Executive directors' compensation and monitoring: the influence of gender diversity on Spanish boards

Abstract

This study presents evidence of the influence of gender diversity on the pay system and the monitoring of executives in Spain. In this country/context, characterized by a few male dominant shareholders acting simultaneously as executives, there is an ongoing discussion regarding the enactment of laws to promote gender equality on the boards of directors of large listed companies. This paper presents several contributions. On the one hand, the scarce previous evidence on this topic is focused on US firms. On the other hand, this study includes the role of ownership structure as a factor that indirectly moderates the relationships between gender diversity on board and monitoring effectiveness in terms of executive directors’ compensation. Furthermore, this paper makes an important effort to control endogeneity. The sample examined includes 120 companies listed on the Spanish stock market during the period 2004–2011. The results show a positive and highly significant effect of the presence of women independent directors on the proportion of variable pay in the compensation of executive directors. Our findings also point out the negative moderating effect of ownership concentration: the more concentrated is ownership in the hands of internal majority shareholder, the less is the link between board diversity and pay-for-performance systems.

Keywords:

• executive compensation
• gender diversity
• board of directors
• ownership structure
• agency theory
• institutional context
• Spanish listed firms

JEL Classification:

• G34
• J16
• J31

Additional information

Notes on contributors

J. Samuel Baixauli-Soler

J. Samuel BAIXAULI-SOLER is an Associate Professor of Finance in the Department of Management and Finance at the University of Murcia, Spain. He received his PhD in Finance from the University of Valencia, Spain. His main research areas include corporate finance and financial modelling. He has published on these topics in international journals such as Journal of Business Research, European Journal of Operational Research, Journal of Financial Research, Journal of Business Economics and Management, International Journal of Human Resource Management, and European Journal of Finance.

M. Encarnacion Lucas-Perez

M. Encarnacion LUCAS-PEREZ is an Assistant Professor of Business Organization in the Department of Management and Finance at University of Murcia, Spain. She received her PhD in Management Science at the University of Murcia, Spain. At present, her research interests focus on the compensation of directors and corporate governance. She has published in refereed international journals such as International Journal of Human Resource Management and Journal of Business Economics and Management.

Juan Francisco Martin-Ugedo

Juan Francisco MARTIN-UGEDO has a Diploma of Advanced European Studies from the College of Europe (Brugge) and a PhD in Business Administration from the University of Murcia. At present he is Associate Professor of Corporate Finance and Head of the Department of Management and Finance at the University of Murcia. His main research topics are related to corporate finance and corporate governance. He has published in journals such as Journal of Business Finance and Accounting, Journal of Business Economics and Management, Feminist Economics, and Journal of Business Research.

Antonio Minguez-Vera

Antonio MINGUEZ-VERA is PhD in Economics and Business (Technical University of Cartagena). At present he is Associate Professor of Financial Economics at the University of Murcia. His main research topics are related to gender diversity, corporate finance and corporate governance. He has published in refereed international journals such as Journal of Business Ethics, Journal of Business Economics and Management, Feminist Economics, International Journal of Human Resource Management, and International Review of Financial Analysis.

Gregorio Sanchez-Marin

Gregorio SANCHEZ-MARIN is an Associate Professor of Human Resource Management in the Department of Management and Finance at the University of Murcia, Spain. He received his PhD in Management from the University of Murcia, Spain. His current research interests focus on executive compensation, family firms’ compensation, and international human resource management. He has published his works in several journals, such as Journal of Business Research, Family Business Review, Journal of Business Economics and Management, Journal of Small Business Management, and International Journal of Human Resource Management.