The effect of gender diversity on remuneration packages in Saudi Arabia
List of Authors
  • Faisal D Alfordy

Keyword
  • Female Directors, Board’s Remunerations, Corporate Governance, and Accounting

Abstract
  • Gender diversity among corporate directors has garnered increased appeal in recent times. Current studies have shown increased female representations in boardrooms is capable of enhancing performance, governance, and effectiveness. Thus, regulating bodies such as the Organization for Economic Cooperation and Development has been promoting such initiative, especially among developing countries such as Saudi Arabia, where such representation is still low. Therefore, this study seeks to investigate the level of gender-diversity’s representation among listed Saudi corporations’ boardrooms viz. directors’ remuneration packages. The descriptive analysis reveals that only 12% of the 136 Saudi corporations sampled have female directors on their boards. In addition, results from the regression analysis shows a positive relationship between gender diversity and directors’ compensation packages (P = 0.039). Such findings might indicate the corporates’ appreciation of women directors’ exercising their responsibilities and commitments: thus, they are highly compensated for their efforts. Or this positive association might be accredited to female directors’ power in negotiating their compensation packages in alignment with the interests of their male counterparts regardless of attributes and contribution as specified by the managerial power theory. This exploratory research study serves as one of the first of its nature in the Saudi context examining Saudi female directors’ participation on corporates’ boards in relation to their remuneration packages.

Reference
  • 1. Adams, R. B. & Ferreira, D. (2009). Women in the boardroom and their impact on governance and performance. Journal of financial economics, 94(2), pp.291-309.

    2. Bebchuk, L. A. & Fried, J. M. (2004). Stealth compensation via retirement benefits (No. w10742). National Bureau of Economic Research.

    3. Campbell, K. & Mínguez-Vera, A. (2008). Gender diversity in the boardroom and firm financial performance. Journal of business ethics, 83(3), pp.435-451.

    4. Finkelstein, S. & Mooney, A. C. (2003). Not the usual suspects: How to use board process to make boards better. Academy of Management Perspectives, 17(2), pp.101-113.

    5. Francoeur, C., Labelle, R. & Sinclair-Desgagné, B. (2008). Gender diversity in corporate governance and top management. Journal of business ethics, 81(1), pp.83-95.

    6. García-Izquierdo, A. L., Fernández-Méndez, C. & Arrondo-García, R. (2018). Gender diversity on boards of directors and remuneration committees: The influence on listed companies in Spain. Frontiers in psychology, 9, p.1351.

    7. Golden, B. R. & Zajac, E. J. (2001). When will boards influence strategy? Inclination x power= strategic change. Strategic management journal, 22(12), pp.1087-1111.

    8. Helfat, C. E., Harris, D. & Wolfson, P. J. (2006). The pipeline to the top: Women and men in the top executive ranks of US corporations. Academy of Management Perspectives, 20(4), pp.42-64.

    9. Johnson, R. B. (1997). Examining the validity structure of qualitative research. Education, 118(2), p.282.

    10. Konrad, A. M., Kramer, V. & Erkut, S. (2008). The impact of three or more women on corporate boards. Organizational dynamics, 37(2), pp.145-164.

    11. Lee, S. P. & Isa, M. (2015). Directors’ remuneration, governance and performance: the case of Malaysian banks. Managerial Finance.

    12. Liao, Z., Zhang, M. & Wang, X. (2019). Do female directors influence firms' environmental innovation? The moderating role of ownership type. Corporate Social Responsibility and Environmental Management, 26(1), pp.257-263.

    13. Lucas-Pérez, M. E., Mínguez-Vera, A., Baixauli-Soler, J. S., Martín-Ugedo, J. F. & Sánchez-Marín, G. (2015). Women on the board and managers’ pay: Evidence from Spain. Journal of Business Ethics, 129(2), pp.265-280.

    14. Morgan Stanley Capital International. (2015). Women on Boards, Global Trends in Gender Diversity on Corporate Boards, MSCI ESG Research Inc: https://www.msci.com/ documents/10199/04b6f646-d638-4878-9c61-4eb91748a82b

    15. Nielsen, S. & Huse, M. (2010). The contribution of women on boards of directors: Going beyond the surface. Corporate governance: An international review, 18(2), pp.136-148.

    16. Ntim, C. G., Lindop, S., Thomas, D. A., Abdou, H. & Opong, K. K. (2017). Executive pay and performance: the moderating effect of CEO power and governance structure. International Journal of Human Resource Management, pp.1-43.

    17. Nyambia, H. S. & Hamdan, H. (2018). The scantness of the effect of corporate governance mechanisms on executive directors’ remuneration in small listed companies: evidence from Malaysia. Social Responsibility Journal

    18. OECD. (2020). Corporate Governance in MENA: Building a Framework for Competitiveness and Growth, Corporate Governance, OECD Publishing, Paris, https://doi.org/10.1787/2a6992c2-en

    19. Pamies, D. S. (2015). The Relationship between Women Directors and Corporate Social Responsibility, Corporate Social Responsibility and Environmental Management, 22, pp. 334–345.

    20. Pasaribu, P. (2017). Female directors and firm performance: Evidence from UK listed firms. Gadjah Mada International Journal of Business, 19(2), pp.145-166.

    21. Pletzer, J. L., Nikolova, R., Kedzior, K. K. & Voelpel, S. C. (2015). Does Gender Matter? Females on Corporate Boards and Firm Financial Performance-A Meta-Analysis. In Academy of Management Proceedings (Vol. 2015, No. 1, p. 12370). Briarcliff Manor, NY 10510: Academy of Management.

    22. Post, C. & Byron, K. (2015). Women on boards and firm financial performance: A meta-analysis. Academy of management Journal, 58(5), pp.1546-1571.

    23. Sarhan, A. A., Ntim, C. G. & Al‐Najjar, B. (2019). Board diversity, corporate governance, corporate performance, and executive pay. International Journal of Finance & Economics, 24(2), pp.761-786.

    24. Saudi General Authority of Statistics. (2021). Labour Market Report, 3rd Quarter-2021: https://www.stats.gov.sa/sites/default/files/nshr_swq_lml_lrb_lthlth_2020m.pdf.

    25. Seierstad, C., Warner-Søderholm, G., Torchia, M. & Huse, M. (2017). Increasing the number of women on boards: The role of actors and processes. Journal of Business Ethics, 141(2), pp.289-315.

    26. Usman, M., Farooq, M. U., Zhang, J., Dong, N. & Makki, M. A. M. (2019). Women on boards and CEO pay-performance link. International Journal of Manpower.