Corporations With Female CEOs Have Greater Board Oversight

Corporations run by female CEOs tend to have smaller boards of directors, which tend to have different characteristics than corporations with CEOs who are men.

Corporations whose chief executive officers (CEOs) are women tend to have boards with different characteristics than corporations with CEOs who are men. Corporations run by female CEOs tend to have smaller boards of directors. Boards of such companies tend to engage in greater oversight of the CEO. They also have more independent directors, a lower ratio of inside to outside directors, more gender diversity, a broader director network, less interlocked directors and better attendance. The directors comprising the board also tend to be younger.

Smaller boards are believed to have directors that are more engaged since there are fewer members to share the work among. Independent directors have been found to monitor the CEO more effectively. Previous studies have found both younger and female directors to be more likely to monitor CEOs. A broader network can provide access to more information to help monitor the CEO. Interlocked directors serve on multiple boards and may not be as independent as and may be more distracted than non-interlocked directors.

Analysis of the data does not suggest that female CEOs seek out such board structures. Rather, the opposite seems to hold true (even though the proportion of female CEOs remains relatively small). Firms of a similar size and in the same industry have greater board oversight if their CEO is female instead of male.

There isn’t any strong evidence showing certain board structures purposely seek out women to be their CEOs. Rather, women who replace male CEOs see “significant increases … in board independence, board gender diversity, board network and aggregate monitoring intensity post-transition compared to new male CEOs.”

A few characteristics are associated with a greater chance of a woman being hired as CEO. Corporations hiring female CEOs tend to have less debt, more volatile stocks and greater board diversity. They also tend to be headquartered in states with higher gender equality rankings.

The findings are based on analysis of publicly traded corporations. A minimum tenure of three years was required for each CEO. The proportion of female CEOs never exceeded 4.5% during any of the years studied (1996 through 2016).

Source: “CEO Gender and Corporate Board Structures,” Melissa Frye and Duong Pham; The Quarterly Review of Economics and Finance, forthcoming.