Gender Differences in Executive Compensation on British Corporate Boards: the Role of Conditional Conservatism

We exploit the effectiveness of the [Davies Report (2011). Women on Boards. London: Department for Business, Innovation & Skills], which urged FTSE 350 companies to increase female representation on corporate boards, to examine the potential effect that this may have on the gender pay differenti...

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Bibliographic Details
Published inThe International journal of accounting Vol. 55; no. 1; p. 2050002
Main Authors Al-Shaer, Habiba, Harakeh, Mostafa
Format Journal Article
LanguageEnglish
Published Urbana World Scientific Publishing Company 01.03.2020
World Scientific Publishing Co. Pte., Ltd
Subjects
Boards
Compensation
Conservatism
Earnings
Executive compensation
Females
Financial reporting
Gender differences
Innovations
Research Article
Women
Davies Report
female executives
Executive compensation
conditional conservatism
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Summary:We exploit the effectiveness of the [Davies Report (2011). Women on Boards. London: Department for Business, Innovation & Skills], which urged FTSE 350 companies to increase female representation on corporate boards, to examine the potential effect that this may have on the gender pay differential at the executive level. To this end, we employ a multivariate regression and a difference-in-differences approach that compare executive compensation between all-male executive boards and boards with at least one female executive. Using a sample of FTSE 350 companies that spans the period 2008–2015, we find that differential executive compensation exists in bonus and equity compensation following the Davies Report (2011). Given that the differential compensation exists in the components primarily determined by the firm’s reported earnings and that female directors are prone to exhibit higher conditional conservatism in their financial reporting, we examine whether the firm’s financial reporting practice plays a role in determining the differential executive compensation. Our investigation reveals that the presence of female executive directors on the board makes the effect of conditional conservatism more prominent, resulting in lower bonus and equity-based compensation.
ISSN:1094-4060
2213-3933
DOI:10.1142/S109440602050002X