female directors on their boards. In addition, results from the regression analysis shows a positive relationship between gender diversity and directors’ compensation packages (P = 0.039). Such findings might indicate the corporates’ appreciation of women directors’ exercising their responsibilities and commitments: thus, they are highly compensated for their efforts. Or this positive association might be accredited to female directors’ power in negotiating their compensation packages in alignment with the interests of their male counterparts regardless of attributes and contribution as specified by the managerial power theory. This exploratory research study serves as one of the first of its nature in the Saudi context examining Saudi female directors’ participation on corporates’ boards in relation to their remuneration packages.