Abstract
We examine the role of alignment between organizational social consciousness and the informal and formal institutions of a country in increasing female representation on boards. Using fixed-effects and Hausman Taylor regression methodology for endogenous covariate with panel data for the years 2006–2020, we find that the greater the alignment between organizational social consciousness and certain formal (i.e., a gender quota) and informal (i.e., high gender equality) institutions, the more progress there is toward gender representation on corporate boards in Europe. We also find that more socially conscious firms make the most progress, often going beyond the minimum regulatory targets. By showing the complementarity of these factors, we address the enduring question of how the interplay of formal and informal institutions directly affects corporate behavior, thus contributing to the institutional, public policy/regulatory, and corporate governance literatures. We note the need for policymakers to go beyond mere codification of rules via quotas and simultaneously work toward raising national and organizational social consciousness levels on issues of gender equality.
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Notes
Our sample consists of Austria (117), Belgium (195), France (785), Germany (663), Italy (249), the Netherlands (309), Norway (115), Portugal (91), Spain (297), United Kingdom (2206) and United States (4,546) for a total of 9,573 observations.
Note that results with random-effects models are almost identical, which further substantiates robustness of our findings.
On the basis of their Monte Carlo simulation experiments, econometricians have found this technique to be particularly effective at deriving robust estimates when several explanatory variables may be endogenously correlated with each other (Baltagi et al., 2002).
Note also that in our Hausman Taylor regression estimates, we explicitly included industry and country effects to account for their unobserved effect on firms’ institutional environment, strategies, and performance (Chacar et al., 2010; Chan et al., 2008; McGahan & Victer, 2010; Sakakibara & Yamawaki, 2008). We used 14-industry classification (Arora & Dharwadkar, 2011; Waddock & Graves, 1997) to control for this purpose as the standard three-digit SIC classification (e.g., Datta et al., 1991) resulted in too many different industries.
Results available on request.
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Appendices
Annex 1: Elements of Quota Design for Publicly Listed Firms
Quota target (%) | Bill passed | Target date | Sanction level | |
|---|---|---|---|---|
Norway | 40 | 2003 | 2008 | Sanctions: Denied registration as businesses or even dissolved |
Spain | 40 | 2007 | 2015 | No sanctions. Positive reinforcement: preference in public contracts |
Iceland | 40 | 2010 | 2013 | No sanctions & no incentives |
France | 40 | 2011 | 2017 | Sanction: Invalidation of the appointment (“empty chair sanction”) |
Italy | 33 | 2011 | 2017 | Sanctions: first a warning, if still not complying, monetary sanctions. If still not complying, the elected bodies will be considered not valid and removed |
Belgium | 33 | 2011 | 2017 | Sanctions: Invalidation of the appointment (“empty chair sanction”) and temporary loss of benefits for board member |
The Netherlands | 30 | 2014 | 2023 | No sanctions & no incentives |
Germany | 30 | 2015 | 2016 | Sanctions: Invalidation of the appointment (“empty chair sanction”) |
Portugal | 33 | 2017 | 2018 | Sanctions: Invalidity of the company’s decision appointment of the irregular boards and, if the irregularity persists, the application of administrative fines |
Austria | 30 | 2017 | 2018 | Sanctions: Invalidation of the appointment (“empty chair sanction”) |
Annex 2: Variables and Data Sources
Variable name | Data source | Definition |
|---|---|---|
Female representation of board (FRB) | BoardEx | Proportion of female directors |
Organizational social consciousness (OSC) | Asset4 ESG | Social score computed by trained Asset4 analysts |
Regulatory spectrum (REG) | Authors’ elaboration | Punitive Quota (PQ) = 3, Self-regulatory Quota (SRQ) = 2, Guidance = 1, No Quota (NQ) = 0 |
Gender gap index (GGI) | WEF | Global Gender Gap Index ratings from the World Economic Forum |
Firm size | Thomson Reuters Datastream, complemented by Compustat for missing observations | Natural log of number of employees |
EBIT to total assets | Earnings Before Interest Taxes to total assets | |
Retained earnings to total assets | Retained earnings to total assets | |
Working capital to total assets | Working capital to total assets | |
Current to fixed assets | Current to fixed assets | |
Capital expenditure intensity | Capital expenditure to total assets | |
Board size | BoardEx, complemented by Datastream for missing observations | Total number of directors on the board |
Proportion of independent directors | Proportion of independent directors | |
CEO-Chair duality | Dummy variable = 1 if CEO is also the chair of the board | |
Female CEO | Dummy variable = 1 if CEO is female |
Annex 3: GGI Over Time
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Clark, C.E., Arora, P. & Gabaldon, P. Female Representation on Corporate Boards in Europe: The Interplay of Organizational Social Consciousness and Institutions. J Bus Ethics 180, 165–186 (2022). https://doi.org/10.1007/s10551-021-04898-x
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DOI: https://doi.org/10.1007/s10551-021-04898-x