The Role of Rookie Female Directors in a Post‐Quota Period: Gender Inequalities within French Boards

• Published date: 01 July 2019
• Author: Antoine Rebérioux,Gwenaël Roudaut
• DOI: http://doi.org/10.1111/irel.12238
• Date: 01 July 2019

The Role of Rookie Female Directors in a Post-

Quota Period: Gender Inequalities within French

Boards*

ANTOINE REB

ERIOUX and GWENA€

EL ROUDAUT

The board-level gender quota enacted in France has induced the massive arrival

in corporate boards of a new population—namely, women with no prior board

experience. We examine the positions and the compensation of these “rookie

female directors.”We show that, conditional on their individual characteristics

and firm effects, rookie female directors have had a limited access to the key

positions within boards and have suffered from a significant compensation gap.

We interpret this evidence of positional segregation as resulting from gender

stereotypes that have persisted in the process of rookie female directors’integra-

tion within boards.

Introduction

Board-level mandatory gender quotas, as enacted over the last decade by

several European countries (Norway, Iceland, France, Belgium, Italy, and Ger-

many), have to a large extent succeeded in breaking the glass ceiling at the

top of listed companies. They have done so by forcing companies to open

their board to a new population of female directors, with no prior board

JEL: J16, G34, J31, J71.

*The authors’affiliations are, respectively, Universit

e de Paris, Paris, LADYSS, France. E-mail: antoine.re-

berioux@gmail.com; and Ecole Polytechnique and AgroParisTech, Paris, France. E-mail: gwe-

nael.roudaut@polytechnique.edu. This project benefited from the support of the Chair Energy & Prosperity

(Energy Transition Pathways and Financing; http://www.chair-energy-prosperity.org/en/) and from the Chair

FDIR (Sustainable Finance and Responsible Investment; https://fdir.idei.fr/en/) and from the financial support

of the CEPREMAP (Programme Travail 2015) and the LABEX ECODEC (ANR-11-IDEX-0003/Labex Eco-

dec/ANR-11-LABX-0047, Area 3 “Decision-making and market regulation”). The authors wish to thank

Ethics&Boards for giving them free access to its database on directors. They are are also thankful to

Cl

emence Clos, Sarah Desch

enes, and Oliver Leroy for research assistance. Finally, they thank the editor,

two anonymous reviewers, Ren

ee Adams, Tristan Auvray, Viviane de Beaufort, Thomas Breda, Matthias

B€

urker, Patricia Crifo, Edith Ginglinger, Marc Goergen, Dominique Meurs, and Bert Scholtens for helpful

comments, as well as seminar participants at EEA 2016 Conference, Paris Financial Management 2016 Con-

ference, World Finance 2016 Conference, ASSA-AEA 2017 Conference, and SASE 2018 Conference. Of

course the usual disclaimer applies.

INDUSTRIAL RELATIONS, DOI: 10.1111/irel.12238. Vol. 58, No. 3 (July 2019). ©2019 The Regents of the

Universit y of Calif ornia Published by Wiley Periodicals, Inc., 350 Main Street, Malden, MA 02148, USA,

and 9600 Garsington Road, Oxford, OX4 2DQ, UK.

423

experience (“rookie female directors”). While several papers have examined

the impact of these quotas on firm performance and related changes in board

characteristics (see, e.g., Ahern and Dittmar 2012; Bohren and Staubo 2016;

Matsa and Miller 2013), there is no evidence so far on the role given to this

new population within corporate boards. This is the focus of our study.

Corporate boards are the locus of power and strategic decision making

within large firms. They are complex bodies, coordinating the action of various

individuals. Not every director is equal. A director comes as a bundle of char-

acteristics (in terms of experience and profile), making her singular in her abil-

ity to perform her duties. Further, there are some key roles inside the

boardroom, associated in particular to committee memberships and chairs (“po-

sitions”in this paper). Committees are board substructures comprised of few

members, in charge of specific functions (audit, chief executive officer [CEO]

selection and compensation, risk strategy, corporate social responsibility, etc.).

