Do female board members matter?

Maybe less than you might think, at least once you adjust for geographic distance:

Recent literature has shown that gender diversity in the boardroom seems to influence key monitoring decisions of boards. In this paper, we examine whether the observed relation between gender diversity and board decisions is due to a confounding factor, namely, directors’ geographic distance from headquarters. Using data on residential addresses for over 4,000 directors of S&P 1500 firms, we document that female directors cluster in large metropolitan areas and tend to live much farther away from headquarters compared to their male counterparts. We also reexamine prior findings in the literature on how boardroom gender diversity affects key board decisions. We use data on direct airline flights between U.S. locations to carry out an instrumental variables approach that exploits plausibly exogenous variation in both gender diversity and geographic distance. The results show that the effects of boardroom gender diversity on CEO compensation and CEO dismissal decisions found in the prior literature largely disappear when we account for geographic distance. Overall, our results support the view that gender-diverse boards are “tougher monitors” not because of gender differences per se, but rather because they are more geographically remote from headquarters and hence more reliant on hard information such as stock prices. The findings thus suggest that board gender policies, such as quotas, could have unintended consequences for some firms.

Here is the paper by Zinat S. Alam, Mark A. Chen, Conrad S. Ciccotello, and Harley E. Ryan.  Via the excellent Kevin Lewis.

Comments

First!

panshot!

For virtue signaling, at a minimum.

Why don't people just go transgender? Seriously. More diversity Pokemon points.

Does it matter? The easiest way to get the positive effects is still to hire women.

This reads a bit like 'Do you need women for bearing children? Once you correct for the confounding factor of who has wombs, perhaps not as much as you may think.

No it doesn't, not in the slightest. What tosh. Also tosh is the phrase "gender-diverse".

" The easiest way to get the positive effects is still to hire women."

No, you failed to comprehend what the abstract says. If you ended up hiring more women but they were all local, then there would be little to no benefit.

Your not thinking far enough. What the article says is that women suited for certain positions are more likely to live further away. You’re not magically going to get more suitable males from further away to apply, nor are you going to manage to get your hiring process to prefer those.

We are talking about Board positions, not regular employees. You could in fact fairly easily prioritize the retention of directors who are farther away, live in big cities, etc. if you chose to.

In optimization any extra constraint will have zero or negative effect on the optimum value. If it is zero then the added constraint is just comestic. Neverthelss board with female members has free ride for higher compensation, any object to that will be labeled as anti-feminist. On the other hand,

https://www.washingtonpost.com/news/on-leadership/wp/2014/05/02/heres-why-women-ceos-are-more-likely-to-get-sacked-from-their-jobs
"Here’s why women CEOs are more likely to get sacked from their jobs"

"Strategy&, the consulting firm formerly known as Booz & Company, released its 14th annual Chief Executive Study earlier this week, and it found that women are more often forced out of CEO jobs than men who hold the same position. The study showed that over the past decade, 38 percent of female chief executives who left their positions were sent packing (rather than leaving due to a retirement or merger), compared with 27 percent of male CEOs."

"because they are more geographically remote from headquarters and hence more reliant on hard information such as stock prices."

Oh dear. You get what you measure. This'll end well.

If female board members tend to be geographically remote, does that suggest that (1) they are not insiders (i.e., companies don't appoint female employees to the board) and (2) companies with female board members tend to favor females who have a particular profile (e.g., who reside in places like NYC). Are board members who are "more reliant on hard information" because of (1) or (2)? In other words, being female has little or nothing to do with it. Of course, being female may be relevant if qualified females (those reliant on hard information) more typically reside in places like NYC.

"Overall, our results support the view that gender-diverse boards are “tougher monitors” not because of gender differences per se, but rather because they are more geographically remote from headquarters and hence more reliant on hard information such as stock prices. "

Yikes. They rode off to battle women but slew capitalism instead.

It really requires distance to do the job? So much for efficient allocation of capital as the norm.

So, it's a positive outcome. Tougher monitors are better monitors, right?

The problem with these studies is they study a single metric when multiple ones apply. In this case, quality obviously matters, as does nepotism. If everyone selected comes from similar schools, professional backgrounds, etc., the utility of the "minority" aka "outsider" diminishes.

As I read it, independence matters, and women are more independent because they are less socially connected. You could achieve the benefits of additional women by appointing socially isolated men. But socially isolated women (in this sense) are likely to be much better than socially isolated men, because women may be socially isolated because of bias instead of them being of lower quality.

But socially isolated women (in this sense) are likely to be much better than socially isolated men, because women may be socially isolated because of bias instead of them being of lower quality.

Amazing what sort of static emerges from the heads of other-directed people.

Okay, so they found out that 2 variables were co-linear. Does this mean there's no gender effect? Why not instead say there's no geography effect once we adjust for gender?

"Overall, our results support the view that gender-diverse boards are “tougher monitors” not because of gender differences per se, but rather because they are more geographically remote from headquarters and hence more reliant on hard information such as stock prices."

Oh, it's because you can tell a hindsight story about it. Well here's another hindsight story if the data had come out the opposite way:

"Being geographically far from headquarters causes board members to focus on hard facts, such as stock prices, and to feel less constrained by entrenched local politics"

This isn't analytics. It's arts and crafts.

actually you've missed the point here. The narrative is arbitrary as you say, but the fact that gender and geography are co-linear is the point. It's the location not the sex of the board member that correlates with the differing outcomes. Yes, then we get into the made up story explaining it all, but that is not the point here.

"It's the location not the sex of the board member that correlates with the differing outcomes"

You must be confused. If they're co-linear, then they both correlate with outcomes in the same way. You can't privilege one over the other in an explanation.

File this under failure to King's failure to reject the null hypothesis. My guess why:

1) Gender differences on business decisions are small.
2) Board Of Directors have little importance here.

Of course they natter. They're women.

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