The influence of boardroom diversity on
corporate social responsibility transparency
Ruby Mens
12307041
Master’s Thesis
Graduate School of Communication
Corporate Communication
dhr. dr. P.H.J. (Pytrik) Schafraad
27-03-2020
1
The influence of boardroom diversity on corporate social
responsibility transparency
Abstract
More than ever, companies are under pressure to demonstrate corporate social responsibility (CSR). In order to show this responsibility, they must be transparent. Diversity in the
composition of the management board is assumed to influence CSR transparency. The aim of this study is to investigate the impact of board member characteristics such as gender, age and nationality on CSR transparency. The sample covers 100 Dutch companies ranked by the Dutch Transparency Benchmark of the Ministry of Economic Affairs and Climate Policy. The results show that a board’s gender diversity has a significant influence on a company’s CSR transparency, but age and nationality do not. These results are highly relevant since only 16% of board members in the Netherlands are women.
2
Introduction
In the battle against global issues such as climate change, corporate behaviour is under more scrutiny than ever. The public is calling for companies to be more transparent about their activities that impact society. This has led to greater linkages between corporate social performance (CSP), corporate social responsibility (CSR), and corporate transparency (Carroll & Einwiller, 2014). “What gets measured, gets managed, and what gets managed, gets done,” said Ernst and Young (2016, p. 4). This emphasizes the need for transparency in promoting CSR. In addition, conscious consumers and other stakeholders consider an organisation’s CSR record when choosing which companies to give their business to (Carroll & Einwiller, 2014).
Therefore, it is important to investigate the factors that influence CSR transparency. Several studies have shown that diversity in board composition has a significant impact on both CSR and CSR reporting (Bear, Rahman, & Post, 2010; Velte, 2019; Harjoto, Laksmana, & Lee, 2014).
In particular, gender diversity on company boards has been subject to recent investigation. Several studies have suggested that gender diversity leads to greater CSR transparency (Kiliç, Kuzey, & Uyar, 2015; Sundarasen, Je-Yen and Rajangam, 2016; Cabeza-García, Fernández-Gago, & Nieto, 2017; Nekhili, Nagati, Chtioui, & Nekhili, 2017). For example, Cabeza-García et al. (2017) revealed that a higher percentage of women in boardrooms resulted in improved CSR disclosure. A study by Nekhili et al. (2017) showed that the market value of firms with gender-diverse boards increased more than that of firms with only male directors in response to higher levels of CSR reporting. They also found that boards that included three or more women improved a company’s CSR disclosure.
Besides gender, it is important to investigate other diversity measures that might play a role in the improvement of CSR transparency. Therefore, age and nationality are also examined
3 in this study. When studying age diversity, it is interesting to note whether companies that rely on a so-called ‘old boys’ network’ perform worse not only due to a lack of gender diversity, but also a lack of age diversity. Furthermore, Ferrero, Fernández and Muñoz (2012) introduced the concept of generational diversity, which describes characteristics of both younger and older people that tend to have a positive influence on CSR transparency. Investigating nationality is also relevant, because different nationalities imply different backgrounds, cultural differences, worldviews and values (Ely & Thomas, 2001; Alderfer & Smith, 1982; Pfeffer & Salancik, 2003).
The aforementioned studies took place in several countries; however, none were conducted in the Netherlands. Performing such a study in the Netherlands would be particularly relevant due to the recently introduced quota mandating that at least 30% of supervisory boards must be composed of women (DutchNews, 2019). This could be the start off an overall women quota in the top of companies. This is urgently needed in the Netherlands; within companies in the Stoxx Europe 600, only 17% of Dutch management boards consist of women
(Algemeen Dagblad, 2020). By contrast, women comprise 35% of leadership roles in Norway due to a law which required publicly listed companies to include at least 40% women on both management and supervisory boards. Although gender diversity seems very important, most of the studies conducted, focussed on just one of the characteristics of diversity (gender, age or nationality). It would be interesting to have these all investigated in one study and see which particular one has influence on CSR transparency and which not.
The results of this study are expected to be useful to companies because the research aimed to identify characteristics of board members that would improve CSR transparency. Velte (2019) stated: “When stakeholders are satisfied with board composition and CSR reporting, a positive impact can be expected on corporate financial and CSR performance.”
Research question: To what extent does boardroom diversity have a positive impact on CSR transparency?
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Theoretical framework for the literature review
The need for CSR transparency
Over the past decade, stakeholders have strongly believed that corporations should be held responsible for more than just their economic profit, as they are “…no longer expected to be mere contributors to the global economy, but rather to reconcile and skill-fully balance multiple bottom lines and manage the interests of multiple stakeholders’’ (Jamali, 2008, p. 443). This means that companies should be conscious of their CSR activities and
communication as well as their broader responsibility towards society. Stakeholders are demanding that companies strengthen their transparency with regard to activities that have an impact on society, increasing the linkages between CSR and corporate transparency (Carroll & Einwiller, 2014).
