The relationship between women directors and the degree of impression management in sustainability reports

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The relationship between women directors and the degree of impression

management in sustainability reports

Master thesis, Msc, Accountancy

University of Groningen, Faculty of Economics and Business

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The relationship between women directors and the degree of impression

management in sustainability reports

Master thesis, Msc, Accountancy

University of Groningen, Faculty of Economics and Business

09-06-2017 Nienke Bos Studentnumber: S2462176 Ringstraat 18 7848 BW Schoonoord Tel.: +31 (0) 6 11 82 90 54 E-mail: n.bos.6@student.rug.nl

Supervisor of the university prof. dr. D.A. de Waard

Drs. L.M. Wielens

Abstract

This paper examines whether the presence of women in top management influences the use of impression management in (sustainability) reports. For this research the number of women on the board of directors and the supervisory board is used. Also the influence of a female CEO on the relationship between the presence of women directors and the use of impression management is examined. The dataset consists of 34 Dutch listed organizations and their (sustainability) reports of the year 2015. The paper does not find a significant relationship between the presence of women in top management and the use of impression management. However it does find a very small significant relationship between the number of women on the board of directors and the use of impression management.

Keywords

Impression management, (sustainability) report, women directors, board of directors, supervisory board, female CEO.

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1. Introduction

‘’Building and maintaining trust in businesses and governments is fundamental to achieving a sustainable economy and world. The value of the sustainability reporting process is that it ensures organizations consider their impacts on sustainability issues, and enables them to be transparent about the risks and opportunities they face (GRI, www.globalreporting.org).’’ In

the past, sustainability reporting contained disclosures on environmental and social policies. These disclosures were included in the annual financial reports. Nowadays, we are dealing with stand-alone reports which include social, environmental, and economic/financial information, also called the ‘triple bottom line reporting’ of Elkington (1997). The last two years, the interest for the so called ‘integrated reporting’ also increased. Integrated reporting is ‘’the summarized report in which organizations define how they operate sustainable and how strategy, governance, performance, and prospects generate value in the short, medium and long term (NBA).’’ Due to the fact that these stand-alone disclosures or integrated reports are largely non-regulated, the potential for organizations to engage in impression management is increasing. According to Godfrey, Mather, and Ramsay (2003) impression management ‘’occurs when management selects the information to display and presents that information in a manner intended to distort readers’ perceptions of corporate achievement.’’ In

(sustainability) reports the importance of descriptive sections (i.e. the use of graphs) is growing. This trend also provides organizations with the opportunity to present performance and prospects in the best possible light (Merkl-Davies and Brennan, 2007). The use of impression management does not benefit the quality of sustainability reporting, because the users of the reports can get the wrong impression about the impact of business on

sustainability issues.

The Global Reporting Initiative (hereafter GRI) provides a framework and standards to give direction to sustainability reporting, which will increase the quality of the reports. ‘’GRI helps businesses, governments and other organizations understand and communicate the impact of business on critical sustainability issues such as climate change, human rights, corruption and many others. The mission of GRI is to empower decision makers everywhere, through their sustainability standards and multi-stakeholders network, to take action towards a more sustainable economy and world (GRI, www.globalreporting.org).’’

Also the International Integrated Reporting Council (hereafter IIRC) provided a framework (the integrated reporting <IR> framework). The mission of the IIRC is ‘’to establish

integrated reporting and thinking within mainstream business practice as the norm in the public and private sectors (IIRC, www.integratedreporting.org).’’

For the promotion of transparency in sustainability reports the ministry of economic affairs in the Netherlands performs every year a study on the content and quality of sustainability reporting by Dutch organizations. This study is called the Transparency Benchmark (hereafter TB). It is one of the means of the Dutch government of encouraging social entrepreneurship. The force of the TB is that it not only looks at the content but also at the quality of the (sustainability) reports of the organizations (Transparency benchmark, 2016). Organizations are assessed on the basis of a questionnaire (self-assessment). These self-evaluations will be checked and scored and this will result in a ranking of the organizations. One of the problems

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5 with organizations that rank the quality of sustainability reports is that firms that report under GRI could receive a positive recognition of these ‘evaluating’ organizations while the actual performance is not that good. The reason could be that these evaluations are often based on the amount of disclosures in sustainability reports and that other barriers like impression management are not taken into consideration (Hess, 2008).

