How do women directors ensure corporate ethics? The role of board tenure

Abstract

Women board members have been shown to reduce corporate misconduct. We ask how they accomplish this given that their numbers are small, their voices often go unheard, and they tend to be on committees that have been considered less important. Using social identity theory and the theory of gendered expectations, we hypothesize that long tenure on the board is the characteristic that allows a woman director’s voice to be heard. We test our hypothesis by looking at women directors’ power to reduce stock option backdating. Our hypothesis regarding long tenure is supported. Other sources of power such as critical mass, prestige and ownership power are not significantly related to reduced corporate misconduct. We use logit regression and perform several robustness checks, including instrumental variable techniques to deal with possible endogeneity. We discuss the implications of our findings for management practice and board structure.