Organisations have responded to demands for more transparency by publishing CSR reports in which they justify how they operate, demonstrate transparency and try to improve their reputations (Brown & Deegan, 1998; Hooghiemstra, 2000; Neu, Warsame, & Pedwell, 1998; O’Donovan, 2002). The goal of transparency is to ensure that stakeholders are able to understand how a company operates, especially when they have no direct contact with the company itself. This provides conscious stakeholders with the opportunity to choose which companies to invest in or buy from based on how they operate.
In order to help stakeholders evaluate a company’s CSR performance and encourage a responsible business approach, the European Commission introduced a law in 2018
(European Commission, w.d.) which required large companies to report specific information on the way they operate and manage social and environmental challenges. This law only applied to public-interest companies with more than 500 employees, including listed companies, banks and insurance companies.
5 Under the directive, companies must disclose information on the policies they have
implemented in relation to environmental protection, social responsibility and treatment of employees, respect for human rights, anti-corruption and bribery, and boardroom diversity (in terms of age, gender, education and professional background). This last item confirmed that the European Commission valued diversity on company boards when considering CSR. Despite this law, there are still wide variations in the way companies report on CSR.
Velte (2017) addressed two different methods of measuring CSR reporting of companies, CSR reporting quantity and CSR reporting quality. “CSR reporting quantity is the easiest way of modelling as just counting the words, sentences or pages of the CSR disclosures or checking the existence of certain CSR items” (p. 22). This a criteria-based content analysis of CSR reports which uses a scoring mechanism (disclosure index). This method is
debatable as it might promote information overload and greenwashing by companies. The validity of this method is therefore limited. Notwithstanding Velte (2017, p. 22) argued that most of current research is based on this method. CSR reporting quality is often based on external disclosure quality ratings or measured by a Likert scale which judges on the use of CSR disclosure principles, as for example the GRI-guidelines. To protect the validity in this study, CSR transparency is measured by both content and quality indicators of CSR
reporting through an external rating(Ministry Economic Affairs and Climate Policy, 2019) , these are outlined in the method part of the thesis .
Board composition
Velte (2017) stated that, according to agency theory, monitoring institutions such as the management board can play an important role in the demand for useful CSR reporting. The latter should decrease information asymmetries and conflicts of interest between
management and different stakeholder groups. The management board is the institution at the top of the decision-making tree. Board members determine the company’s mission, direction and strategy regarding CSR and stakeholder management. Thus, the management
6 board – the agent, in this case – should respond to stakeholders’ demands for transparency, as they are assumed to also operate on their behalf. Along with the resource dependency theory, the agency theory explores the influence of boardroom diversity and composition on the way a company manages their CSR (Bear et al.2010).
“Resource dependence theory offers the rationale for the board’s function of providing critical resources to the firm, including legitimacy, advice, and counsel,” wrote Hillman and Dalziel (2003, pp. 383-396). Board members bring resources such as diversity and individual backgrounds, which helps the organisation understand and respond to its environment (Boyd, 1990). Board composition and diversity influence how management is monitored in relation to CSR issues (Cabeza-Garcia et al. 2017). Velte (2017) added that, when
stakeholders are satisfied with board composition and CSR reporting, a positive impact can be expected on corporate financial performance and CSR performance alike. This means that corporations, society and the environment can benefit from well-chosen board members and focus on CSR reporting and transparency.
Diversity
“Diversity is a characteristic of groups of two or more people and typically refers to
demographic differences of one sort or another among group members,” stated McGrath, Berdahl and Arrow (1995, pp.17-45). The current study focuses on demographic difference among board members. This heterogeneity can include various characteristics such as age, gender and nationality, but also functional background, skills and political preference (Van Knippenberg et al. 2004). Diversity can be more or less visible (e.g. nationality, gender, age) or invisible (e.g. educational, functional and occupational background), according to Kang et al. (2007). This study focuses on the more visible characteristics of nationality, age and gender.
According to one definition, diversity is ‘the fact that there are many
7 strongest argument in favour of diversity is that “heterogeneity results in a broader
perspective which allows groups to be involved in in-depth conversations and generate different alternatives” (Watson, Johnson and Merrit, 1998). The European Commission cautioned that low levels of diversity can lead to a ‘group-think process,’ which means less debate, fewer ideas and challenges in the boardroom. This results in less effective
supervision of the management board (COM, 2012). Mattis (2000) also argued that a lack of boardroom diversity could contribute to lack of critical thinking and innovation.
Westphal and Milton (2002) had a similar understanding of the effects of low diversity, arguing that it divided the group into two sub-groups: the in-group (majority) and out-group (minority). In-group members often agree with similar peers and resist those who are not like them. They do not value or recognize the contributions of out-group members (Nielsen 2010). Randoy, Thomson and Oxelheim (2006) added that, as a result, out-group members tend to have lower group loyalty and lower levels of psychological commitment.
Why diversity?