Three years ago, the target for women in top management was set at 30 percent. This legal objective was set by the Dutch government and applies to all 5000 Dutch organizations that fall under the law of management and supervision (www.rijksoverheid.nl). At the beginning of 2016 this target was not reached and therefore organizations have extended the horizon to 2023. If organizations do not reach the target in 2023, the target of 30 percent will even become a legal requirement (Volkskrant, 2016). Despite the fact that the previous target was not reached several studies prove the positive effects between women in top management functions and the performances of the organization (Post and Byron, 2015).

Another aspect in which men and women are different is narcissism (Grijalva, Newman, Tay, Donnellan, and Harms, 2014). This factor could declare the difference between men and women in top management. One person which is expected to be narcissistic is the current president of the United States of America, Donald Trump. It looks like this new president has a lack of empathy, thinks that he is more important than his country and uses a typical

narcissistic technique namely ‘gas lighting’. This is a technique whereby one person manipulates the facts in such a way that everyone else but himself looks crazy (AD, 2017). The fact that an organization has a male or female CEO could influence the use of impression management in the sustainability or annual report of that organization.

In previous research the influence of women directors on the level of CSR reporting (Fernandez-Feijoo, Romero, and Ruiz-Blanco, 2014), the CSR performance of a company (Setó-Pamies, 2010) and the financial success of a firm (Bernardi and Threadgill, 2010) are already examined. However, there is no research that have examined the link between women directors on boards and the use of impression management in sustainability reports. That’s why in this research the following question will be central:

To what extent has the presence of women directors influence on the use of impression management in sustainability reports of Dutch companies?

The relationship between the presence of women directors and the degree of impression management has, as was said above, not been examined in previous research and will therefore fill a gap in the existing literature. This research will be interesting and relevant given the debate about the presence of women directors in top management and the annual research from the Dutch ministry of economic affairs to the quality of sustainability reports.

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6 The following chapter examines the scientific theories used in this study and will treat the most important aspects of this research. Chapter 3 will explain the research design which include the data collection and the methodology. Chapter 4 will analyse the results of the tests. On the basis of this analysis the propositions will be discussed. The conclusion of this research will be given in chapter 5. This chapter also includes the limitations of this research and recommendations for further research.

2. Theoretical framing

In the literature a variety of theories exists that explains the influence of women directors on the quality of sustainability reporting and corporate social responsibility. In this research theories that seemed to be most relevant for the aspects concerning women directors,

sustainability reporting, impression management and CEO narcissism will be discussed. First, legitimacy theory which will be central in the reasoning behind the answer of the research question. Next, agency theory to explain why and by whom the management and probably the creators of the sustainability report should be supervised. Third, stakeholder theory which has a fundamental relationship with sustainability reporting (De Waard, 2011). Finally

stewardship theory, that assumes the sense of duty by management, will be discussed. In addition to naming and clarifying the theories, the following aspects will be treated: impression management, the use of graphs and the presence of women directors.

2.1 Legitimacy theory

First the legitimacy theory, because this is one of the most used theoretical approaches in the literature about sustainability reporting. Suchman (1995) defines legitimacy as ‘’a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions.’’ This theory assumes that there is a ‘social contract’ between business and society. On the basis of the contract, the ongoing relationship between these two parties is explained (Deegan, Ranking, and Tobin, 2002). If society suspects that the organization breaches the ‘social contract’, the legitimacy theory assumes that the survival and existence of the organization is in danger (Deegan, Rankin, and Voght, 2000). The legitimacy theory also arguments that when organizations face potential threats to their social or environmental legitimacy, they have an incentive to use communications strategies, like impression management, to attempt to influence the perceptions of their relevant publics (Cho and Patten, 2007). One of the means to show society if the organization is operating conform the social contract is to disclose a sustainability report. However this communication with society is quite subjective, because the organization can influence the public opinion by choice of subject, choice of words, subjective wording, speculative statements and the disclosure of more positive information rather than negative information (De Waard, 2011).

