The Association Between Gender-Diverse Compensation Committees and CEO Compensation


We examine the association between gender-diverse compensation committees and CEO pay and find that CEO compensation levels are negatively associated with gender-diversity of the compensation committee, but not gender-diversity of the board. Furthermore, we find that excess CEO compensation is negatively related to subsequent return on assets for firms with an all-male compensation committee but not for firms with a gender-diverse compensation committee. These results suggest that CEOs do receive some level of excess compensation which can be mitigated by having one or more females on the compensation committee.

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  1. 1.

    Norway maintains a mandatory gender quota of 40 %, Spain of 40 % by 2015, and France is to introduce 50 % by 2015. More recently, the European commission is seeking to implement a 40 % female-quota for company boards across Europe, which is being opposed by eight countries including Britain, the Czech Republic, Hungary and Malta (Traynor 2012).

  2. 2.

    ‘Excess’ compensation is compensation above what can be explained by economic determinants (e.g. Core et al. 1999, 2008).

  3. 3.

    For example, see Cuomo (2009) and Parsons and Puzzanghera (2009).

  4. 4.

    See Weisman and Lublin (2009) and Schuman (2010) for some U.S. examples and Murphy (2010) for proposed changes in Europe. There is also legislation introduced in March 2013 in Switzerland which mandates that CEOs’ incentive payments cannot be greater than a marked percent of their base compensation. And more recently, Say on Pay legislation is being implemented in numerous countries (see for example, Burns and Minnick (2013), Correa and Lel (2013), Cunat et al. (2013), and Kimbro and Xu (2013)).

  5. 5.

    Krishnan and Parsons (2008) also document a positive relation between gender-diversity of senior management and earnings quality. However, the relation between gender-diversity and firm performance remains mixed (e.g. Campbell and Mínguez-Vera 2008; Adams and Ferreira 2009; Joecks et al. 2013; Chapple and Humphrey 2014).

  6. 6.

    See for example, Core et al. (1999) and Smith and Watts (1992).

  7. 7.

    The natural logarithm of these measures is used due to a positively skewed distribution.

  8. 8.

    CEOs may receive excess compensation both as a reward for past performance and an incentive for future performance. We test the incentive aspect of CEO compensation as the reward component is incorporated by our method of estimating expected compensation shown in Eq. 2.

  9. 9.

    We also test the association between gender-diverse compensation committees and levels of excess compensation, discussed in “Further Tests” section.

  10. 10.

    These observations are either data errors or unusual circumstances. The next lowest value for total CEO compensation is $1180.

  11. 11.

    The sample is reduced to 7552 observations for tests on equity compensation due to the removal of firms for which equity data is missing or equal to zero.

  12. 12.

    The descriptive statistics are shown prior to winsorizing the economic control variables at the 0.05 and 99.5 percentiles to remove the effect of significant outliers/data errors.

  13. 13.

    This is expected due to the Compustat database being biased towards large listed firms.

  14. 14.

    For tests on equity, the sample reduces to 4690 observations as we exclude firms for which equity data are missing or equal to zero.

  15. 15.

    Tobit regression is used for bonus due to the large number of zero bonuses in the sample. We also use rank regressions to test the robustness of results and then OLS regressions after having deleted zero bonus firms. The results do not change.

  16. 16.

    This involves estimating a yearly logit regression that models the probability of having a female on the compensation committee. See Rosenbaum (2001) for an overview of the procedure and applications, Rosenbaum and Rubin (1983) for a detailed theoretical discussion, and Armstrong et al. (2012) for a discussion and example of the procedure.

  17. 17.

    See Adams and Ferreira (2009), Carter et al. (2003) and Farrell and Hersch (2005).

  18. 18.

    In nearly all of the matching regressions used in the propensity score procedure, sales is insignificant. The percentage of female directors on the board and board size are positive and significant.

  19. 19.

    The financial services industry (GICS 40) is regulated and known for high levels of executive compensation. Although industry indicators are included in the models, it is possible that the financial industry is influencing the results.

  20. 20.

    The inclusion of additional governance variables did not reduce the size or significance of the gender-diverse compensation committee variable. The majority of female directors in the sample are independent directors as opposed to executive directors and thus examining only independent female directors did not alter results.

  21. 21.

    There are many articles in the mainstream press that argue female business leaders receive lower compensation due to some form of gender discrimination; however, recent research shows this is not the case for CEOs (Bugeja et al. 2012).


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Correspondence to Helen Spiropoulos.

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Bugeja, M., Matolcsy, Z. & Spiropoulos, H. The Association Between Gender-Diverse Compensation Committees and CEO Compensation. J Bus Ethics 139, 375–390 (2016).

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  • Gender-diversity
  • Compensation committee
  • CEO compensation