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Gender diversity in boards. Reporter: Guo Yaosen. 1. Gender diversity in boards. 1. Gender diversity in boards. Question: Why the gender diversity in boards is so important?. 1. Gender diversity in boards. Reason 1: Helps to mitigate the agency problem. Board (Agent).
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Gender diversity in boards Reporter: GuoYaosen
1. Gender diversity in boards Question: Why the gender diversity in boards is so important?
1. Gender diversity in boards Reason 1: Helps to mitigate the agency problem Board (Agent) Shareholders (Principal) Agency problem Devices: (1) Fiduciary duty (2) Executive compensation
1. Gender diversity in boards A. Women are less likely to have attendance problems B. Female directors are tougher monitors Fiduciary duty Board (Agent) Shareholders (Principal) Executive compensation Gender-diverse boards win more trusts from companies
1. Gender diversity in boards Reason 2: Improves the quality of decision-making (1) Increase a firm’s innovation intensity (2) Improve a firm’s ability to enter new markets Reason 3: Become an Incentive a signal of good corporate governance
2. Gender quota in boards (1) Mandatory gender quota in Norway’s corporation All listed companies must abide by a 40% gender quota for female directors or face dissolution.
2. Gender quota in boards Question: Did this mandatory gender quota have effects on corporate performance?
2. Gender quota in boards A. Most financial data Revenues Non-labor costs Mergers and acquisitions Initiations of joint ventures Were similar between firms affected and unaffected by the gender quota
2. Gender quota in boards B. Labor Costs Reason Female directors are more long-term oriented and altruistic. Fewer layoffs Relative labor costs
2. Gender quota in boards Conclusion: Gender quotas only lead to changes in human resources management.
2. Gender quota in boards Question: Why the gender quota can not improve the corporate performance?
2. Gender quota in boards Potential reasons: Reason 1: More nominal directors Gender quota may lower the average competence of directors.
2. Gender quota in boards Reason 2: More additional costs 6 male directors After the gender quota 6 male directors and 5 female directors For example: If there are six male directors in a corporation’s boardroom, and none of them want to leave. In this case, this company have to add another five female directors for complying with the mandatory gender quota and meanwhile avoiding deadlock. These five female directors are new to the board. At the same time, the total number of board seats increases.
2. Gender quota in boards Reason 2: More additional costs More and more female directors who have different personalities, backgrounds, perspectives enter the board. In this case, the gender quota in boards may lead to more conflicts, and the company have to spend additional costs for developing trust between men and women, and more importantly, for coordination of conflicts. So the gender quota lowers the efficiency of board operation, and has no any positive effects on corporate performance. Costs for developing trust Costs for coordination of conflicts
2. Gender quota in boards Conclusion: The mandatory proportion (40%)for female directors of gender quota is unreasonable, because it magnifies the disadvantages of gender diversity. As a result, this gender quota can not improve the corporate performance.