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7 According to Dowling and Pfeffer (1975), organizational legitimacy exists when the

organization’s activities and their social values are congruent with the norms of acceptable behaviour of the society in which they operate. In their paper Dowling and Pfeffer (1975) distinguish three aspects of behaviour: Behaviour that is economically profitable, legal, and legitimate. An organization will try to operate in a manner that intersect with all three aspects and will therefore behave in such a way they perceive will accomplish this.

Summarized, in line with legitimacy theory, sustainability reporting is used to provide information that intends to influence society’s perceptions about the organizations in such a way that the behaviour of the organization is legitimised (Hooghiemstra, 2000). To influence society’s perception organizations can use among other things impression management.

2.2 Agency theory

Another theory that can be taken into consideration is the agency theory. In this theory the interest of on the one hand the agent (management) and on the other hand the principal (shareholders) is central. These conflicts of interests are caused by the separation of

ownership and control of the organization. This separation provides the basis for the board’s function of supervising management on behalf of the shareholders (Eisenhardt, 1989). Previous research of Carter, Simkons, and Simpson (2003) suggests that board diversity may be a better board monitor of managers because a diverse board increases board independence. A greater proportion of women directors on the board will diversify the board and will thus lead to better monitoring of the management. When impression management is used readers of the annual or sustainability report could get the wrong impression because for example management is withholding or distorting information. This will increase information asymmetry between the agent and the principal. However as was said above, a diversified board will lead to better monitoring and better monitoring should withhold management from the use of impression management.

2.3 Stakeholder theory

Besides shareholders, organizations show more and more interest in the needs of stakeholders in the past few years. Therefore organizations provide information that is not only at the interests of the shareholders, but also goes beyond their interest. ‘’A stakeholder is a person, a group or an organization that has interest or concern in an organization. Stakeholders can affect or be affected by the organization’s actions, objectives and policies

(www.busisnessdictionary.com).’’ When an organization performs CSR activities it shows

that it has a lot of responsibilities towards their stakeholders (Setó-Pamies, 2015). The stakeholder approach (Freeman, 1984), could form the basis for CSR activities. Benn and Kramar (2011) claim that from a stakeholder approach ‘’organizations are part of the

community in which they operate and they are expected to behave in such a way that they do not harm the well-being of society or destroy natural resources that are important for the future of society and the planet.’’ If an organization accepts its social responsibility and communicates this responsibility through its sustainability reports, the organization can obtain the long-lasting trust from its stakeholders (Setó-Pamies, 2015). However to obtain this trust the report should present a true picture of reality and should not include techniques like impression management to mislead the reader.

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2.4 Stewardship theory

“Stewardship theory holds that there is no inherent, general problem of executive motivation. The executive manager, under this theory, far from being an opportunistic shirker, essentially wants to do a good job, to be a good steward of the corporate assets (Donaldson and Davis, 1991).” The manager wants to do a good job because he/she believes that serving the organization’s interests is the best way to achieve its own goals. Vaisanen(2006) argues that the stewardship theory is relevant to CSR because ‘’a steward who successfully improves the performance of the organization generally satisfies most groups, because most stakeholder groups have interests that are well served by increasing organizational wealth.’’ In the light of this theory, the executive motivation will not lead to the use of impression management, because that’s not what doing a good job and being a good steward means. Impression management could harm the organization by misleading the reader and giving the wrong impression of the organization.

2.5 Impression management

As was said above, impression management ‘’occurs when management selects the

information to display and presents that information in a manner intended to distort readers’ perceptions of corporate achievement (Godfrey et al., 2003).’’ Hummel and Schlick (2016) claim, in line with the legitimacy theory, that organizations that perform poorly on a specific performance indicator prefer information that is superficial, incomplete, not easily subject to comparison or ambiguous to obscure their poor true state. This low-quality information indicated the use of impression management in the sustainability reports of these

organizations. In this research impression management will be measured in the most material subjects that an organization discloses in its annual or sustainability report. The GRI

guidelines (G4) emphasize the material aspects in the sustainability report of an organization: ‘’At the core of preparing a sustainability report is a focus on the process of identifying material aspects – based, among other factors, on the Materiality Principle. Material Aspects are those that reflect the organization’s significant economic, environmental and social impacts; or substantively influence the assessments and decisions of stakeholders (GRI, 2013a, p.7).’’ It could be expected that especially in those material aspects the organization will try to mislead the reader in such a way that it looks like the organizations is doing well on its most important economic, social or environmental aspects.

