Tokenism in gender diversity on board of directors

• Tokenism exists in the boards of Japanese companies. • The introduction of the Japan's Corporate Governance Code has led to tokensim. • Tokenism in Japanese firms occurs when appointing a second outside director. • Tokenism is not observed in the appointment of busy female outside directors. This study examines the existence of tokenism in Japanese companies following the implementation of corporate governance reforms. We focus on the appointment of female outside directors. The existence of tokenism on corporate boards is an important issue for companies worldwide because it deals with gender diversity in the appointment of board members. Following the Abenomics policy of empowering females, Japan introduced “Japan's Corporate Governance Code” (the Code), which included board reforms such as appointing at least two outside directors. Using our sample period after the introduction of the Code, we examine whether tokenism occurs in Japan, a country with low female participation in business. The empirical analysis reveals the occurrence of tokenism at the start of the Code's introduction. Companies appoint two outside directors to meet the formal requirements of the Code. They appoint a male outside director first and a female director later as a token. However, tokenism is not observed when busy female directors with extensive experience are appointed to the board, presumably because they have expertise and skills.