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

Khine Kyaw, Pongsapak Chindasombatcharoen, Pornsit Jiraporn and Sirimon Treepongkaruna

International Review of Financial Analysis, 2021, vol. 73, issue C

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.

Keywords: Co-opted boards; Corporate governance; LGBT–supportive policy; Agency theory; Stakeholder theory; Strategic-choice hypothesis (search for similar items in EconPapers)
JEL-codes: G34 G39 J50 M14 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:73:y:2021:i:c:s1057521920302921

DOI: 10.1016/j.irfa.2020.101651

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