- Title
- An agency theoretical approach to corporate board diversity
- Creator
- Gopalan, Sandeep; Watson, Katherine
- Relation
- San Diego Law Review Vol. 52, Issue 1, p. 1-66
- Relation
- https://www.sandiego.edu/law/academics/journals/sdlr/archive/?_focus=2921
- Publisher
- University of San Diego, School of Law
- Resource Type
- journal article
- Date
- 2015
- Description
- There is a growing realization that the current low level of women's representation on corporate boards is difficult to justify in a society premised upon gender equality. Nevertheless, in the face of continued resistance by business interests to regulatory solutions, policy makers have focused upon offering business-friendly justifications for appointing more women directors claiming that increased representation is positively associated with firm performance. These arguments have been buttressed by a plethora of empirical studies examining the relationship between gender diversity and a variety of aspects of firm performance and purporting to show a positive relationship. Conversely, there are studies showing a negative association between diversity and firm performance highlighting increased conflict and decreased perceptions of merit. Both categories of empirical literature have problems of reverse causality and endogeneity, making clear conclusions difficult to draw. Amidst this landscape of empirical work, some of the clearest available evidence concerns the relationship between diversity and better monitoring of management. We argue that diversity goals will not be achieved by businesses absent regulatory action and that cheap talk is likely as long as information asymmetries persist. Therefore, we offer a model tailored to empowering shareholders and designed to enable one of the key structural goals of corporate governance law––to reduce the principal-agent gap via the mechanism of the board of directors. If shareholders have a say in the constitution of the board of directors and believe that diversity is an attribute worthy of pursuit, they can vote for it compelling management to consider more women for board positions. This solution is incentive-compatible, flexible, and less costly than mandatory quotas.
- Subject
- corporate board diversity; female representation; corporate boards; gender equality; gender diversity
- Identifier
- http://hdl.handle.net/1959.13/1331941
- Identifier
- uon:26743
- Identifier
- ISSN:0036-4037
- Language
- eng
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