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Do religion and politics impact corporate governance diversity policy?

Author

Listed:
  • Parveen P. Gupta
  • Kevin C.K. Lam
  • Heibatollah Sami
  • Haiyan Zhou

Abstract

Purpose - In this paper, the authors examine how religious and political factors affect a firm's corporate governance diversity policies. Design/methodology/approach - The authors develop five basic empirical models. Model 1 examines how religious beliefs and political affiliation determine whether a firm will establish diversity incentive in its senior executives' performance assessment. Model 2 investigates how the diversity goal, religious beliefs and political affiliation separately affect the level of actual diversity achieved. Model 3 examines how the diversity goal and environmental factors interact to affect the level of actual diversity achieved. Model 4 and Model 5 examine whether the diversity incentive in senior executives' compensation plan and the environmental factors (religious belief and political affiliation) help to reduce the compensation differentials between male and female executives. Findings - The authors find that firms located in more liberal counties with more Mainline Protestants and less Republican voters in the United States are more likely to include workforce diversity as a criterion in evaluating their senior executives. The authors also provide evidence that firms with diversity goals have more female directors, more female senior executives and more minority directors. However, they find no evidence that the compensation differentials between male and female executives are smaller in these firms. Finally, they find that external environment affects the effectiveness of the implementation of the diversity goals. Originality/value - In line withthis branch of research, the authors expand the literate on the link between corporate culture and corporate decision-making by investigating the non-financial performance measures. Besides the corporate decision-making in investment, financial reporting and social responsibilities as documented in prior studies, the authors argue that the religious beliefs and political affiliations could also affect the development and implementation of corporate non-financial performance goals in executive incentive contracts.

Suggested Citation

  • Parveen P. Gupta & Kevin C.K. Lam & Heibatollah Sami & Haiyan Zhou, 2022. "Do religion and politics impact corporate governance diversity policy?," Asian Review of Accounting, Emerald Group Publishing Limited, vol. 30(1), pages 1-30, January.
  • Handle: RePEc:eme:arapps:ara-09-2021-0181
    DOI: 10.1108/ARA-09-2021-0181
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    Citations

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    Cited by:

    1. Carter, David A. & Shank, Corey A., 2023. "Do religiosity and political beliefs affect female representation and firm performance?," International Review of Financial Analysis, Elsevier, vol. 89(C).
    2. Vestrelli, Roberto & Fronzetti Colladon, Andrea & Pisello, Anna Laura, 2024. "When attention to climate change matters: The impact of climate risk disclosure on firm market value," Energy Policy, Elsevier, vol. 185(C).

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