When Does Appointing a Female Director Influence CEO Pay Raises? Investigating the Conditions that Unleash Her Minority Influence in the Boardroom

Given women’s distinct values, perspectives, and decision-making approaches, the inclusion of female directors has been proposed as a potential mechanism for curbing excessive CEO pay raises. Yet, empirical evidence remains mixed, indicating that the mere presence of a female director does not reliably translate into meaningful influence. Drawing on minority influence theory as our core framework, supplemented by decades of gender research, we examine the incremental influence of appointing a female director on CEO pay raises to identify conditions under which her minority influence is strengthened or weakened. Using 5,395 firm-year observations from 791 Standard & Poor’s (S&P) 1500 firms between 2010 and 2017, we find that appointing a new female director is associated with smaller CEO pay raises when boards have higher levels of incumbent female representation (vs. token representation), a female CEO, fewer male-held interlocking directorships, and more frequent membership changes among male directors. We replicate our analyses using an alternative dataset, alternative measures, and more nuanced decompositions of CEO pay raises (e.g., warranted vs. unwarranted raises) and find consistent results. This research augments the dialogue on gender diversity in board governance and provides evidence on when incremental changes in board composition can help address persistent concerns about excessive CEO compensation.