The case for diversity can be made on two fundamental grounds. The first is a moral obligation by boards to shareholders and stakeholders (Carver & Oliver, 2002). Since shareholders and stakeholders believe it is morally desirable to have higher levels of diversity, the company should respond to this demand. Walt and Ingley (2003) emphasized this moral obligation by describing modern society as multicultural, gender-sensitive, and inclusive of diverse backgrounds. In order to adapt, “…boards need to examine how they can build the links that reflect democracy and civil society in its diversity, within their governance role as this relates to the organisations they serve and the wider community within which they exist” (Walt and Ingley 2003, p. 219)
The second reason is diversity for commercial or business reasons. In their business case for diversity, Kochan et al. (2003) described three reasons for improving diversity in a
8 capabilities of all employees. Secondly, diverse teams produce better results, as described by Watson et al. (1998). Carver and Oliver (2002) argued that diversity ensures that boards are composed of qualified individuals who reflect a diversity of experiences, genders and ethnicities. Board members can take advantage of their differences to successfully work together on behalf of the organisation (Andringa and Engstrom, 1998). People with different backgrounds and areas of expertise offer can therefore make a valuable contribution to board decisions by providing different perspectives on strategic issues (Westphal and Milton, 2000).
Lastly, Kochan et al. (2003) argued that boardrooms need to reflect the company’s customers in order to understand and communicate with them in terms that mirrored their concerns. Burke and Mattis (2000) echoed this idea and expressed the benefit of having women in senior leadership roles at companies that employed large numbers of women or marketed their products directly to women. The idea is that female consumers would be more attracted to the company than if only men fulfilled these leadership roles.
It is clear from the research that, the higher the level of diversity in a company, the more benefits accrue to it. This idea is the basis of the research question and hypotheses in this study.
The influence of diversity on CSR
One advantage of boardroom diversity is that it enhances network ties (Beckman and Haunschild, 2002). People with diverse backgrounds have diverse network connections. These connections help the company understand and respond to its environment; by
providing input and sharing knowledge, stakeholders can collaborate on CSR issues with the company. Tushman (1997) also found that diverse boardrooms have access to broader networks of contacts. This gives them the opportunity receive up-to-date information which helps the decision-making process, increases commitment to these decisions and supports responsiveness to environmental insecurities.
9 Therefore, the impact of a rich, diverse set of network ties are expected to enhance CSR ratings, because companies can better respond to the interests of their stakeholders and society at large (Bear at al, 2019). Carpenter and Westphal (2001) had a similar theory. They argued that, as a group, a board have a mix of competencies and capabilities, and
collectively represent a pool of social capital for their organisation. The social capital of directors helps the board execute governance functions such as CSR. The role of the board is to convince shareholders that their participation in CSR activities is in their interest (Hafsi & Trugut, 2012). Besides Hafsi and Turgut (2012), more researchers have argued that CSR perspectives are related to board involvement in CSR issues and primarily to whether a diversity of people are involved in the decision-making process (Huse, Nielsen and Hagen, 2009).
The next sections concern how researchers believe that diversity in gender, age and nationality influence CSR transparency.
Gender diversity
According to Burke (2000), there are not enough qualified male Chief Execute Officers (CEO’s) available. The continued reliance on male CEOs results in the appointment of lower quality hires as the candidate pool shrinks. This stresses the need for more female
candidates in senior leadership positions.
Burke argued that “increasing women’s board presence enriches board information,
perspectives, debate and decision making” (2000, p. 193). Williams (2003) identified another major strength of including women on boards: women have an increased sensitivity, which is assumed to increase CSR ratings. This increased sensitivity is the result of their
backgrounds in fields as law, education and non-profit activities which makes them more aware of stakeholder interests and CSR issues. A recent study by Braun (2010) found that women had stronger attitudes and commitment towards environmental issues than men. In addition, women tend be more concerned with ethical behaviour (Ford and Richardson,
10 1994) and community activities (Betz, O’Connell and Shepard, 1989; Bernardi & Arnold, 1997). By contrast, men tend to be more comfortable with profitable activities.
As discussed in the business case for diversity, female directors can also benefit their
companies by expanding diversity in business and on labour markets (Bilimoria and Wheeler, 2000). Biggins wrote: “Diverse boards help to better represent all shareholders, nurture better appreciation of ‘intangibles’ like work/life issues, and can help recruit and retain top executive women and minorities” (1999, p. 2).
Focusing on CSR, Cabeza-García et al. (2017) found that a higher percentage of women in boardrooms implied greater CSR transparency. Including more women on a board increases its welfare activity and is expected to encourage more CSR disclosures (Sundarasen et al.,2016) and higher CSR reporting quality (Amran, Pink and Devi, 2014). Female directors may contribute to meaningfully enhancing the credibility of CSR information by limiting greenwashing (Boulouta, 2013) and making CSR-related reporting more relevant.
Women are also known to be better communicators; the presence of more women on boards could therefore stimulate more participative communication among its members. If female directors are more participative (Eagly et al., 2003) and democratic (Eagly and
Johnson, 1990) than men, having more women on a board may encourage more open dialogue and better appraisal of stakeholders’ needs.
With their research conducted in France, Nekhili et al. (2017) found that boards with three or more women improved CSR transparency. In addition, Kramer et al. (2016) showed that simply putting one woman, or even two women, on a board did not necessarily permit a board to benefit fully from gender diversity. They stated that board members spoke differently when there were more women in their midst; board meetings became more conversational and less hierarchical, and all the directors received better information as a result (Kramer et al., 2006). One could imagine that having a female CEO – the highest position in a company – and more women on a company board would weaken this corporate hierarchy. To
11 investigate these assumptions, the following hypotheses were investigated.
