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Board Gender Diversity and Women in Senior Management

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Abstract

This study examines the influence of women’s board representation on the proportion of women senior managers in the United Kingdom (UK) from 1999 to 2019. We take a multi-theoretic approach, drawing on the trickle-down effect, critical mass theory, and agency theory, to explore several aspects of this topic. We find that more women on boards is associated with more women in senior management as suggested by the trickle-down perspective. We also find support for a critical mass effect; while one or two women on a board is beneficial for advancing women into senior management, three or more women directors is more advantageous. Consistent with agency theory expectations, the relationship between women on boards and senior management gender diversity is driven almost entirely by women in non-executive, rather than executive, board positions, presumably as a result of the relative independence non-executive directors have compared to their executive director counterparts. Our study suggests that increasing women’s board appointments is a potential solution to the underrepresentation of women senior managers and may assist in building a pipeline for future CEO and board appointments.

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Notes

  1. Norway passed the earliest legislation in 2003. There is substantial variation in laws across countries with regard to both regulation and quota. Some laws are unregulated and some strongly enforced. Some countries established a minimum of at least one woman on the boards of public companies, such as India, Pakistan, while others mandated women’s representation between 30 and 40%, including France, Iceland, Italy, Belgium, Germany, Spain, Portugal, Austria, and Netherlands. Some countries, such as Australia and United Kingdom, are subject to industry lead quotas and targets of between 30 and 40% of women on boards, but these are not mandatory. (In Australia, the quota is mandatory for public sector boards only).

  2. https://economia.icaew.com/news/february-2019/more-steves-are-ftse-100-ceos-than-ethnic-minorities.

  3. This is to be noted that gender information is missing for 45,833 person-years (4916 individuals) when using the BoardEx-UK database. For these observations, we checked the director profiles in the BoardEx-USA, BoardEx-Europe, and BoardEx-Rest of the World databases using DIRECTORID (a unique identifier, assigned to each individual by BoardEx) as the identifier. Using this approach, we were able to identify the gender of all individuals. Using individual names, we also checked for the consistency in the DIRECTORID in different BoardEx databases.

  4. The company name is also used to match firms when the Balance Sheet date for a particular year is not available from the Capital IQ database (in particular, for cases when the company was acquired, and Capital IQ assigns a different company identifier to the acquirer and the acquiree). We also use the FAME database to verify the financial variables such as turnover and total assets, ensuring comparability of information between the databases.

  5. The FAME database provides information on the main exchange of the currently listed firms. We use yearly FAME disks (2002–2018) to identify the main exchange of delisted firms.

  6. The code provisions are consistent with the Equality Act, which came into effect on October 1, 2010. This provides a legal framework to protect the rights of individuals at all levels of the organization (including those at the board level) and advance equal opportunity for all.

  7. Accessed on November 20, 2019 from https://www.parliament.uk/business/committees/committees-a-z/commons-select/women-and-equalities-committee/news-parliament-2015/women-at-executive-level-evidence-15-16/.

  8. Our results are robust to alternative specifications of four- or five-manager cutoffs.

  9. $$9.19\%=0.139\times \frac{0.119}{0.180}$$

    .

  10. To examine whether the relation between WOMPCT and MGRWOM is non-linear, we include the quadratic form of WOMPCT in our regression equation. Untabulated results show that the relation is not non-linear, as the coefficient of the quadratic term is not statistically different from zero.

  11. Supporting Principle B.2 requires that “[T]he search for board candidates should be conducted, and appointments made, on merit, against objective criteria and with regard for the benefits of diversity on the board, including gender.”

  12. Ahmed and Ali (2017) and Pandey et al. (2020) also use this variable as the instrument for board gender diversity.

  13. To verify that the firms in the treatment and control groups are indistinguishable in terms of observable characteristics, we conduct a diagnostic test (untabulated) that examines the differences in the mean value of each observable characteristic between the treatment and control firms. We find that none of the differences between the firm observable characteristic of the treatment and control groups are statistically significant at the 5% level or higher.

  14. https://ftsewomenleaders.com/wp-content/uploads/2019/11/HA-Review-Report-2019.pdf.

  15. Source: Office of National Statistics.

  16. Referred to as demographic similarity in the psychology literature (Tsui and O'Reilly 1989).

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Acknowledgements

The authors wish to thank the anonymous reviewers and participants at the Griffith Business School research seminar for their comments and feedback. We thank Linda Bennison for her research assistance.

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  1. Authorship is equal and listed alphabetically.

Authors and Affiliations

  1. Department of Accountancy and Finance, University of Otago, PO Box 56, Dunedin, 9054, New Zealand

    Pallab Kumar Biswas & Helen Roberts

  2. QUT Business School, Queensland University of Technology, Brisbane, 4000, Australia

    Larelle Chapple

  3. Department of Sociology, Purdue University, 700 West State Street, Stone Hall, West Lafayette, IN, 47907-2059, USA

    Kevin Stainback

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Biswas, P.K., Chapple, L., Roberts, H. et al. Board Gender Diversity and Women in Senior Management. J Bus Ethics 182, 177–198 (2023). https://doi.org/10.1007/s10551-021-04979-x

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