According to the World Economic Forum, social issues such as income inequality, climate change and natural resource shortages are among the most pressing global challenges facing 21st-century economic factors.
Boards of directors, then, may hold considerable sway in determining the extent to which firms respond to and address these social issues.
How can firms be more responsive? One oft-recommended solution is to increase the number of women on corporate boards.
According to this line of reasoning, female directors are thought to be more likely to bring humanistic and holistic values to the board.
For this reason, the feminization of boards of directors could help organisations improve their firms’ social performance—to engage in more socially responsible business practices and generate a more positive reputation among diverse stakeholders.
However, whether and how women directors influence firms’ engagement in socially responsible business practices and social reputation among diverse stakeholders is unclear due to conflicting empirical evidence.
Some studies have found that more female directors are associated with higher corporate social performance—for example, firms with more female directors engage in more philanthropy, have better social reputations and are better environmental stewards.
Other studies have found the opposite relationship or have found no relationship between female directors and corporate social performance.
Corinne Post (Lehigh University) and I thought one of the reasons studies have found conflicting results is due to inattention to the national contexts in which these relationships occur.
We statistically combined the results from 87 different studies and found that, in general, female board representation is associated with greater corporate social performance.
Specifically, firms with more female directors tended to have more diverse workforces, have higher scores on social audits, engage in more environmentally responsible behaviour (such as reducing harmful emissions), be more philanthropic, and be more likely to have a strong code of ethics.
In addition, firms with more female directors enjoy better social reputations: for example, they were more likely to be included in a list of most admired or most ethical companies.
However, while generally positive, the female board representation and social performance relationship is even more positive in particular national contexts.
First, female directors are more positively associated with corporate social performance in countries with stronger shareholder protections. We reasoned that, in these countries, boards are more motivated to draw on the resources that women directors bring to a board.
Second, female directors are more positively associated with corporate social performance in countries with greater gender parity.
We reasoned that, in these countries, power on the board is likely to be more balanced—such that female directors are more likely to have a say.
In sum, these results suggest that female directors may positively influence firms’ corporate social performance.
However, they also suggest that, to enhance any benefits of diversity for corporate social performance, efforts should be directed at holding boards more accountable toward diverse stakeholders and improving the status of women in society and in the workforce.
Kris Byron is PhD, associate professor of management at the Martin J. Whitman School of Management at Syracuse University