Mind the (gender pay) gap: the role of board gender composition

TL;DR

This study finds that increasing the share of female directors in UK companies helps reduce the gender pay gap by influencing wages and pay equity.

Contribution

The paper introduces a novel instrumental variable approach to estimate the causal effect of board gender composition on gender pay gaps.

Findings

A one-percentage-point increase in female directors reduces the gender pay gap by 0.043 percentage points.

The effect is strongest in firms with 250-5,000 employees and when UK nationals dominate the board.

Female directors drive wage increases for women, improve female representation, and ensure fairer performance-related pay.

Abstract

We study how the share of female directors affects company-reported gender pay gaps using linked administrative data. We combine gender pay gap reports with proprietary board-composition data for 8,411 UK firms with at least 250 employees (2017–2021). Our identification uses a Bartik (1991)-style instrumental variable design that exploits regional shifts in female board representation. A one-percentage-point increase in the female director share reduces the gender pay gap by 0.043 percentage points. Moving from the current UK average to board gender parity would close about one-sixth of the reported 9.7% pay gap. The effect operates through three channels. Female directors generate asymmetric wage increases favouring women, improve female representation across pay quartiles, and ensure more equitable allocation of performance-related pay. Effects are concentrated in firms with 250-5,000 employees and are strongest when UK nationals comprise a board majority.

The online version contains supplementary material available at 10.1007/s00148-026-01159-x.

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