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Beyond the glass ceiling: Does gender matter?

Beyond the glass ceiling: Does gender matter?. Ren é e Adams University of New South Wales, FIRN, ECGI Patricia Funk Universidad Pompeu Fabra. Women in the boardroom-the facts (2010 EOWA census). Women in the boardroom-the trends. Explicit quotas:

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Beyond the glass ceiling: Does gender matter?

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  1. Beyond the glass ceiling: Does gender matter? Renée Adams University of New South Wales, FIRN, ECGI Patricia Funk Universidad Pompeu Fabra

  2. Women in the boardroom-the facts (2010 EOWA census)

  3. Women in the boardroom-the trends • Explicit quotas: • Norway: law since 2008 40% female directors in PLCs • Spain: passed guidelines in 2007 to encourage companies to increase the share of female directors to 40% by 2015 • France: proposal for law in 2010 that will impose 20% gender quotas on boards of listed French companies within 3 years of the law's adoption and 40% quotas after 6 years • Similar laws are currently under debate in Belgium, Italy and the Netherlands • Voluntary targets or disclosure requirements: • Australia, Germany, U.K.

  4. Does gender diversity matter? • Journal of Financial Economics “Women in the Boardroom and their Impact on Governance and Performance” (with Daniel Ferreira): YES! • Women have better attendance behavior at board meetings • Probability a director has attendance problems is reduced by 29.17% if director is a woman • Men have fewer attendance problems the more women are on the board • This is not driven by an "age attraction" factor • Women more likely to sit on audit, governance and nominating committees (=monitoring committees) • Diverse boards have higher sensitivity of CEO turnover to past performance • Diverse boards have more equity based pay for directors

  5. But is this a gender effect? • Experimental research on gender suggests that women and men are different • Risk-taking (Gneezy & Croson, 2008, JEL, “Gender Gaps in Preferences”) • Performance in competitive situations (e.g. Gneezy, Niederle, Rustichini, 2003, QJE) • Social preferences (Gneezy & Croson, 2008, JEL, “Gender Gaps in Preferences”) • Corruption in policy (Duflo and Topalova, 2004)

  6. Does boardroom gender diversity matter? • Selection based on taste: Only women who have male characteristics want to have a high-level position • Selection due to promotion: Only women who have male characteristics make it to the top • Socialization/Learning: Women in competitive environments aquire male characteristics, which makes them indistinguishable from men

  7. Are female directors different from male directors? • Metric = Schwartz human values (e.g. Schwartz, 2005) • Transituational goals, varying in importance, that serve as guiding principles in the life of a person or a group • 10 motivationally distinct basic values that are recognized across societies and that leave out no major distinct value that are meaningful across societies • These can be aggregated into 4 values • Values shown to predict behavior (voting, deliquency, cooperation, competition…) in more than 20 countries • Metric = survey measure of risk-aversion

  8. Our answer: Yes! • Moreover, the differences between male and female directors are not always the typical differences in values documented for men and women in representative population samples • Female directors ARE more self-transcendent (“other-oriented”) than male directors (a “typical” finding), BUT ALSO • Female directors are more open to change (less tradition-oriented) than male directors (in contrast to the population), and • Female directors are more risk-loving than male directors! (in contrast to findings for non-executives)

  9. Values and their relations

  10. Two basic conflicts Self-Enhancement versus Self-Transcendence “Self-enhancement values focus on self-interests through the pursuit of control over people and resources (power) and of competence and success (achievement). These values conflict with self-transcendence values that reflect concern for others (benevolence) and for all people and nature (universalism)”. Openness to Change versus Conservation “Openness to change values reflect openness to what is new: excitement and novelty (stimulation), and autonomy of thought and action (self-direction). These values conflict with conservation values tradition, conformity and security.

  11. Data 2006 survey of ALL directors of listed Swedish companies in 2005: 1372 board members and 468 CEOs and Vice-CEOs in 286 companies 17% female 126 responses (29.7% response rate) for CEOs 502 responses (36.6% response rate) for directors 17% female European Social Survey and the World Value survey Boardex

  12. Gender gaps in the boardroom

  13. Representative Swedes vs. directors: ESS and our data

  14. Gender gaps in the population may reverse in the boardroom • Swedish women have higher benevolence, universalism and tradition values • Swedish women have lower power, achievement and stimulation and conformity values • The same achievement, power and benevolence gender gaps also exist for directors • But, female directors are less tradition, security, conformity oriented and more stimulation oriented • Gender gaps in the boardroom are atypical along the conservation/openness to change axis

  15. Values and their relations This is not too surprising... This is surprising!

  16. Mechanism? Evidence so far: Female directors have a high taste for stimulation and a low valuation of tradition/conformity/security Is this driven by characteristics? For example, Betrand Goldin and Katz (2010) show women drop out of labor force when they have children If remaining women have fewer children and the number of children is correlated with values, this could explain our result

  17. Characteristics of directors as compared to population

  18. Gender gaps due to characteristics?

  19. Gender gaps due to characteristics? Gender gaps in values not entirely explained by differences in characteristics of men and women Our results suggest that certain types of women want to get to the top (e.g. the ones with a strong taste for stimulation and a low taste for tradition/conservation)

  20. Conclusions Even after controlling for observable characteristics female and male directors are different Boards do not appear to choose women who look like men Being on a board does not seem to make women exactly like men

  21. Implications These differences may lead to differences in corporate outcomes BUT not necessarily less risk-taking! “Lehman Sisters” (with Vanitha Ragunathan): bank boards with more women had better performances during the crisis, but also greater volatility in stock returns

  22. Concerning quotas • The larger the quota, the more “typical women” may become directors • Firms with quota women may have different outcomes than firms with non-quota women • “Is there a business case for female directors? Evidence from the market reaction to mandatory director appointment announcements” (with John Knowland and Steve Grey): • The market reacts more positively to the appointment of female directors (even after controlling for characteristics), • However, this effect decreases once pressure to appoint women increases

  23. Final thoughts • It is important not to generalize from the population to the boardroom • Diversity in the boardroom appears to matter • It is not yet clear why → Care should be taken in designing regulation around the issue of diversity

  24. Example: Power Three statements measure how important power is: 1) It is important to him to be rich. He wants to have a lot of money and expensive things 2) It is important to him to be in charge and tell others what to do. He wants people to do what he says 3) He always wants to be the one who makes the decisions. He likes to be the leader. Answers: “Please mark in the box to the right how much this person in the description is like you”. Very much like me (1), Like me (2), Somewhat like me (3), A little like me (4), not like me (5), not like me at all (6)

  25. Measure of Risk-Taking We use a standard question from the literature: Imagine you had won SEK 1,000,000 in a lottery. Almost immediately after you collect, you receive the following offer from a reputable bank: There is a chance to double the money within two years. It is equally possible that you could lose half of the money invested. Which amount of SEK 1,000,000 would you invest: 1 (0 SEK), 2 (200,000 SEK), 3 (400,000 SEK), 4 (600,000 SEK), 5 (800,000 SEK), 6 (1,000,000 SEK)?

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