ESG (Environmental, Social and Governance) Performance and Board Gender Diversity: The Moderating Role of CEO Duality

Mauro Romano,Antonio Netti,Alessandro Cirillo,Christian Favino

doi:10.3390/su12219298

Abstract

According to the 2030 Agenda, gender equality plays a central role in achieving social development, expanding economic growth and improving business performance. From this perspective, many studies claim that a more balanced presence of women on Board of Directors (BoD) could have a positive impact on firms’ financial performance, but the effect of such diversity on sustainability performance is still underexplored. The purpose of this paper is to investigate how gender composition of BoD affects the corporate sustainability practices. In particular, we focused on the relationship between board gender composition and ESG (Environmental, Social and Governance) performance, by verifying if and to what extent there is a moderation effect due to the presence of CEO duality. We used the ESG index, provided by Bloomberg Data Service, as a proxy of sustainability performance and the Blau index as a measure of gender diversity in the BoD. The empirical analysis was carried out on a sample of Italian non-financial companies listed on Mercato Telematico Azionario (MTA) and includes a total of 128 observations. Results has shown that a greater gender diversity on BoD has an overall positive influence on ESG performance, while CEO duality negatively moderates the foregoing relationship.

Highlights

The issues of gender equality have been gaining considerable importance over the last years, especially in management studies [1,2,3,4,5]
In this perspective, such a result can contribute to the academic debate by demonstrating that in Italy, a country characterized by concentrated ownership structure, low independence of Board of Directors (BoD) and where a low number of women hold influential positions in corporate governance pattern, gender diversity could play a pivotal role in firm value creation process, enhancing sustainability performance
Our findings reveal that gender diversity positively impacts on ESG score, showing how a more balanced number of male and female directors in the board of companies played an important role in sustainability performance

Summary

Introduction

The issues of gender equality have been gaining considerable importance over the last years, especially in management studies [1,2,3,4,5]. Several researches paid attention on board composition and firm performance, on the role that female directors played in value creation processes, whose positive effect on firm performance was confirmed by empirical evidence. UN Sustainable Development Goals (SDGs) have prompted many firms to adopt ethical and sustainable practices, ensuring equal participation of women in firm organization in order to achieve gender equality and female empowerment. According to the 2030 Agenda, gender inequalities hinder the sustainable development, the economic growth and the achievement of equal opportunities between genders, whereas a full and effective women’s participation in decision-making processes at all levels plays a crucial role in firms’ value creation process. While a large number of analyses examined the relationship between firm characteristics and financial performance, little attention has been devoted to verify how board gender composition can affect sustainability performance

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