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E-MailPo-Hsuan Hsu is the Tsing Hua Chair Professor and NTHU Ching-Jing Distinguished Talent Chair at the National Tsing Hua University, Kai Li is the W.M. Young Professor of Finance and the Canada Research Chair in Corporate Governance at the University of British Columbia, and Yihui Pan is an Associate Professor of Finance at the University of Utah. This post is based on their article forthcoming in Management Science.
Rising interest in board gender diversity has spurred debates in both academia and the business world about what women bring to the boardroom table. Proponents argue that female directors are less likely to succumb to groupthink, better positioned to identify long-term risks and opportunities, and more willing to prioritize stakeholder concerns. Skeptics question whether female directors have a measurable impact on firm outcomes.
Our recent paper, The Eco-Gender Gap in Boardrooms, available here, takes up these questions in the context of corporate environmental performance. We characterize our project as “E meets S and G”: Po has long worked on environmental issues, while Kai and Yihui have focused on corporate governance, including corporate social responsibility. Together, we examine how board gender diversity—a governance issue with social implications—affects firms’ environmental engagement.
Gender Differences in Prioritizing Environmental vs. Economic Issues
We begin with new survey evidence from the Gallup Social Series Poll. Across different income groups and time periods, we find a consistent gender gap: female respondents are more likely than male respondents to prioritize environmental protection over economic growth or energy supply. Male respondents, by contrast, more often emphasize short-run economic or energy benefits.
This finding echoes results from PwC’s Annual Corporate Directors Survey, which shows that female directors are more likely to prioritize environmental issues than their male counterparts. The survey also highlights a persistent challenge: 43% of directors surveyed report that it is difficult to voice a dissenting view in the boardroom.
We propose that one way to increase diversity of thought, especially on complex tradeoffs such as environmental investments, is through gender diversity inside the boardroom.
Female Directors and Corporate Environmental Performance
Motivated by these survey results, we ask whether female directors’ environmental attitudes translate into corporate decision-making. Using Refinitiv’s environmental scores and RepRisk’s negative environmental news, we document some robust relationships:
- A higher share of female directors is positively associated with stronger firm-level environmental scores.
- Female directors are linked with fewer instances of negative environmental news.
Although the economic magnitude of these results is modest, their robustness across different measures of environmental performance and regression specifications strongly suggests that female directors play a distinct role in shaping corporate environmental outcomes.
Causal Evidence from California’s Board Gender Quota
A central question is whether the presence of female directors leads to better environmental outcomes or whether environmentally conscious firms are simply just more likely to appoint women. To address this, we exploit California’s 2018 Senate Bill 826 (SB 826), which required all public companies headquartered in the state to have at least one female director by the end of 2019.
Roughly 90% of affected firms complied in the first year, sharply increasing their female director ratio. We employ a difference-in-differences strategy, comparing these treated firms with two sets of control firms:
- Similar public firms headquartered outside California without female directors before 2018, and
- California firms that already had female directors before the law passed.
Relative to both control groups, treated California firms significantly increased their environmental performance after SB 826—but not before. Falsification tests using 2016 as a placebo event year confirm that our results are not driven by other state-level shocks. Together, these findings provide compelling evidence of a causal link between female directors and improved corporate environmental performance.
Facility-Level Evidence: Real Effects of Female Directors
The availability of the U.S. Environmental Protection Agency’s Toxic Release Inventory (TRI) data allows us to examine how board diversity translates into concrete actions. We analyze two measures:
- The number of source reduction practices at a facility, weighted by the number of toxic chemicals handled.
- The total volume of toxic production waste.
We find that a one-standard-deviation increase in the female director ratio is associated with a 20% increase in pollution-prevention activities and a meaningful reduction in production waste. These results suggest that female directors influence not only corporate policies but also the operational decisions that determine firms’ environmental footprint.
Why Do Female Directors Matter?
To understand the mechanisms, we investigate the demographics, skills, and governance roles of directors. Compared to male directors in the same firm-year, female directors are:
- Younger, with shorter board tenures.
- More likely to have non-business backgrounds, including government, policy, and sustainability.
- Less likely to have traditional boardroom credentials, such as M&A or general management experience.
Female directors also contribute to broader board diversity, encompassing age, educational background, and professional experience. Female directors are more likely to serve on sustainability or monitoring committees, and firms with female directors are more likely to link executive pay to ESG performance.
Despite these patterns, we find that female directors bring values and perspectives to the boardroom that cannot be fully captured by their observable qualifications. In this sense, director gender acts as a holistic measure of the diversity of thought inside the boardroom.
Contributions and Implications
Our study contributes to three key debates:
- Values in the boardroom. We show that directors’ personal values and preferences matter for firm outcomes. Female directors’ stronger emphasis on environmental protection translates into concrete corporate decisions.
- ESG spillovers. Policies designed to address social or governance issues, such as board gender quotas, can have spillover effects on environmental performance. This complements existing research on how financial markets and stakeholders influence firms’ environmental performance.
- The unique role of gender diversity. While female directors possess distinctive skills and governance expertise, their gender itself is a unique, powerful predictor of corporate environmental outcomes. This underscores the importance of diversity of thought alongside traditional board qualifications.
Conclusion
As Renée Adams wrote in 2016, “This is the age of the female director.” Our findings confirm that women bring something distinctive to the boardroom table: a greater willingness to prioritize long-term environmental benefits over short-term financial gains. By broadening perspectives and diversifying thought, female directors play an important role in shaping firms’ environmental engagement—an outcome that matters for shareholders, stakeholders and society at large.
