Ideasroom

What women bring to the company board

Want to improve your company's corporate social responsibility? Charl de Villiers shares four proven ways to shape boards to improve social and environmental outcomes.

The Covid-19 crisis has led to a re-assessment of what society expects of companies, and companies have responded by re-affirming their commitment to social values.

At the same time, commentators have called for environmental gains, associated with reduced travel and working from home, to form part of rebuilding the economy after the crisis. This is the time for companies to ensure their recovery plans connect with this drive for social and environmental responsibility to take full advantage of the current mood in society. The boardroom is a good place to start.

In a forthcoming article, my colleagues and I show which board characteristics lead to better social and environmental outcomes for companies, based on 82 empirical studies that represent between 50 and 127 thousand observations. The outcomes (or performance) relate to matters, such as lower environmental risks, better treatment of employees, and lower product-related risk factors.

Four board characteristics stand out. Women on a boards, independent board members, larger boards, and a board committee dedicated to corporate social responsibility (CSR) are all associated with better social and environmental performance in these companies. There is compelling evidence that the first three characteristics (women, independent, and more directors) lead to better CSR performance, and that these three characteristics also lead to better CSR performance via the work performed by a CSR board committee.

If you want your company to perform better in terms of social and environmental matters, there is no better way than to show your commitment by appointing additional directors with expertise in these fields to the board from outside the company, especially if they are female. This is because women generally consider a wider range of social impacts and consequences than men.

Directors benefit companies by providing them with access to resources, such as networks, knowledge and insight, advice and counsel, and communication channels between the company and external organisations and parties. Furthermore, directors’ expertise and their access to expanded networks provide reputational benefits and legitimacy to firms and can reduce uncertainty for external stakeholders.

In addition to appointing directors with social and/or environmental expertise, committed companies should consider appointing a board committee dedicated to corporate social responsibility. Of course, the specific expertise that is required for new board members, will depend on the core business of the company. For example, a company with a major carbon footprint may focus on environmental expertise, while a consumer goods company may consider product or consumer behaviour expertise more desirable.

The view that directors are there to police management has given way to the view that directors can open doors for managers and enable better performance. The reputational advantage of better social and environmental performance can, and most often does, lead to enhanced financial performance. Not only do companies with better social and environmental performance perform better in financial terms, but better social and environmental performance have also been shown to have an insurance effect during economic downturns or during other crises.

To be more specific, the share price of companies that perform better in terms of social and environmental matters tend to reduce less during a recession than their counterparts with worse performance. In addition, companies increasingly find new lucrative business opportunities when they start to consider social and environmental trends.

Companies may also consider maintaining the flexible work arrangements enforced during the current Covid-19 crisis, which could lead to a more loyal and motivated workforce, increased productivity, and the attendant financial benefits. These are real world benefits of aiming for better social and environmental performance and the enhanced reputation that accompanies it.

The Covid-19 crisis is an opportunity to rebuild stronger by focusing on the most important social and environmental impacts of the company and bolstering the board with additional directors with relevant characteristics and expertise.

Professor de Villiers refers to his jointly-authored publication: Board Characteristics and Corporate Social Responsibility: A Meta-Analytic Investigation, Business & Society.

Can you help our journalists uncover the facts?

Newsroom is committed to giving our journalists the time they need to uncover, investigate, and fact-check tough stories. Reader donations are critical to buying our team the time they need to produce high-quality independent journalism.

If you can help us, please donate today.

Comments

Newsroom does not allow comments directly on this website. We invite all readers who wish to discuss a story or leave a comment to visit us on Twitter or Facebook. We also welcome your news tips and feedback via email: contact@newsroom.co.nz. Thank you.

With thanks to our partners