Corporate Governance, Board Gender Diversity and Firm Performance

• Author: Alessandro Zattoni,Praveen Kumar
• Published date: 01 July 2016
• Date: 01 July 2016
• DOI: http://doi.org/10.1111/corg.12172

Editorial

Corporate Governance, Board Gender Diversity

and Firm Performance

Praveen Kumar*and Alessandro Zattoni

Boards of directors are becoming more and more gender

balanced across the world due to the increased pressure

of legislators, regulators, advocacy groups, and institutional

investors. Norwaywas the f‌irst country to introduce a gender

quota law for boards of directors in 2003, later followed by

several other countries, including Spain, France, Belgium,

Italy, and Germany. Not all countries followed this example

by adopting a quota law, however. Other countries (e.g., the

UK, Canada, andAustralia) preferred to issuesoft recommen-

dations (basedon the comply or explain principle)to promote

gender representation on boards. Quota law and soft-law

principles on gender diversity have been supported by some

advocacy organizations, like Catalyst, that are alsopressuring

listed companies to voluntarily adopt higher board gender

diversity. Finally, shareholders have recently started a number

of actions targeting individual f‌irms with the purpose of

increasing female representation on corporate boards.

The reasons behind the promotion of gender diversity on

corporate boards can be classif‌ied into two major groups: the

business case and the individual and social justice rationale.

According to the business case, board gender diversity –or

group diversity in general –cancontributetoanincreasein

the numberof alternatives that are consideredby its members,

and so may positively affect its creativity and the quality of

collective decision-making (Hillman, 2015). The social justice

rationale argues, instead, that women represent about half of

the total population and so they should occupy half of the

board seats, while the individual justice view supports an

equal treatment of people and so favors an increase of the

underrepresented group if the qualif‌ications of people t end

to be similarin society.Still from thisperspective, we canargue

that forcing or promoting a certain board gender composition

goes against the principles of non-discrimination and merit.

The presence of gender diversity on boards is assumed to

produce signif‌icant positive consequences on board effective-

ness (Adams, de Haan, Terjesen, & van Ees, 2015). For

example, Adams and Ferreira (2009) show that boards with

a balanced gender representation can allocate more time to

board monitoring,so supporting the idea that a more diverse

board may be more independent from top managers. The

empirical evidence linking gender diversity to f‌irm f‌inancial

performance is more equivocal. With regard to the relation-

ship between the introduction of quota law and f‌irm

performance, Ferreira (2015) argues that previous studies are

affected by too many methodological problems to produce

conclusive results. More recently, however, combining the

results of 140 studies in a meta-analysis, Post and Byron

(2015) show that women on boards tend to positively affect

accounting returns, but do not have a large inf‌luence on

market performance.

In sum, there is growing pressure to increase gender

diversity on corporate boards across a number of countries.

At the same time, there is not a full consensus on the reasons

why to support board gender diversity and on the potential

consequences on board effectiveness and f‌irm performance.

More research is needed to better understand the

characteristics of female directors,the interests they represent,

the contribution they provide to board debate and to f‌irm

performance, and so on (see also Adams et al., 2015; Terjesen,

Sealy, & Singh, 2009).

The four papers in this issue contribute to the corporate

governance literature by both exploring country-level ante-

cedents of gender re presentation on boards, and analyzing

f‌irm-level consequences on f‌irm performance.Thanks to these

four papers, we gaina deeper knowledge of both the relation-

ship between corporate governance, board of directors and

f‌irm performance (Kumar and Zattoni, 2013b, 2014), and on

the interaction between country-level institutions and f‌irm-

level governance practices (e.g., Kumar and Zattoni, 2013a).

In the f‌irst paper, Seierstad explores the arguments that

benef‌iciaries of gender quotas use when they discuss their

usefulness. The empirical study is based on interviews with

19 female non-executive board members in Norwegian listed

companies.The directors’interpretations are divi ded between

the utility rationale (i.e., the business case) and the justice

rationale (i.e., fairness). The study both presents a rich

description of the opinion of the female board members in

the Norwegian context, and provides some interesting

© 2016 JohnWiley & Sons Ltd

doi:10.1111/corg.12172

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Corporate Governance: An International Review, 2016, 24(4): 388–389