Hypothesis 1a: Boards which are more gender-diverse score higher on CSR transparency. Hypothesis 1b: Companies with a female CEO score higher on CSR transparency than companies with a male CEO.
Age diversity
Shore et al. (2009) argued that “research on age diversity of the board of directors is much less developed and needs new paradigms and approaches to explain how it may affect corporate performance.” Over the past decade, several researchers have worked on this topic (Ferrero et al., 2012; Hafsi and Turgut, 2013; Handajani et al., 2014).
Ferrero et al. (2012) explored how age diversity affected economic performance. They were inspired by Harrison and Klein (2007), who found that age diversity had a positive impact on corporate performance. Ferrero et al. (2012, pp. 136) defined age diversity as “a categorical attribute that represents differences in personality, traits, skills, attitudes, mental health, work values, and behaviors.” With respect to age, these differences can be categorised according to generations, as an individual’s behaviour is influenced by the social and historical
experiences and circumstances of their specific generation. They called this phenomenon generational diversity. Focusing on company boardrooms, their study suggested that generational diversity promoted problem-solving and improved management quality. A second study revealed that generational diversity also helped companies to adopt a sustainable approach to their businesses (Ferrero-Ferrero, Fernández-Izquierdo, & Muñoz-Torres, 2013)
Hafsi and Turgut (2013) argued that both younger and older board directors had their advantages. Older directors tend to have more experience, whereas younger directors have more energy and higher levels of alertness, which is needed in the decision-making process and has a positive impact on performance. Focusing on CSR, they argued that “older
12 directors are more likely to be sensitive to welfare of the society (due to their increased generational behaviour) and younger directors tend to be more sensitive to environmental issues (as a matter of logic and principle) (p.466).” Handajani et al. (2014) also researched the relationship between age diversity and CSR, and found that age of board members in Indonesia was linked to CSR reporting quantity, according to the Global Reporting
Initiative(GRI) guidelines. They stated that, because many national corporate governance codes have clear recommendations on the age limit of board members, more research was needed on this topic to determine a process for future board compositions. As several researchers have suggested, it is a diversity of ages that is needed – not only younger members.
With this in mind, the next hypothesis is introduced below.
Hypothesis 2: Boards which are more age-diverse score higher on CSR transparency.
Nationality diversity
In their research, Ely and Thomas (2001) argued that race, ethnicity, sex, social class, religion, nationality, and sexual identity were all elements of cultural identity. Members of a cultural identity group share certain worldviews such as norms, values, goal priorities, and sociocultural heritage (Alderfer & Smith, 1982). In the current study, cultural identity is viewed as nationality diversity, because the latter is easier to study.
Resource dependence theory suggests that board members bring resources to the organisation as a result of their individual backgrounds (Pfeffer & Salancik 2003). For example, the appointment of people from ethnic minorities is expected to increase board attention to CSR issues related to racial imbalances. According to Ayuso and Argandona (2007), foreign board members are assumed to play an important role with regard to CSR reporting strategies. The results from Khan’s 2010 study, which was based on Ayuso and Argandona’s argument, demonstrated that corporate governance practices such as the
13 inclusion of foreign nationals had a significant positive impact on CSR reporting in
Bangladesh.
Furthermore, Erhandt et al. (2003) argued that international representation on boards also increased corporate financial performance as result of improved CSR reporting strategies. Coffey and Wang also promoted nationality diversity, as their boardroom diversity thesis (1998) assumed that there was a positive relationship between international representation in boardrooms and corporate philanthropy, which is part of a company’s CSR activities. In addition, Branco and Rodrigues (2008) explained that the relationship between the involvement of foreign nationals and CSR reporting might raise the issue of causality. To investigate if the inclusion of people of different nationalities does indeed increase board attention to CSR disclosure, this study will examine one last hypothesis.
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Method
The research method used in this study is content analysis. The goal of content analysis is to systematically examine communicative material (Mayring, 2004). The chief disadvantage of previous literature reviews which were conducted in the 20th century is that they only provided a qualitative summary of empirical results, without measuring the total impact of board composition on CSR reporting. Thusfar in the 21st century, quantitative studies using content analysis have been performed, but not in the Netherlands. This study will investigate whether this content analysis in Holland shows the same results as empirical studies abroad (Kiliç, Kuzey, & Uyar, 2015; Sundarasen, Je-Yen and Rajangam, 2016; Cabeza-García, Fernández-Gago, & Nieto, 2017; Nekhili, Nagati, Chtioui, & Nekhili, 2017; Ferrero et al, 2012; Hafsi and Turgut 2013; Handajani et al. 2014; Ayuso and Argandona 2007; Erhandt et al. 2007; Coffey & Wang, 1998; Branco & Rodrigues, 2008)
The Netherlands’ Ministry of Economic Affairs and Climate Policy uses the Transparency Benchmark to provide an insight into the manner in which the largest Dutch companies report their CSR activities (Ministry of Economic Affairs and Climate Policy, 2018).
