Pay inequality and gender dynamics in top executive positions

• Published date: 01 November 2021
• Author: Mario Daniele Amore,Orsola Garofalo
• Date: 01 November 2021
• DOI: http://doi.org/10.1111/corg.12389

EDITOR'S PICK

Pay inequality and gender dynamics in top executive positions

Mario Daniele Amore

1

| Orsola Garofalo

2

1

Department of Management and Technology,

Bocconi University, Milan, Italy

2

Department of Strategy and Innovation,

Copenhagen Business School, Frederiksberg,

Denmark

Correspondence

Mario Daniele Amore, Department of

Management and Technology, Bocconi

University, Via Roentgen 1-2, 20136 Milan,

Italy.

Email: mario.amore@unibocconi.it

Abstract

Research Question/Issue: Contributing to ongoing debates on the determinants of

diversity at the helm of companies, we investigate the relationship between execu-

tives' gender and pay inequality within the top executive team.

Research Findings/Insights: Using a panel data set of US listed firms, we find that a

greater inequality in executive pay is positively associated with the exit of female

executives from the firm's top executive team. This effect is economically larger

when the starting level of female representation in the executive team is low, when

the firm uses more variable compensation to reward executives, and when the firm

operates in geographic areas featuring stronger aversion toward income inequality.

Theoretical/Academic Implications: Our study expands existing knowledge on the

organizational and external factors promoting gender diversity at the top of compa-

nies. Although this literature has widely analyzed women's entry into corporate posi-

tions, exit has been largely neglected. Our study fills this gap by documenting

significant gender differences in the relationship between executives' pay inequality

and exit from the top executive team. In so doing, we connect the literatures on gen-

der diversity and executive pay distribution, which have developed in a rather inde-

pendent manner.

Practitioner/Policy Implications: Drawing on insights from corporate governance

and behavioral economics, this study offers novel evidence to policy-makers inter-

ested in addressing the under-explored challenges associated with the retention of

women in corporate positions and their upward mobility within the corporate hierar-

chy. Moreover, the contextual variations behind our main finding suggest that cul-

tural values and norms may play a key role in shaping the effectiveness of public

policies aimed at increasing diversity in corporate governance positions.

KEYWORDS

corporate governance, executives, exit, gender, pay inequality

1|INTRODUCTION

The past two decades have witnessed a surge of academic and policy

debates around the gender wage gap (e.g., Goldin, 2014), the rate of

women's participation in the labor market (e.g., Azmat et al., 2006),

and their representation in top corporate positions (Carter

et al., 2010; Nielsen & Huse, 2010; Terjesen et al., 2009). An

established finding of this literature is that, despite recent progresses,

women continue to be significantly underrepresented in top corporate

positions (Bertrand & Hallock, 2001; Matsa & Miller, 2011). Moreover,

some works have suggested the existence of a gender wage gap in

corporate positions (Blau & Kahn, 2017), primarily among executives

occupying lower organizational ranks (Elkinawy & Stater, 2011;

Geiler & Renneboog, 2015).

To understand the origins of these findings, scholars have used a

broad set of explanations ranging from discrimination to human

Received: 9 January 2020 Revised: 5 May 2021 Accepted: 7 May 2021

DOI: 10.1111/corg.12389

526 © 2021 John Wiley & Sons Ltd Corp Govern Int Rev. 2021;29:526–540.wileyonlinelibrary.com/journal/corg