Individuals holding these positions have a greater ability to shape corporate

decisions, and are likely to be better compensated.

We know little about the allocation of roles and compensation across direc-

tors. Companies have a large flexibility in this regard. The board basically sets

up its own functioning, with few obligations (except for, in most jurisdictions,

the existence of an audit committee and the presence of independent directors).

We know even less about gender inequality within boards. While gender

quotas have dealt with women underrepresentation in board seats, they did not

attempt to regulate the distribution of positions and fees across gender. Fully

understanding the consequences of a gender quota then necessitates examining

how firms have coped with the arrival of rookie female directors. Did newly

appointed women receive equitable treatment, accounting for their specific

characteristics? Or did companies allocate them to nonstrategic roles, with

likely consequences in terms of compensation?

We answer these questions, relying on French corporate data. In January

2010, the French National Assembly voted the general principle of a gender

quota for listed companies. In January 2011, the quota was adopted, requiring

each gender to represent at least 20 percent of directors in 2014 and 40 percent

in 2017. The sample we use in this study includes the firms belonging to the

SBF120 index in 2011 (i.e., the 120 largest listed firms in 2011 by market cap-

italization on Euronext-Paris), over the 2006–2014 period (2014 corresponds to

the expiration of the first compliance period). We focus our attention to the

post-quota period, as we are interested in the situation of rookie female direc-

tors. However, in extended analyses, we also consider the pre-quota period.

We first show that the quota significantly raised the share of female directors

in corporate boards, without decrease in board experience (as one could have

expected). Before and after the quota, the annual flux of people entering boards

424 / ANTOINE REB

ERIOUX AND GWENA€

EL ROUDAUT

with no prior director experience has remained similar. However, and without

surprise, the regulation deeply changed the gender composition of new board

appointments (with the fraction of females in new entries passing from 10 per-

cent pre-quota to 50 percent post-quota). Before the quota, companies mainly

appointed males, with no particular board experience but with some specific,

sought-after characteristics. After (and because of) the quota, companies had to

modify their behavior: they hired women with no prior board experience and

who would not have been appointed absent the regulation. We call these

women, appointed for the first time during the first compliance period, “rookie

female directors”(RFDs). Importantly, RFDs present distinct attributes, as com-

pared to the traditional pool of male directors—mostly because of the existence

of (short-run) supply-side effects, inducing a shortage of women with some

sought-after characteristics (for instance, executive experience).

We then provide evidence that companies gave a limited access to key posi-

tions to these RFDs, conditional on their individual characteristics (and firm

fixed effects). More precisely, we observe that rookie women have had on

average less committee memberships and chairs than nonrookie males—while

it has not been the case for rookie males. Our empirical results are therefore

indicative of a second, inner glass ceiling—with “positional segregation”

against rookie women. We interpret this pattern as resulting from persistent

negative gender stereotypes regarding women in leadership positions. We then

use individual compensation as a proxy of individual role in the decision-mak-

ing process. Director compensation reflects committee and chair arrangements,

but is also driven by unobservable factors correlated with individual role or

influence (such as board attendance). We show that RFDs supported a condi-

tional within-firm fees gap, primarily driven by the positional segregation pre-

viously identified. Ultimately, our story runs as follows. To comply with the

quota, French companies had to appoint RFDs. These RFDs presented specific

individual characteristics that accounted for some of the discount they sup-

ported in terms of committee access and compensation. But even considering

these specific attributes, a significant gap remained. On this basis, we conclude

that RFDs have not been treated fairly, at least in the short run.

Finally, we measure the magnitude of the gender fees gap before and after

the quota. In the absence of a control group, we are not able to identify proper

causal relations. Having said so, we observe that the regulation has been asso-

ciated with an increase in the within-board gender fees gap, from 3.4 percent

on average in the pre-quota period to 5.5 percent on average in the post-quota

period. This increase in time is likely to be related to the mechanisms identi-

fied so far: even if the positions of nonrookie (seasoned) female directors have

slightly improved after the quota, the segregation against RFDs has overall led

to a deterioration of female role within boards—once again, at least in the

Gender Inequalities within Boards / 425