Female representation in top management teams (TMTs) offers numerous organizational benefits, yet many firms struggle to achieve gender diversity in upper echelons. Drawing on behavioral agency theory, we examine how CEO risk preferences, shaped by severance pay arrangements, influence TMT gender diversity. Analysis of 5,768 observations from 650 U.S. firms (2011-2022) reveals that CEO severance pay negatively affects TMT gender diversity, as reduced risk bearing makes CEOs more likely to appoint executives with aligned risk preferences. This relationship is weakened by long-term incentive plans and board interlocks but strengthened by board gender diversity. Our findings suggest that compensation structures intended to mitigate CEO risk bearing can paradoxically reinforce gender imbalances in corporate leadership, while specific governance mechanisms can help counteract these effects.
