This study examines the correlation between female presence on the board of directors and a company’s corporate social responsibility (CSR) performance. It has been widely accepted that CSR makes business sense; that a company will do well if it does good. Focusing on the importance for, and interest of governments and societies in having more socially responsible businesses. The study finds that, a higher percentage of women on the board is associated with a higher environmental rating of the company. I argue that this positive effect could be explained by the ethics of care theory, which highlights female personality traits (i.e., women’s tendency to be cooperative, democratic, inclusive, and collectivist-oriented) to explain why women are more prone to care for others.
Nowadays, Milton Friedman’s 1970 statement that "There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits..." is hard to support. It has been widely accepted that corporate social responsibility makes business sense; that a company will do well if it does good. On this point, a number of empirical studies (Barnett & Salomon, 2011; Eccles et al., 2012; Edmans et al., 2014) have found a positive relationship between being socially responsible and a company’s financial performance. The authors of these studies conclude that CSR is cost effective, it makes businesses more sustainable, and it improves the image of the company making it more attractive to investors, customers, and employees (Rahman, 2010). However, there has been much less progress when it comes to women gaining leadership positions in the business world (Pew Research Center, 2015). According to a Standard and Poor’s 500 (S&P 500) study of publicly traded US companies in 2016, women represent less than 5% of CEOs, and hold less than 20% of board seats. Yet, studies that have examined the impact of women as decision makers on companies’ financial performance, have found a positive correlation between the two (Adams & Ferreira, 2009; Frick & Bermig, 2010). A number of studies have also evaluated the relationship between women and governance practices, corruption, and fairness in both the public and the private sector (Dollar et al., 2001; Goetz, 2007; Sung, 2003 and 2012; Swamy et al., 2001), and found that women are less involved in cases of corruption, and are more inclusive and fairer leaders. Nonetheless, on combining CSR and the subject of women in leadership positions in the private sector, the few studies that have looked at this relationship have either focused on only one specific area of CSR, such as the environment (Segarra-Ona et al., 2014), studied very specific societies and markets: Austria and Germany (Velte, 2016), or used a limited sample (Setó-Pamies, 2013). These and other features of the studies, make it difficult for them to have external validity. It is difficult to generalize their conclusions to many countries due to the different socioeconomic, geographical, and political characteristics of each country.
One approach to making theoretical sense of the relationship between females and better governance practices and financial performance is the ethics of care. This theory holds that female personality traits make for a leadership style that is more inclusive, democratic, and attentive to the needs of others. Following this, the present study takes a broader approach and attempts to test the hypothesis that female presence on a company’s board of directors increases a company’s responsiveness to social needs, measured by the Morgan Stanley Capital International (MSCI) Environmental, Social, and Governance (ESG) ratings1. Due to data access limitations, the study only observes companies based in the United States. Even though the argument about external validity could be apply to this particular study, it is expected that the extensiveness and diversity of American corporations, as well as the size of the sample used in this study will grant more legitimacy to its results. Furthermore, the well-established legal framework and public scrutiny (Kendall, 2007; Reid & Toffel, 2009) within which US corporations operate allows for the study’s findings to be generally
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