Gender Pay Gap in the Board Room and Governance Attributes That Moderate the Gap

ABSTRACT We examine whether there is a difference in the compensation paid to female and male directors of US firms and find that, on average, US female directors receive less total compensation than their male counterparts. Further, the gender pay gap is smaller on female‐friendly boards, a pattern consistent with the homophily principle and social identity theory. Despite the lower compensation, additional tests find that female directors are associated with higher financial reporting quality and marginally higher CEO compensation‐performance sensitivity, indicating that the pay gap is not explained by weaker monitoring. Among the governance attributes we examine, a female board chair is associated with the largest reduction in the gap, larger than that associated with a female CEO or a female‐majority board. The gap is also smaller when females hold a super majority, a configuration that is far less common in practice.