This paper documents several significant correlations between the variability of stock
returns, the structure of director compensation, and the gender diversity of corporate
boards. In a cross-sectional sample of boards of directors of 1024 publicly traded firms in fiscal year 1998, we find three robust results: (1) firms facing more variability in their stock returns have fewer women on their boards of directors, (2) firms with more diverse boards provide their directors with more pay-performance incentives, and (3) firms with more diverse boards hold more board meetings. We provide an explanation for these findings, based on the idea that board diversity affects directors’ incentives to work cooperatively. We also find that female directors have fewer attendance problems at board meetings, which suggests that diverse boards can be more effective than homogeneous boards.
(joint work with Daniel Ferreira)

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