Does the Percentage of Women on a Firm's Board of Directors Matter? Effects on Relative Board Power, Committee Composition, and Strategic Change
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This study examines how the percentage of women on a company’s board of directors (PWOB) affects board governance, and in turn, how board governance impacts the extent of firm strategic change. Scant research exists that investigates the connection between PWOB and relative board power, and prior research has not tested for a direct relationship between relative board power and firm strategic change. Through the application of agency theory and upper echelons theory lenses, I attempt to fill this gap in management research. The moderating effects of nominating, compensation, executive, and audit committee composition are investigated, with the findings’ offering important implications that should help both researchers and practitioners better understand how the demographic composition of a board committee can affect processes at both the board level and the firm level. The relationship between PWOB and strategic change is tested with partial least squares (PLS) analysis using PLS-Graph on a three-year sample (2006-2008) of the 2006 top two hundred-fifty Fortune 500 companies. Evidence is found that supports the theory that, under certain circumstances, there exists a positive relationship between PWOB and relative board power. Support is also found for the moderating effects of the percentage of women on each of a board’s major committees on the relationship between PWOB and relative board power. While these effects are significant, they are found to attenuate the PWOB / relative board power relationship. Possible justification for these moderators’ acting opposite the direction initially hypothesized is provided. Limited evidence supporting the moderating effects of committee chairperson gender on the PWOB / relative board power relationship is discovered, and no support is found for PWOB’s exhibiting a connection, either directly or as mediated by relative board power, with firm strategic change.