Do Board Gender Diversity and Director Typology Impact CSR Reporting?

• DOI: http://doi.org/10.1111/emre.12143
• Published date: 01 December 2018
• Date: 01 December 2018

Do Board Gender Diversity and Director

Typology Impact CSR Reporting?

LAURA CABEZA-GARCÍA,ROBERTO FERNÁNDEZ-GAGO and MARIANO NIETO

Department of BusinessAdministration, University of León, León, Spain

By studying femaledirectors and their typology, this paper contributes to the empirical evidence relating to board

gender diversity and the disclosure of corporate social responsibility (CSR) information. An ordered random effect

probit model was applied to a panel of Spanish non-financial and non-insurance listed firms over the 2009–2013

period. The analyses revealed that a higher percentage of women in boardrooms and in groups of outside and

independent directors imply better CSR disclosure. These results hold for corporations with a critical mass of three

women on the board and among outside directors.

Keywords: corporate social reporting; board gender diversity; director typology

Introduction

The business case for corporate social responsibility

(CSR) has been an important topic of discussion that

has provided rational justifications for CSR initiatives

from a primarily corporate economic and financial

perspective (Carroll and Shabana, 2010). Engaging in

and publicising CSR activities can be a major benefit

to a company’s reputation and legitimacy (Brammer

and Pavelin, 2004; Kurucz et al., 2008). Many

companies have decided to issue specific reports on their

economic, environmental and social performance, but

reporting may not be sufficient. Stakeholders must be

made aware of companies’CSR activities and overcome

their initial scepticism, which means that the way in

which this information is communicated will be vital

(Du et al., 2010).

In view of CSR’s relevance, there are good reasons to

study any factors affecting CSR activities and CSR

reporting in particular. As previous works state, it is

necessary to examine corporate governance mechanisms

–and particularlyboard composition –and their influence

on both CSR actions and disclosure (Brennan and

Solomon, 2008; Rao and Tilt, 2016). In this context,

current figures and diversity initiatives demonstrate the

importance andtimeliness of studying diversityon boards

(Miller andTriana, 2009). This paper focuseson directors’

gender, as it is one of the most significant sources of

diversity (Lückerath-Rovers, 2013). Additionally, the

current unstable economic environment has created

renewed awareness of CSR, corporate governance, and

the (gender) composition and roles of boards of directors

(Huse et al., 2009).

Current figures reveal a lack of representation of

women on boards, as only 23% of board members of the

largest publicly listed companies are women, and the

figure for Spain is 20%.

1

There is still much progress to

be made, but a significant increase of 11 percentage points

has been achieved since 2010 when the European

Commission first put this issue high on the political

agenda. The EU’s proposal for a Directive on Improving

the Gender Balance Among Directors of Companies

Listed on Stock Exchanges and Related Measures

2

in

the EU Parliament is still pending approval. Meanwhile,

a number of EU member-states have taken measures at

the national level. In the case of Spain, the Law on

Effective Equality

3

recommended that those companies

with more than 250 workers and a turnover exceeding

€22 m a year include on their boards a number of women

who will allow them to reach a balanced presence of

women and men –between 40% and 60% –by 2015.

However, thatobjective has not been reachedand remains

Correspondence: Laura Cabeza-García, Universityof León, Departmentof

Business Administration, Campus de Vegazana s/n León 24071, Spain,

Tel: 34-987293496, Fax: 987291454. E-mail laura.cabeza@unileon.es

1

The data were collected in April 2016 and covered the largest publiclylisted

companies from the28 Member States of the EU. Informationis available at:

http://ec.europa.eu/justice/gender-equality/gender-decision-making/database/

business-finance/supervisory-board-board-directors/index_en.htm.

2

COM (2012) 614 final.

3

Approved22 March2007.

European Management Review, Vol. 15, 559–575, (2018)

DOI: 10.1111/emre.12143

©2017 European Academy of Management

somewhat distance, as only 12% of the members of the

affected boards were women as of 2016 (Informa D&B,

2016). As in other countries, such as the UK

(Martin et al., 2008),it must be noted that female directors

are generally found in smaller firms. Another

recommendation along these lines was recently included

in the Spanish Good Governance Code of listed

companies approved by the Board of the Comisión

Nacional del Mercado de Valores (CNMV) in 2015,

which stated that the director selection policy should

pursue the goal of having at least 30% of all board

positions occupied by women before 2020. This is a

voluntary goodgovernance recommendation,and it is still

too early to assess its impact on women’s representation

on boards.