2.5.1 The use of graphs, tables, and other visual techniques

In this research the use of graphs, tables and other visual techniques, among others headings, colours, bullet points, bold texts or logos (Jameson, 2000) may indicate the use of impression management in a (sustainability) report. These techniques are expected to exaggerate positive information and underplay negative information (Beattie and Jones, 2002). The use of graphs in financial reports already received considerable research attention, because it is seen as a powerful communication device (Cho, Michelon, and Patten, 2012). From all the previous research Muino and Trombetta (2009) came up with two major findings in the research of graph usage in financial reports. First, organizations that face improvements in corporate performance will use more graphs in their financial reports. Second, graphs will tend to describe a more favourable view of the performance of an organization when there is

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9 discovered a distortion in the graph depiction. This research expects the same for the use of tables and other visual techniques and will search for distortions in the use of these techniques that are being displayed in annual and sustainability reports.

2.5.2 Position of visual techniques

Although the use of visual techniques already may indicate the use of impression management in reports. Management may change the position or location of these techniques in such a way that it could alter the impression of the readers. The location or position of information is part of the tool called ‘emphasis’ that is used for impression management (Brennan, Guillamon-Saorin, and Pierce, 2009). The location of information can draw the attention to a specific topic or, conversely, reduce the attention that is given to specific information. Previous research has looked at the influence of the location of information on the readers’ perception. In these studies the primacy effect is appointed. This effect implies that ‘’when people are presented a list with ordered items, they will disproportionally select the first option (Erkel and Thijssen, 2000).’’ So when people are forming their first impressions these are mainly based on the information that they receive first (Hooghiemstra, 2000). In line with the primacy effect it could be expected that organizations present their bad news at the end of their report or at the end of a specific section in the report, so the good news will form the basis of the impression of the reader.

2.6 Women in top management

2.6.1 Presence of women directors

As was said above, one of the major issues that organizations face nowadays is the presence of women directors on and composition of the board of directors. The increased interest in women directors is among other things due to the high percentage that women form of total graduates at universities and are therefore a great part of the work force. It would be a strategic mistake for an organization if it decides not to rely on female talent (Setó-Pamies, 2015). Several studies show the benefits of having female directors on the board. First, it seems that having women directors translates into financial successes. According to Bernardi and Threadgill (2010), women directors provide the development of a positive corporate environment, more customer satisfaction and an increase in revenues and profits. Second, research shows the positive impact on CSR performance when an organization has women directors on board. According to Setó-Pamies (2015) organizations act with greater social responsibility when the number of women on board increases. Besides the greater social responsibility that organizations with female directors have, organizations with boards with at least three women on it show higher levels of CSR reporting. Which indicates a higher quality of the sustainability reports. These facts leads to the following proposition.

Proposition 1a: The presence of women on the board of directors or the supervisory board has a negative effect on the use of impression management in sustainability reports.

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10 2.6.2 (Female) CEO and narcissism

Women could sit on the board of directors, but an organization also could have a female CEO. To identify the difference between a male and a female CEO this research takes a look at the concept of CEO narcissism. ‘’A narcissistic personality is characterized by an inflated sense of self that is reflected in feelings of superiority, arrogant behaviour, and a need for constant attention and admiration (Bogart, Benotsch, and Pavlovic, 2004).’’ The American Psychiatric Association (APA) adds that a narcissistic person has a lack of empathy and that narcissism begins by early adulthood. Although the mostly negative aspects in the above mentioned definitions of narcissism, a little narcissism seems essential for effective leadership. Self-esteem, the ability to exercise authority over others and to motivate them are indispensable qualities of a leader. However to much narcissism by a CEO will lead to an excessive desire for power and recognition and will harm the organization in the long term (Rijsenbilt and Commandeur, 2011). A narcissistic CEO goes to extremes to maintain its status and to pretend that the organization prospers, even if the results are disappointing. If the results are disappointing a narcissistic CEO is inclined to conceal these results by means of fraud in financial or sustainability reports (Rijsenbilt and Commandeur, 2011).