The Ministry believes that external disclosure encourages companies to increase their focus on CSR policy and thus improve business performances in this area based on constructive criticism from stakeholders. However, the disclosure of sustainability information is not an objective in itself; it provides a means to better address and manage sustainability issues in both strategy and operations. The rationale is that garnering insight on sustainability
performance provides organisations with additional armour in the sense that ‘what gets measured, gets managed, and what gets managed, gets done’ (Ernst & Young, 2016).
Each year, the Ministry of Economic Affairs and Climate Policy provides an overview of the performance of the largest Dutch companies on their website. The companies are divided according to sector, with a total of 17 sectors. The highest-scoring companies, which scored
15 between 41 and 89.5 points (of the possible 100 points), were sampled in this study. In total, 100 companies were coded (see Appendix 1). This sampling strategy allows the current study to demonstrate the extent of boardroom diversity in the companies which scored highest on transparency, and thus examine how a company can achieve greater CSR transparency through board composition. The overview of scores published by the
Transparency Benchmark was used to provide an overall score about CSR transparency of the company (Ministry of Economic Affairs and Climate Policy, 2019). This score is the dependent variable of this study and is based on both content-oriented standards and quality-oriented standards.
Table 1
Transparency Benchmark Criteria 2019
Criterion
Elements
Descriptions
Organisation and chain
- Business model and chain
- Environment - Opportunities and
risks
-The organisation provides a clear and coherent picture of the organisation’s business model.
-The report explains the external environment in which the organisation operates and explains the main social aspects of this environment.
-The reporting explains the
opportunities and risks arising from the external environment or
developments therein (and how they manage them). Strategy - Vison - Value creation - Materiality - Chain management - Governance and remuneration
-The organisation provides a clear explanation of the organisation’s strategy and vision (purpose). -The organisation provides a clear picture of the process of value creation.
-The organisation provides an
explanation of the subjects that are of material importance (and explains the process).
-The organisation explains how chain responsibility is taken based on the OECD Guidelines for Multinational Enterprises.
-An explanation of the management and the supervisory body (age, gender and background of board members) and remuneration are provided, covering the tasks and responsibilities within the organisation with regard to
16 the material social aspects of doing business.
Targets - Policy and objectives - Results
-The reporting explains the
organisation’s policies and objectives with regard to material issues.
-The reporting provides insight into the results and performance of the
organisation with regard to the material topics.
Communication - Reporting principles - Clarity
- Coherence
-The organisation explains the reporting policy underlying the social reporting and the reporting process. -The reporting is designed to be easy to read and understand.
-There is good coherence of information in the reporting. Accuracy - Accuracy -The reporting includes a signed
statement from an independent party which has verified the content of the social information and which provides assurance as to the reliability of the social information.
Responsiveness - Stakeholder involvement - Evolving insights - Comparability
-The organisation demonstrates how they engages stakeholders in the organisation’s policies and activities, and how they take into account their legitimate interests and expectations. -The organisation clearly show which aspects have gone well over the past year and what needs to be improved over the next few years
-The organisation show results from previous years to increase
comparability (Ministry Economic affairs and Climate Policy, 2019)
The independent variable diversity is divided into three characteristics as described in the theoretical framework. Information on the board members of the company is gathered from the annual report(2018) or corporate website of the company, in order to calculate gender, age and nationality diversity of the boards.
In the codebook (Appendix 3) the gender of the board members is questioned, through the introduction of two categories, man and women. The first board member questioned is always the CEO of the company. This enabled the researchers to check if the companies with a women CEO demonstrated higher CEO transparency . As for hypothesis 1b, the independent variables tested are companies with a male CEO and companies with a female CEO.
17 The next diversity characteristic examined in the codebook is age. The variable age diversity is calculated by the number of age categories which a company has board members is in, divided by the number of board members, which is also questioned in the codebook. In the codebook for each board member is asked in which age category he or she belongs (31-40, 41-50, 51-60, 60>).
The last characteristic addressed in the codebook is nationality diversity. The variable nationality diversity is measured by dividing the board members in different nationality categories. These included ‘Dutch’ and the different continents (Dutch, European, Asian, African, Latin American, North American, Australian ), as it would have been too difficult to code and analyse all the different nationalities.
The codebook starts with some control variables: the name of the company, the industry that the company operated in and the number of employees working at the company.
Table 2
Variables and operationalization
Independent variable: diversity (in) Calculated by
- Gender of board members
- Companies with a male/female CEO
- Ratio women/men
- Nationality of board members - Number of coded categories divided by the number of board members
- Age of board members - Number of coded categories
divided by the number of board members
Dependent variable: disclosure of CSR information
- Overall CSR transparency according Transparency Benchmark
- Score according to criteria, with a maximum score of 100
Intercoder reliability
“Intercoder reliability refers to the extent to which two or more independent coders agree on the coding of the content of interest with an application of the same coding scheme” (Allen,
18 2007). To measure intercoder reliability, 10% of the 100 companies were double-coded by a second independent coder. To calculate intercoder reliability, the KALPHA macro was used, which computed Krippendorff's alpha reliability estimate for judgments made at any level of measurement and any number of observers, with or without missing data. In other words, Krippendorff’s alpha tested the codebook’s reproducibility. Among the types of reliability (i.e. stability, reproducibility, and accuracy), reproducibility is probably the strongest and most easily tested (Krippendorff, 2004a). It shows whether the coding instrument, which provides instructions to the coder in order to analyse the same set of variables, results in the same data within a tolerable margin of error. The basis for reliability is agreement among all independent observers.