We have just illustrated the way in which gender

representation is central in contemporary debates

(Seierstad, 2016). Some efforts are being made to help

women attain board positions, finding justification in

utility, mainly the ‘business case’, and individual justice

arguments (Seierstad, 2016). According to Labelle et al.

(2015), public policy on this issue should be introduced

gradually and voluntarily, as a coercive, regulatory

approach may negatively affect the relation between

gender diversityand performance. However, it is not only

corporate financial performance but also social

performance that is at stake, as social performance can

also be linked to board composition. In this regard, a

stated need exists for more academic research addressing

the ways in which demographic diversity in general and

gender diversity in particular relate to board effectiveness

and CSR (Zhang, 2012).

As Byron and Post (2016) mentioned in their meta-

analysis, boards of directors and corporate governance

scholars haveincreasingly directed their attention towards

finding ways to increase corporate social performance

(Rahim, 2012). One oft-recommended solution has been

to increase the number of women on boards, based on

the idea that the experience and values of female directors

may positivelyimpact CSR and reputation (Terjesenet al.,

2009; Adams et al., 2015). Women are more concerned

with ethical behaviour (Ford and Richardson, 1994) and

environmental issues (Diamantopoulos et al., 2003).

Moreover, men are more comfortable with profitable

activities, while women are more comfortable with

community activities (Betz et al., 1989;Bernardiand

Arnold, 1997). Thus, having more women on a board

increases its welfare activity and is expected to encourage

higher CSRdisclosures (Sundarasen et al., 2016)and CSR

reporting quality (Amran et al., 2014). Most previous

studies have focused on the impact of female directors

on corporate social performance in general (e.g., Zhang,

2012; Hafsi and Turgut, 2013; Setó-Pamies, 2015) or

certain aspects of it (e.g., environmental performance in

Ciocirlan and Pettersson, 2012; Walls et al., 2012; Glass

et al., 2016, and philanthropic contributions in Bernardi

and Threadgill, 2010; Jia and Zhang, 2013; Marquis and

Lee, 2013).However, as stated in a recent literaturereview

by Rao and Tilt (2016)as well as in Fernández-Feijooet al.

(2014), studies focusing on female directors and their

impact on CSR disclosure are still very limited. These

authors suggest that more qualitative and quantitative

studies are needed to examine whether gender diversity

really matters to CSR disclosure decisions.

This paper aims to contribute to this strand of literature

through a novel analysis of the specific effect of gender

diversity among directors on CSR reporting. Thus,

compared to other works at the international level and

particularly in Spain, this research uses a more recent

period of time to extend a step further by considering not

only the representation of women on the board (both as a

percentage and a critical mass) but also director typology

to uncover the relevance of having female outside

directors and femaleindependent directors.

Agency theory and resource dependence theory

constitute the main lenses through which we studied this

topic. Frynas and Yamahaki (2016) conducted an

exhaustive review of the theories that have been utilised

to explain CSR, and they revealed that various studies

have investigated the role of board members in setting

CSR strategies from the perspective of both theories.

Following the recommended adoption of a multilevel

approach (Aguinis and Glavas, 2012), we have

simultaneously considered an individual characteristic –

gender –within an organisational characteristic, that is,

the distribution of board positions between inside/outside

directors and proprietary/independentdirectors.

Agency theory aids in understanding the relation

between owners and managers, the consequent agency

problem and the ways it can be overcome through

different governance mechanisms of which boards of

directors are one. Board composition and diversity will

affect the way management is monitored in relation to

CSR issues. Additionally, resource dependence theory

emphasises that directors must help their organisations

acquire the critical resources they need, and board gender

diversity can provide some of those resources, such as

personal ties, knowledge or even values that will

positively affect the firm’s social performance.

Furthermore,opting for outside and independent directors

when adjusting board composition can affect CSR

initiatives and disclosure (e.g., Johnson and Greening,

1999; Ibrahim et al., 2003; Brammer and Pavelin, 2008;

Prado-Lorenzo et al., 2009b) and it may also be

interesting to examine the importance of the gender

diversity of directors in those specific groups. Finally,

critical mass theory was also used in the analysis to

examine a specific aspect of the research question: the

expected consequences on CSR disclosure of having

female directors may depend not only on their

560 L. Cabeza-García et al.

©2017 European Academy of Management