Women on Boards in Italy Magda Bianco, Angela Ciavarella, Rossella Signoretti Banca d’Italia, Consob Workshop on Diversity in Boards – De Nederlandsche Bank Amsterdam, 19 December 2013
Outline 1. Literature and motivation 2. Women and the traditional features of the Italian market Which companies and which women? 3. Determinants of women representation 4. Some suggestions about effects Possible recurring relationships between women and governance-related outcomes 5. Conclusions and future work Women on Boards in Italy – DNB Amsterdam, 19 December 2013 2
1. Literature and motivation (1/3) • Traditionally, very limited women representation in Italian corporate boards – Far behind other countries • However the number of women directors has been increasing, especially in recent years • In July 2011 the law on quotas passed – Requiring that in listed companies the less represented gender holds at least one third of board seats (one fifth for the first term) – Sunset clause: 3 board terms (9 years) – Applying to board nominations following August 2012 Women on Boards in Italy – DNB Amsterdam, 19 December 2013 3
1. Literature and motivation (2/3) • Relatively large literature on beneficial effects of diversity – Resource dependence – Agency theory • Empirical analysis ambiguous – Benefits of diversity on some governance-related outcome have been demonstrated Pay-for-performance, conflict of interests, board attendance – Mixed evidence on the effects on performance Either positive or negative or variable with firm’s complexity • Limitations – Concerns about endogeneity and reverse causality make it often difficult to interpret results as causal relationship – Women rarely reach a critical mass, sufficient for expecting them to exert an effect Women on Boards in Italy – DNB Amsterdam, 19 December 2013 4
1. Literature and motivation (3/3) In our paper • given the limited number of seats held by women, very difficult to evaluate effects • but knowledge of phenomenon should drive future evaluation of effects and policy implications • Hence here we aim at understanding – Who are the women on Italian boards – Why are they on boards • The analysis covers the boards of Italian listed companies in the period 2008-2010 (before quotas regulation) Women on Boards in Italy – DNB Amsterdam, 19 December 2013 5
2. Which companies? • At a first glance, women are more frequently appointed in: – smaller companies – consumer sector and ITC • As for the ownership and control structure summary statistics show that women are common in: – Single-controlled companies – rather than coalitions and widely-held – Family-controlled companies – on average 7,6% of board seats held by women – women sit in nearly half of family firms Women on Boards in Italy – DNB Amsterdam, 19 December 2013 6
2. Which women? • We classify women directors according to their affiliation with the controlling agent and education (simple proxy) • 56% of women have family links with the controlling agent • As compared to men, women are on average: – more frequently executive rather than independent – less frequently appointed in board committees • Among women: – graduation is more common in the non-family group (93% vs 61%) – only a minority is independent (22%), being the majority executive or non executive (especially family) – interlocking (no. of board seats) is higher in the family group Women on Boards in Italy – DNB Amsterdam, 19 December 2013 7
3. Determinants: hypotheses We expect a role of • Firm’s characteristics size (+), industry (+ consumer) – Common results of gender diversity literature – While also controlling for ‘inertia’ (age, i.e. since going public) and performance (Tobin’s Q) • Ownership and control dispersed ownership (+), family (+), institutional investors (+) – On the one hand, dispersed and institutional shareholders might have a preference for diversity – On the other hand, family-controlled Italian listed companies may be more willing to appoint family members • Board size (+), age (-), independence (+) – Might capture how diversity-oriented a company is Women on Boards in Italy – DNB Amsterdam, 19 December 2013 8
3. Determinants: methodology • Object We investigate the drivers of women presence overall and in the sub-groups of family and non family female directors • Regressions the dependent variable is whether at least one female/ family female or non-family female director sits on the board. We perform both: • Probit regressions • Linear probability (OLS) models with firm fixed effects (to address endogeneity concerns) • Data Boards of directors in 2008-2010 Unbalanced panel of 8,279 director-level obs. from 834 firms • Caveat We interpret our probit results as correlations • short depth of our panel and reverse causality issues Women on Boards in Italy – DNB Amsterdam, 19 December 2013 9
Non- Firms’ characteristics All women Family Family Size - - Performance - - Age of listing + + + Industry IT/tlc consumer IT/tlc IT/tlc Concentrated ownership + ++ + Widely held + Institutional investors + + + Board size + Independence + Interlocking - Age of directors - - Education + + 10
3. Two different models emerge... • Affiliated women small caps, consumer sector, concentrated ownership, larger board • Unaffiliated women widely held companies (also), better-educated, younger, less connected and more independent boards • openness to diversity? • Common features (both models) age of listing (against ‘inertia’), institutional investors and IT/ Tlc sector • Under the fixed effect model, younger and independent board members drive the appointment of women, especially non-family Women on Boards in Italy – DNB Amsterdam, 19 December 2013 11
4. Effects of women presence • Relationship between gender diversity and two governance outcomes 1. Firm-level : number of board meetings as a proxy of the effectiveness of board monitoring 2. Director-level : individuals’ attendance to board meetings in order to investigate differences in behavior and possible spillover effects on male attendance (Adams and Ferreira 2009) • Are there significant relationships and differences according to affiliation? Women on Boards in Italy – DNB Amsterdam, 19 December 2013 12
4. Effects: results Board meetings • Negative correlation with women presence overall, mainly driven by family women boards • the result is not significant for unaffiliated women • But once we include fixed effects, women effect turns out to be positive • the first result was determined by time- invariant firms’ characteristics • No significant result in the sub-groups but the positive sign holds only for non-family women boards Attendance behavior • Negative correlation with female presence • the sign persists for family women • Negative spillover effects on male-only attendance • However, once we include firm fixed effects, differences between men and women loose significance • some firm-level unobserved characteristic is determinant Women on Boards in Italy – DNB Amsterdam, 19 December 2013 13
4. Effects… to sum up Puzzling results on the two very basic outcomes • Negative at a first glance, women presence has a positive effect on board activity • Worse at a first glance, women attendance behavior does not significantly differ from men’s • Spillover effects are negative • In both cases: • Non-family women behave better than affiliated female directors i.e. are associated with more positive results of the considered outcomes • Firm-level unobserved/able variables play a crucial role to keep into consideration for future research Women on Boards in Italy – DNB Amsterdam, 19 December 2013 14
5. Conclusions and future work • The objective of this work is to have a preliminary insight on: • how women selection has worked so far • to which companies’ characteristics women presence is associated • Until now two different models possibly leading to different performance • Future research will address • characteristics of newly-appointed women in order to investigate possible differences with ‘incumbents’, first • a more comprehensive analysis of the effects of gender diversity in the Italian market that the law will allow to perform, later Women on Boards in Italy – DNB Amsterdam, 19 December 2013 15
5. Is something changing already? • Too early to see any real effect • But the quota regulation is promoting (or forcing) a huge increase in women representation • the non-family component of women on Italian boards is now dominant • Other recent trends • Women reached 17% of board seats (June 2013) • Less executive but more ‘monitoring’ roles (i.e. independent and minority director) Active involvement in corporate governance is crucial in the Italian market where conflicts of interest and minority exploitation are central issues Women on Boards in Italy – DNB Amsterdam, 19 December 2013 16
Thanks for your attention Women on Boards in Italy Magda Bianco, Angela Ciavarella, Rossella Signoretti Workshop on Diversity in Boards – De Nederlandsche Bank Amsterdam, 19 December 2013
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