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Do co-opted boards strategically choose LGBT-supportive policies?

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  • Kyaw, Khine
  • Chindasombatcharoen, Pongsapak
  • Jiraporn, Pornsit
  • Treepongkaruna, Sirimon

Abstract

This study contributes to the underexplored literature: corporate governance responsibilities towards internal stakeholders (the employees). We investigate (a) whether the co-opted board, that is, the proportion of directors appointed after the current CEO takes office, influences firms' adoption of Lesbian, Gay, Bisexual and Transgender (LGBT)-supportive policies, (b) if so, what motivates the co-opted boards to do so, and (c) how these relationships change at times of limited economic resources and heightened governance. Based on 4850 firm-year observations of 1081 firms over the sample period of 1996–2010, we find (a) firms with co-opted boards are more inclined towards LGBT-supportive policies, that address stakeholders internal to the firms, (b) management of co-opted boards that adopt LGBT-supportive policies experience a higher increase in compensation than management of co-opted boards that do not adopt LGBT-supportive policies, and (c) during the global financial crisis (GFC), when firms aimed to survive economically under tighter governance, co-opted boards have lower tendency to adopt LGBT-supportive policies. This study offers insights to regulators interested in promoting board structures that address stakeholders. Despite the positive benefits documented in the literature on inclusive policies such as LGBT-supportive policies, the adoption of such policies may have a dark side to it.

Suggested Citation

  • Kyaw, Khine & Chindasombatcharoen, Pongsapak & Jiraporn, Pornsit & Treepongkaruna, Sirimon, 2021. "Do co-opted boards strategically choose LGBT-supportive policies?," International Review of Financial Analysis, Elsevier, vol. 73(C).
    • Handle: RePEc:eee:finana:v:73:y:2021:i:c:s1057521920302921
    DOI: 10.1016/j.irfa.2020.101651
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    Cited by:

    1. Brahma, Sanjukta & Gavriilidis, Konstantinos & Kallinterakis, Vasileios & Verousis, Thanos & Zhang, Mengyu, 2023. "LGBTQ and finance," International Review of Financial Analysis, Elsevier, vol. 86(C).
    2. Chowdhury, Hasibul & Hossain, Ashrafee & Masum, Abdullah-Al & Zheng, Jiayi, 2023. "Does corporate sexual orientation equality affect labor investment efficiency?," Global Finance Journal, Elsevier, vol. 55(C).
    3. Hasan, Mostafa Monzur & Cheung, Adrian (Wai Kong) & Marwick, Trevor, 2022. "Corporate sexual orientation equality policies and the cost of equity capital," Journal of Behavioral and Experimental Finance, Elsevier, vol. 34(C).
    4. Ayed, Sabrine & Waxin, Timothée, 2023. "LGBT discrimination and harassment, firm value, and reputation repair," International Review of Financial Analysis, Elsevier, vol. 90(C).

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    More about this item

    Keywords

    Co-opted boards; Corporate governance; LGBT–supportive policy; Agency theory; Stakeholder theory; Strategic-choice hypothesis;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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