An examination of how executive remuneration and firm performance are influenced by Chair-CEO diversity attributes

Advancing prior research, this study investigates the effect of Chair-CEO diversity on the relationship between executive remuneration and firm performance. Employing a unique sample of 262 UK listed firms from 2009 to 2020, our findings are five-fold. First, our findings suggest that Chair-CEO diversity is negatively associated with executive remuneration levels. Second, we document a positive relationship between Chair-CEO diversity attributes and firm performance. Third, we observe that an increase in executive remuneration appears to improve firm performance. Fourth, we show that the relationship between pay, and performance is moderated/explained largely by Chair-CEO diversity attributes. Finally, we show that the predicted relationships vary across firms which have female as Chair and where female is the CEO. Our findings imply that decisions about board diversity are driven by more than just moral principles; they are also influenced by the costs and benefits that diversity might bring to the firm. Our evidence offers empirical support for upper echelons, homophily and resource dependence theories and have significant regulatory impact.