Gender diversity in the boardroom

A board meeting

Female directors still not receiving equal pay

New research co-written by staff from the University of Exeter Business School has found that female directors of listed companies are being paid almost 20 per cent less than their male counterparts but that their remuneration package is less performance-sensitive than those of male directors.

The researchers, Dr Clara Kulich from the Centre for Leadership Studies, Dr Grzegorz Trojanowski from the Xfi Centre for Finance and Investment and colleagues from the University of Exeter’s School of Psychology and from Tilburg University, looked at the remuneration levels of 96 female directors of listed companies between 1998 and 2004. These were then compared with the compensation packages of male directors in similar sized firms in similar sectors.

The results showed that not only were female directors paid less overall, but that the proportion of their remuneration packages that was related to performance was much lower than that of male directors. Performance bonuses amongst male directors varied by as much as 263 per cent between the companies in the best and the worst performance deciles, for the female directors this figure was just four per cent. The research offers two explanations for the discrepancies in performance related pay: firstly that there is a commonly held belief in the upper echelons of the business world that female directors do not strongly influence performance when compared to male board members and secondly that female directors will negotiate a pay package less liable to fluctuation because they may be less risk-averse than men.

The key conclusion of the research is that while the boardrooms of plc companies continue to be dominated by male directors the few female directors who are appointed will find the experience unsatisfactory unless the perceptions of the contributions of female board members to company performance change.

Date: 2 September 2010

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