AbstractBoardroom backscratching, or cronyism, is an unethical practice where CEOs conspire with directors to receive remuneration beyond performance- and market-related factors. Premised on the theory of planned behavior, this study investigates whether CEO generalist experience magnifies the likelihood of boardroom backscratching. Using 9482 firm-year observations spanning 1999–2018, our analysis shows that firms with greater CEO generalist managerial experience are more likely to engage in boardroom backscratching, via both cash- and equity-based compensation. We provide further evidence that backscratching firms with CEOs (...) that possess greater generalist experience tend to overinvest, particularly via non-capital expenditure, as a channel for empire building and private rent extraction. We also find that a higher portion of female independent directors sitting on the board and the compensation committee mitigates the positive relationship between CEO generalist managerial experience and boardroom backscratching, which we attribute to greater ethicality of, and increased monitoring exercised by, female independent directors. (shrink)

Is there a compensation gap between female CEOs and male CEOs? If so, are there mechanisms to mitigate the compensation gap? Extending role congruity theory, we argue that the perception mismatch between the female gender role and the leadership role may lead to lower compensation to female CEOs, resulting in a gender compensation gap. Nevertheless, the compensation gap may be narrowed if female CEOs display agentic traits through risk-taking, or alternatively, work in female-dominated industries where communal traits are valued. Additionally, (...) we expect that female CEOs’ risk-taking is less effective in reducing the gender compensation gap in female-dominated industries due to the conflicting emphases on agentic and communal traits. Leveraging a sample of Chinese publicly listed firms, we find support for our hypotheses. Overall, this study contributes to the ethics literature on income inequality issues, by highlighting the effectiveness of potential mechanisms to close the gender compensation gap between female and male CEOs. (shrink)

The readability of 10-K reports, in terms of linguistic complexity, determines the usefulness of information disclosure for stakeholders, particularly individual investors. Since investors largely depend on the financial communication in 10-K reports, firms have an ethical and legal responsibility to present disclosures in a language investors can understand. However, motivated by self-interest, managers obfuscate such disclosures to mask their own actions and hide unfavourable information. Building on the managerial obfuscation hypothesis grounded in stakeholder-agency and ethical-sensitivity theories, I hypothesize and empirically (...) test the relationship between board gender diversity and the readability of narrative disclosure in 10-K reports. Based on a relatively large sample of Russell 3000 firms for the years 2002–2018, I find a significant positive impact of BGD on 10-K reports’ readability, which in turn improves firm performance. Channel analysis reveals that the findings are driven by female independent directors, and their representation on audit and compensation committees; however, board activity does not appear to drive this relationship. Finally, I find that although gender discrimination in the appointment of directors spurs complex readability, the BGD-readability relationship is consistent in gender-biased and non-discriminant firms. I also check the robustness of our main empirical results in several ways. My study has important regulatory and managerial implications in that corporate governance is an important determinant of the readability of disclosure documents. (shrink)