All variables used to analyse the hypotheses were evaluated on intercoder reliability. The coding instrument appeared to be very reliable, as only one of the variables showed a
difference in agreement between the two coders (Appendix 1). All other variables showed the maximum score for Krippendorff’s alpha. This was expected since all of the questions in the coding instrument (i.e. gender, age and nationality of board members) were very clear and concrete. The results confirmed that the coding instrument strongly supported the study’s reproducibility and strengthened the results of the study.
Table 3
Intercoder Reliability
Variable(main) K.Alpha
Number of board members 1,00
Gender of board members 1,00
Age of board members 0.99
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Results
In order to analyse the formulated research question and hypotheses, three linear regression analyses were conducted on the three independent variables of gender diversity, age
diversity and nationality diversity. Furthermore, a one-way ANOVA test was performed to see the differences in CSR transparency scores for companies with a female CEO and
companies with a male CEO.
The table below shows the number of companies (the unit of analysis) used in the analysis, mean CSR transparency scores and the different diversity variables. The scores for
nationality diversity and age diversity were calculated by dividing the number of categories coded by the number of board members. Gender diversity was calculated by examining the ratio of women to men. We found that, on average, only 16% percent of board members were women and 84% were men.
Table 4 Descriptive variables Variable N M SD CSR transparency 100 61.50 12.47 Gender diversity 100 0.16 0.19 Age diversity 100 0.53 0.18 Nationality diversity 100 0.22 0.12
We compared the CSR transparency scores of N = 100 Dutch companies with different levels of gender diversity to see if boards which are more gender-diverse scored higher on CSR transparency. A single linear regression model with the CSR transparency score as
20 dependent variable and gender diversity of board members as independent variable indeed showed significance: F(1, 98) = 4.076, p = .046. The regression model can therefore be used to predict CSR transparency scores, but the strength of the prediction is weak, as only 4% (R2 = .04) of the variation in transparency scores could be predicted on the basis of the gender diversity of board members, b* = 0.20, t = 2.019, p = 0.046, 95% CI [0.22, 25.74]. The regression model met all assumptions of linear regression.
To see if companies with a female CEO scored better on CSR transparency than companies with a male CEO, their scores were compared in a one-way ANOVA test. The latter showed that the average CSR transparency scores of companies with a male CEO (N = 92, M = 60.73, SD = 13.34) fell with 95% certainty between 58.18 and 63.29 points. This differed significantly from the scores of companies with a female CEO (N = 8, M = 70.30, SD = 11.10) which fell with 95% certainty between 61.02 and 79.58 points, F(1,98) = 4.481, p = .037.
We also compared the CSR transparency scores of N = 100 Dutch companies with different levels of age diversity to see if boards which are more age-diverse scored higher on CSR transparency. A single linear regression model with the CSR transparency score as
dependent variable and age diversity of board members as independent variable showed no significance, F(1, 98) = 1.979, p =.163. Therefore, the regression model cannot be used to predict the CSR transparency score.
Lastly, we compared the CSR transparency scores of N = 100 Dutch companies with different levels of nationality diversity to see if boards which are more nationality-diverse scored higher on CSR transparency. A single linear regression model with the CSR transparency score as dependent variable and nationality diversity of board members as independent variable indeed showed no significance, F(1, 98) = 0.024, p =.877. The regression model therefore cannot be used to predict CSR transparency
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Discussion and conclusion
The results showed that only the gender diversity of board members had a positive influence on the CSR transparency of Dutch companies. This confirmed the research of Cabeza-García et al. (2017). However, Nekhili et al. (2017) and Kramer et al. (2016) argued that at least three women were needed on a company board to exert a positive influence on CSR reporting. Nevertheless, very few companies included at least three women on their board. As a result, we also investigated whether a female CEO had a positive influence on CSR transparency compared to a male CEO. Our assumption was that, when a company has a female CEO, the gender hierarchy would be weakened and the female CEO would exert a significant influence over the board’s decision-making process. The analysis indeed showed that companies with a female CEO had greater CSR transparency scores than those with a male CEO.
Particularly in the Netherlands, this outcome strengthens the case for having more women in leadership roles. Recently, a quota was introduced mandating that 30% of supervisory board members should be women. The current research focused on management boards because they determine the company’s overall strategy, including CSR strategy. Therefore, the results of this study provide more evidence for the Dutch government to further set a quota to
include more women on the management boards of companies, where they can have more influence on CSR strategy. Our analyses of 100 companies showed that the average percentage of women on the management boards of companies was only 16%. As mentioned in the introduction, research on the Stoxx Europe 600 showed that women comprised 17% of Dutch management boards, on average (Algemeen Dagblad, 2020). This means that the sample used for this study was very representative.
