Is Board Gender Diversity a Driver of CEO Compensation?: Examining the Leadership Style of Institutional Women Directors

In this investigation, we aim at examining the influence of institutional female directors on CEO compensation. Specifically, we investigate the impact of institutional female directors as a whole, differentiating by whether female directors have business ties with the firms' boards on which they sit (pressure-sensitive female directors) or do not have business links (pressure-resistant female directors). We hypothesize that there is a nonlinear association, specifically quadratic, between institutional, pressure-resistant and pressure-sensitive female directors on boards, and CEO compensation. Our findings show that CEO compensation decreases with low levels of institutional female directors and pressure-resistant female directors on boards, but when their presence on boards increases beyond a certain threshold, CEO compensation also increases. We also find that CEO compensation is not affected by pressure-sensitive female directors on boards. These findings support the premise that institutional female directors on boards cannot be considered a homogeneous group, but play an important role in managerial monitoring and remuneration policies, thus affecting the corporate governance system.