Study shows gender wage gap exists among CEO board directors

Two Black women talk together

Do organizations truly value more diverse boards of directors? A new study suggests many firms may only be paying lip service to the importance of diversity and increasing board diversity in superficial ways.

A new paper in the journal Human Resource Management explores whether external pressures to diversify boards lead organizations to devalue the board memberships held by female CEOs relative to male CEOs and, as a result, pay female CEOs less for these roles. After an exhaustive examination of numerous corporate boards during a period spanning more than a decade, researchers found that companies that engage in token female representation tend to pay female CEO directors less than their male counterparts.

Winny Shen
Winny Shen

Schulich School of Business organization studies Professor Winny Shen and her collaborators, Shavin Malhotra from the University of Waterloo, and PengCheng Zhu from the University of San Diego, examined the relationships between CEO gender, board memberships, and pay in S&P 1500 firms from 2007 to 2019. After controlling for a number of potential alternative explanations, they found that female CEOs receive less compensation for being directors than male CEOs.

Unexpectedly, this gap in compensation was most apparent in organizations that had boards with greater female representation. The study also revealed that this gender pay gap disappeared when female board directors chaired more important and powerful committees.

“Our study points to the importance of moving beyond mere presence to ensuring women have power on boards,” says Shen. “We need to make sure that organizations are not inviting women to be on boards simply to be symbols or tokens. This seems to create a vicious cycle where others assume that female CEOs, who are also directors, should not be rewarded for engaging in these roles because they are not there legitimately, thereby reinforcing gender inequality in the workplace.”

The paper’s findings are published in the article, “A vicious cycle of symbolic tokenism: The gendered effects of external board memberships on chief executive officer compensation.”