In the Netherlands, possible reasons for the low number of women on management boards were described by Holton (2000), Burke (2000) and Mattis (2000). They studied the board member selection process and found that it relied to a great extent on the ‘old boys’ network’
22 and conservative, old-fashioned attitudes on the role of women. This stresses the need for mandatory quotas on women’s participation in the top echelons of companies in the Netherlands.
Focusing on nationality diversity, it became clear from our research that most Dutch
companies had many Dutch board members. To achieve the maximum score for nationality diversity, companies had to include board members from all seven continents. This means that the analysis of nationality diversity resulted in less variances of scores than the analysis variable for gender diversity did, which consisted only of two categories (i.e. male and female). Another limitation of the variable for nationality diversity is that it only captured the national backgrounds of board members. As described by Ely and Thomas (2001), many elements of cultural diversity can influence an individual’s worldview, decision-making and thoughts on CSR. However, nationality diversity is more operationalizable, as it is often mentioned in annual reports or on corporate websites – ethnicity and religion are not.
Age diversity did not appear to be significant. Although Ferrero-Ferrero et al. (2013)
described that generational diversity can have a positive influence on CSR performance and Hafsi and Turgut (2013) described positive characteristics of both older and younger
managers which could be of influence, no direct relationship between age diversity and CSR transparency was found.
Though the independent variables of age and nationality did not have a significant influence on CSR transparency in the Netherlands, much of the literature and many studies promote overall boardroom diversity. Not only does boardroom diversity impact CSR practices, diverse representatives also tend to influence consumer behaviour, as described in the business case for diversity. This is also the case for management boards, as Velte (2019) argued that when stakeholders are satisfied with board composition and CSR disclosure, a positive impact can be expected on both corporate financial and CSR performance. In terms of practical implications for companies, they should not only focus on increasing the gender
23 diversity of board members, but also their overall diversity, the benefits of which are also discussed in the theoretical framework.
A debatable element of this study is the sampling strategy for the companies. We studied the 100 companies with the greatest levels of transparency, because they were more likely to post the needed information about their board members online – one of the criteria for the Transparency Benchmark being reporting on boardroom diversity. In addition, a mandatory European Union law required that companies with more than 500 employees report on their boardroom diversity. Most of these large companies overlapped with the top 100 of the transparency overview. They were of particular interest due to their level of influence on society and the environment as well as their exemplary role for smaller companies. However, our sample strategy means that there was less variation in transparency scores (the
dependent variable) and therefore the analysis was harder to prove as significant.
Further studies could attempt to operationalize nationality (or cultural) diversity in a different manner, which may lead to more robust results than the ones from this study. They could also investigate if companies from Norway – the European country with the most women in top leadership roles, according to the Stoxx Europe 600 (Algemeen Dagblad, 2010) – demonstrate higher levels of CSR transparency than companies in other countries. In the future, it would be interesting to see if the recently introduced quota for supervisory board members in Dutch companies will also lead to changes in management boards. Not only might the quota change views on having women in top roles, but supervisory and
management boards are also loosely connected and might influence each other’s board composition process. Therefore, performing similar research using the same variables in a few years would be very interesting.
24
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30
j
Appendix 1 Intercoder ReliabilityTable 5
Intercoder Reliability
Variable
K.Alpha
Q5 How many board members
1,00
Q8 gender board member
1,00
Q9 age board member
1,00
Q10 nationality board member
1,00
Q12 gender board member
1,00
Q13 age board member
1,00
Q14 nationality board member
1,00
Q28 gender board member
1,00
Q29 age board member
1,00
Q30 nationality board member
1,00
Q32 gender board member
1,00
Q33 age board member
1,00
Q34 nationality board member