Added to the above, CEOs play a major role in the decision for an organization to engage in CSR activities. It’s therefore that the preferences and priorities of a CEO may affect the organizations propensity to participate in CSR activities (Chatterjee and Hambrick, 2007). When an organization engages in CSR projects the organization, or more directly the CEO, often receives attention in the form of praise or criticism. It’s therefore that narcissistic CEOs tend to engage in positive CSR activities, but will avoid negative CSR initiatives (Petrenko, Aime, and Ridge, 2016).

The research of Grijalva et al. (2014) found that men are more narcissistic than women. Their study arguments that agentic characteristics displayed by men are more socially accepted than if those characteristics are displayed by women. Another reason is that women get a lot more criticised when they show aggressive or authoritarian behaviour. That is why women try to suppress narcissistic behaviour more than men do.

Judging the above-mentioned information the following relationship is expected between female CEOs and impression management.

Proposition 1b: The negative relationship between women directors and the use of impression management will become stronger if the CEO is a woman.

3. Research design

In this section the research method will be elaborated. In section 3.1 the data that has been used in this research will be described. Section 3.2 describes the measurement of the variables including a content analysis for the determination of impression management in a

(sustainability) report. This will be done on the basis of an evaluation model. Section 3.2.2 will explain how the information regarding to women directors and a female CEO is found and used in the analysis.

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3.1 Data

For the data collection, data from the TB 2016 is used. The TB 2016 refers to the reports of the fiscal year 2015. To determine whether an organization should be included in the dataset was dependent on criteria used in the TB 2016. The data from the TB contains information of 485 organizations. 253 Organizations are ranked and the other 232 organizations got a 0 score. The organizations with a 0 score were not useful for this research and were filtered out of the dataset. The companies in the database of the TB are all Dutch companies. As was said above this research will examine impression management in the subjects that are most

important for that organization. To determine the most material subjects of the organizations this research obliged an organization to disclose a graphical representation of these material subjects. In the TB this information is given in section 1A (profile and value chain) criteria 3: ‘’In the report a graphical representation of material issues is included, for example in the form of a materiality matrix.’’ Only organizations with a graphical representation of material issues will be included in the dataset. 136 Organizations (54%) got a score on this criteria and are listed in appendix 1. In view with the limited time in which this research will be carried out, the top 30 of the TB will be included in the data. The reports of the top 20 of the TB were assessed by a panel of experts. This panel could change the score of an organization in the TB. Hereafter the 3 highest scoring reports were submitted to a jury, which determined the winning report. The numbers 20 till 30 are included in the population to extend the population which in this way will be more representative.

Within these 30 organizations there is 1 with a female CEO. However to examine the influence of a female CEO, 1 organization won’t give a representative relationship between the presence of a female CEO and the extent of impression management. That’s why this research included 4 other organizations with a materiality matrix and a female CEO. The total population exists of 34 organizations, including 5 organizations (15%) with a female CEO. The 5 organizations with a female CEO are included in appendix 2.

Table 1 Research population

The data regarding to check if an organization has a female CEO as both the measurement of the proportion of women directors was withdrawn from the annual report or the website from that specific organization.

Dataset TB 485 Ranked organizations 253 0 Score 232 Materiality matrix 136 Panel assessment 20 Female CEO 5 Research population 34

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3.2 Measurement of the variables

In this research a content analysis is used to measure impression management in the (sustainability) reports. A content analysis is ‘’any technique for making inferences by systematically and objectively identifying specified characteristics or messages (Holisti, 1968).’’ Brennan et al. (2009), distinguish different types of impression management that are used in corporate documents. The one that will be analysed in this research is the one that is discussed above namely, visual/presentation effects or emphasis. Disclosures could be emphasised in three different ways. First, the position or location of the disclosure could influence the reader. This technique is, as was said above, used to make a specific part of the information more obvious to the reader of the corporate document. Second, repetition is used to repeat a specific item. Finally the last form of emphasis, namely reinforcement. With this technique a word (the qualifier) is added to a specific keyword (e.g. ‘’extreme decrease’’, ‘’extreme’’ is the qualifier and ‘’decrease’’ is the keyword). In this way qualitative

disclosures could be analysed. For this research the position or location of the disclosure will be analysed in the three most materiel subjects of the annual or sustainability report of an organization.

