Female Board of Directors and Organisational Diversity in Japan

Enhancing gender diversity on boards of directors is an important policy agenda across societies. Despite being the third largest economic power in the world, the proportion of female members on boards of directors in Japan was only 3 per cent in 2016, which is one of the lowest among the OECD countries. This paper examines the data of listed firms in Japan, and explores the impact of institutional change on organisational diversity in terms of gender diversity on boards. In particular, it focuses on analysing the institutional pressure which Japan has been recently undergoing: financialisation and incremental regulatory reform. It is found that firms take institutional change as an incentive to relieve institutional pressure. Whilst increasing foreign investors and new policies encourage independence and gender diversity on boards, Japanese firms relieve both pressures by appointing female directors as outside directors after regulatory reform. Further, it is also found that firms have persistence in maintaining their corporate governance systems even when they are transforming their systems. Firms that implemented a more independent board structure do not necessarily nominate female board members, because the implementation of a more independent system complements board gender diversity.