1,00
Q36 gender board member
1,00
Q37 age board member
1,00
Q38 nationality board member
1,00
Q40 gender board member
1,00
Q41 age board member
1,00
Q42 nationality board member
1,00
Q44 gender board member
1,00
Q45 age board member
1,00
Q46 nationality board member
1,00
Q48 gender board member
1,00
Q49 age board member
0,88
Q50 nationality board member
1,00
Q52 gender board member
1,00
Q53 age board member
1,00
31
Appendix 2 Sample
Table 6
Companies coded(Ministry of Economic Affairs and Climate Policy, 2019)
Companies Score
Royal Schiphol Group 89.5
Alliander N.V. 89
Nederlandse Spoorwegen 88.9
ABN AMRO 88.7
Havenbedrijf Rotterdam (HbR) 83
Enexis Holding N.V. 82.4
Energie Beheer Nederland (EBN) 82.3
Koninklijke Philips N.V. 81.3
Ernst & Young Nederland LLP 80.9
Van Lanschot Bankiers 77.8
Nederlandse Waterschapsbank N.V. 77.4
Heijmans 77.2
TenneT Holding B.V. 76.4
Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V. 75.8 Centrale Organisatie Voor Radioactief Afval (COVRA) 75.5
KPN 75.4
Signify NV 74.5
Heineken N.V. 74.1
Koninklijke Vopak N.V. 74.1
Coöperatieve Rabobank U.A. 73.8
ASR Nederland N.V. 73.2 Unilever N.V. 73 PostNL 73 N.V. Nederlandse Gasunie 72 KENDRION 72 DSM N.V. 72 CORBION 70 VolkerWessels 70
Royal BAM Group 70
TKH GROUP 70
Vitens N.V. 69.8
VEON Ltd. 68
Coöperatief Deloitte U.A. 67
Koninklijke FrieslandCampina N.V. 67
WESSANEN 67
Swinkels Family Brewers Holding N.V. 67
Vivat N.V. 66.3
Coöperatie VGZ U.A. 64.6
32
GasTerra 64
De Nederlandsche Bank (DNB) 63.5
Havenbedrijf Amsterdam 63
PricewaterhouseCoopers 63
ROYAL BOSKALIS WESTMINSTER N.V 62.6
Wageningen University & Research 62.6
Coop Nederland U.A. 61.6
Noordelijke Ontwikkelings Maatschappij (NOM) 61.5
VanDrie Group 61
Triodos Bank N.V. 60.6
PLUS Holding B.V. 60
GRANDVISION 59.2
Vreugdenhil Dairy Foods 59.2
TBI Holdings 59
Brabantse Ontwikkelings Maatschappij (BOM) 58.3
STMicroelectronics N.V. 58
Vion N.V. 57
A.S. Watson Health & Beauty Benelux 57
SRLEV N.V. 56.1
Stedin Holding N.V. 56.1
SLIGRO FOOD GROUP 56
FUGRO 56
ORDINA 56
ASML 56
Achmea B.V. 55.1
Fiat Chrysler Automobiles N.V. 54
AKZO Nobel N.V. 54 BNG Bank 53.1 Coöperatie KPMG U.A. 53.1 ARCADIS 53 ING Groep 53 AIR FRANCE -KLM 53
Industriebank Limburgs Instituut voor Ontwikkeling en Financiering (LIOF) 52.1
HEMA B.V. 52
Ontwikkelingsmaatschappij OOST Nederland (OOST) 51.6
Coöperatie Royal FloraHolland U.A. 51
Koninklijke Ahold Delhaize N.V. 50
Holding Nationale Goede Doelen Loterijen N.V. 50
Aegon N.V. 50
NN GROUP 50
Robeco Institutional Asset Management B.V. 50
Unibail Rodamco 49
Jumbo Groep Holding B.V. 49
PGGM 49
Rijksuniversiteit Groningen 49
33
ProRail 48
Royal Dutch Shell 47
Van Oord N.V. 47
FORFARMERS 46
ASM INTERNATIONAL 46
Zeeman Groep B.V. 46
WDP 45
Damen Shipyards Group N.V. 44
HaskoningDHV Nederland B.V. 44
VASTNED 43
Tata Steel IJmuiden B.V. 43
Ingka Holding B.V. 42
Randstad Global 41.8
34
Appendix 3 Codebook
Coding diversity
Q1 What is the name of the coded company?
35 Q2 Which sector is the company operating in according to the dutch transparency benchmark?
o
Construction and maritime (1)o
Energy, oil and gas (2)o
Transportation (3)o
Technology (4)o
Banking and assurance (5)o
Food and drinks (6)o
Industrial resources (7)o
Service sector (8)o
Retail (9)o
Universities (10)o
UMC's (11)o
Media (12)o
Trading (13)o
Consumer products (14)o
Real estate (15)o
Pharma (16)o
Other (17)36 Q3 For the next 3 questions look in the annual/CSR report over the year 2018 on corporate website of the company. Is there a separate CSR report or is the CSR integrated in the annual report/review?
o
Integrated (1)o
Separated (2)o
both (3)Q4 How many employees does the company have?
o
0-100 (1)o
101-1000 (2)o
1001-10.000 (3)o
> 10.000 (4)37 Q5 How many board members/directors does the company have(Management board/board of directors)?
o
1 (1)o
2 (2)o
3 (3)o
4 (4)o
5 (5)o
6 (6)o
7 (7)o
8 (8)o
9 (9)o
10 (10)o
11 (11)o
12 (12)o
13 (13)38 Q7
For each board member give answer to the following four questions, always start with the CEO. Respectively look for information which can answer the questions at the following sources 1. Annual report
2. Corporate website Google :
3. Management scope/market screener/bloomberg/cfo.nl 3. Newspaper reports
4. LinkedIn
What is the name of the board member?
________________________________________________________________
Q8 Indicating from the found pictures, name and information. What is the gender of the board member?
o
Male (1)o
Female (2)39 Q9 Indicating from the found pictures and information. What is the age of the board member. (Picture: hair color, wrinkles/ information: career path (years))
o
<30 (1)o
30-40 (2)o
41-50 (3)o
51-60 (4)o
60> (5)Q10 Indicating from the found name, pictures and information. What is the nationality/continent of the board member? (Picture: skin color, physical characteristics/Information: location of high school/college/university )
