Top management team gender diversity and productivity: the role of board gender diversity

• Pages: 71-86
• DOI: https://doi.org/10.1108/EDI-04-2018-0067
• Published date: 11 February 2019
• Date: 11 February 2019
• Author: Nalongded Luanglath,Muhammad Ali,Kavoos Mohannak
• Subject Matter: Hr & organizational behaviour

Top management team gender

diversity and productivity: the

role of board gender diversity

Nalongded Luanglath

Muanson Company Limited, Vientiane, Laos, and

Muhammad Ali and Kavoos Mohannak

Business School, Queensland University of Technology, Brisbane, Australia

Abstract

Purpose –Based on the significance of context, the purpose of this paper is to investigate a positive top

management team (TMT) gender diversity–productivity relationship derived from the upper echelons theory,

and a moderating effect of board gender diversity on the TMT gender diversity–productivity relationship

derived from the relational framework.

Design/methodology/approach –The hypotheses were tested in 172 organisations listed on the

Australian Securities Exchange. This research uses archival data from multiple secondary sources, with a

one-year time lag between the predictor and outcome.

Findings –The findings indicate a positive effect of TMT gender diversity on employee productivity and a

strong positive TMT gender diversity–employee productivity relationship in organisations with a low level of

board gender diversity.

Originality/value –This study provides pioneering evidence for a positive effect of TMT gender diversity

on employee productivity and for a moderating effect of board gender diversity.

Keywords Gender diversity, Top management team, Upper echelons theory, Board gender diversity,

Employee productivity, Social justice theory

Paper type Research paper

Introduction

Over the past decades, gender diversity has increasingly been embraced and encouraged by

many public and private organisations (Hillman et al., 2002; Smith et al., 2006).

The Australian Government and relevant regulatory bodies, such as the Australian

Securities Exchange (ASX), have taken initiatives to increase women’s representation in

leadership positions (Kang et al., 2007; Klettner et al., 2016). One of the most notable

examples is the introduction of the Workplace Gender Equality Act 2012, which requires

organisations with 100 plus employees to annually report their gender equality initiatives,

including the percentage of women at various organisational levels (Australian Institute

of Company Directors, 2017; KPMG, 2016; WGEA, 2017). Another example is that all

ASX-listed companies are required as part of the ASX’s“Listing Rule 4.10.3”to disclose

gender diversity-related measurable objectives regardless of their organisation size unless

they can justify why the recommendations cannot be complied with (KPMG, 2016). Despite

these efforts, women represent only 19 per cent of the senior executive level in the ASX 500

companies, ranked by market capitalisation companies as of 2015 (KPMG, 2016).

For organisations, motivations behind improving women’s representation in leadership

positions are diverse. For instance, as mentioned above, in some countries the laws and

regulations require organisations to embrace gender diversity. In some cases, legally

mandated quotas have been introduced in countries such as Norway (Seierstad, 2016).

These are termed as the legal case for diversity. However, laws set minimal standards

(Gilbert et al., 1999). A society may expect organisations to do more than what is legally

required. It expects fair and just treatment of their women members, reflecting in

a gender-balanced leadership. This is termed as social justice case for diversity

Equality, Diversity and Inclusion:

An International Journal

Vol. 38 No. 1, 2019

pp. 71-86

© Emerald PublishingLimited

2040-7149

DOI 10.1108/EDI-04-2018-0067

Received 6 April 2018

Revised 29 June 2018

30 July 2018

Accepted 22 August 2018

The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/2040-7149.htm

71

TMT gender

diversity and

productivity

(Mackinnon, 2009; Rawls, 1971). Given a lack of accountability of societal responsibilities,

many for-profit organisations might not do anything beyond the minimum legal

requirements unless evidence shows that a gender-diverse leadership team can also bring

economic benefits for the organisation. This is often referred to as economic or business case

for diversity (Robinson and Dechant, 1997). This can be termed as pull factor for diversity

while the legal and social justice cases being push factors for diversity. The literature

provides evidence for a business case for leadership gender diversity (e.g. Ali and Konrad,

2017; Dezsö and Ross, 2012). However, research evidence for the impact of leadership gender

diversity on additional operational and financial outcomes is needed. Similarly, additional

research is needed to investigate the context that might strengthen the positive impact of

diversity. This study addresses these gaps.

This research focusses on top management team (TMT) and board of directors of

organisations. TMT is defined as “the relatively small group of most influential executives

at the apex of an organization […] the top three to ten executives”(Finkelstein et al., 1996,

p. 8). It comprises the top executives (C-suite executives including the chief executive officer)

who have a direct influence on the formulation of a firm’s strategy (Nielsen, 2010).

The findings from previous research on the TMT gender diversity–performance

relationship are inconsistent and inconclusive (e.g. Dezsö and Ross, 2012; Krishnan and

Park, 2005; Quintana-Garcia and Benavides-Velasco, 2016). Homberg and Bui’s (2013)

systematic review also suggests that the studies examining the impact of TMT diversity

(including gender diversity) on organisational performance have produced mixed findings.

Some previous empirical studies reported positive effects of TMT gender diversity (Dezsö

and Ross, 2012; Phillips et al., 2009; Van Knippenberg et al., 2004). Other found that a TMT

with an excessive level of gender diversity can lead to employee dissatisfaction and

decreased performance (Homberg and Bui, 2013; Tsui et al., 1992; Wiersema and Bantel,

1992). The mixed findings suggest the value of testing contextual variables ( Johns, 2006).

Previously studied moderators include: innovation intensity (Dezsö and Ross, 2012);

country-level managerial discretion and autonomous organisational structure ( Jeong and

Harrison, 2017); environment characteristics of munificence, dynamism and complexity

(Krishnan and Park, 2005); proportion of female employees (Lyngsie and Foss, 2017); and

management structure (Opstrup and Villadsen, 2015).

This research advances the knowledge of gender diversity in TMTs. First, it predicts and

tests a pioneering positive relationship between TMT gender diversity and productivity in

Australia, derived from the upper echelons theory (Hambrick and Mason, 1984). Second,

given the inconsistent findings of past research, it predicts and tests a pioneering

moderating effect of board gender diversity on the TMT gender diversity–productivity

relationship, derived from the relational framework (Syed and Kramar, 2009; Syed and

Özbilgin, 2009). The board of directors’primary roles are to advise and monitor

management (Welbourne et al., 2007). The interaction between a TMT and its board of

directors demands a test of interactive effects of diversity at these two levels on outcomes

(Ali et al., 2014; Daily and Schwenk, 1996). Third, this study uses archival data from multiple

sources to ensure a one-year time lag between TMT gender diversity and productivity; it

allows both the predictor and moderator to precede the outcome (Ali, 2016; Hambrick and

Mason, 1984). The predictions are tested in organisations listed on the ASX.

Australian context

Australia shares many similarities with western democratic nations (e.g. Canada, the UK

and the USA), particularly on the cultural dimension of masculinity (where gender has a

moderate to high level of impact on social behaviours and roles) and the low number of legal

regulations (Hofstede, 2001). As such, the results of this study can be meaningful and useful

for firms in other western nations (Hofstede, 2001). In Australia, gender diversity in the

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