3.2.1 Dependent variable- impression management

For the measurement of impression management the method of Brennan et al. (2009) will be used. Of the 34 organizations in the population the three most material subjects of each

organization must be established. These are the subjects which will be analysed on impression management. As was said above emphasis could be used as an impression management tool. The more information is emphasised the greater the probability that the reader will notice that information. In the study of Brennan et al. (2009) three different ways of analysing emphasis are used. This study will analyse emphasis in one way. However it will determine the degree of emphasis (impression management) for the three most material subjects of an organization. The method that will be used consist of the analysis of the positioning and location of the information that is disclosed. A very important aspect of this analysis is the use of visual techniques in displaying the information. This is also called degree of prominence or visual emphasis (Brennan et al. 2009). Examples of visual techniques were called in the theoretical section of this research.

After the material subjects are established the content analysis can start. Every time a visual technique is used to disclose information, it has to be determined if that disclosure is positive or negative. For example if ‘emissions’ is a material subject for organization X and a graph is displayed in the section ‘emissions’ wherein a decline of CO2 is visible it could be stated that

it is a positive visual technique (or a positive quantitative amount).

Next the disclosure of visual techniques have to be scored. Figure 1 shows a classification of the visual techniques. During the analysis other techniques may be discovered. For these techniques a professional judgement need to be applied to classify the technique in one of the three groups. The score for every group is displayed in table 1.

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Table 2 Score of visual techniques

Finally the bias score has to be calculated. Table 3 gives an example of the calculation of the bias score. Appendix 3 shows an example of the data collection model of impression

management that will be used in this research.

Scenario: Organization Y has released seven positive quantitative amounts and three negative quantitative amounts in its sustainability report. Three positive

quantitative amounts are displayed in a most-emphasised location in the report. Two positive quantitative amounts are displayed in a next-most emphasised location and two in a least-emphasised location. The three negative quantitative amounts are displayed in the least-emphasised location of the sustainability report.

Table 3 Example calculation bias score

After the composite impression management scores are calculated the bias score could easily be determined.

Bias score = (positive composite score – negative composite score) / total composite score

Group Score Most 3 Next-most 1 Least-emphasised 0 Positive amount Negative amount Total amount Number of quantitative disclosures 7 3 10

Positive score Negative score Total score

Emphasis- location

Most 3x3 0 9

Next-most 2x1 0 2

Least-emphasised 2x0 3x0 0

Total composite impression management score

18 3 21

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14 Though this is the bias score of one material subject in the (sustainability) report. To calculate the overall bias of an organization’s report. The following formula should be used:

Overall bias score = 1/3 * (bias score subject 1) + 1/3 * (bias score subject 2) + 1/3 * (bias score subject 3)

In this formula subject 1 is the total composite impression management score of the first material subject of an organization. Subject 2 and 3 are the total composite impression management scores of respectively the second and the third material subjects of an organization.

A report could be positively or negatively biased or there is no bias at all. Table 4 shows which kind of bias is applied to the report.

Limitations of the research model

During the research it may happen that a company scores very well on a material subject and discloses this performance only three times (example) in the plain text of the report. This means that the positive composite score will be 3 and the negative composite score 0. The total bias score will be, in this case, 1 ((3-0)/3). According to table 4 the report of this organization will be completely positively biased. However according to the theory that was given above, it could be said that this report has no bias at all, because the organization really has no negative performance on this subject and only highlights the positive performance in a minimal way (plain text). That’s why this research will give a bias score of 0 in this kind of situations.

Table 4 Bias classification 3.2.2 Independent variable Proportion of women directors

As in previous research (Setó-Pamies, 2015) the variable ‘proportion of women directors’ will be measured by calculating the percentage of women on the board of directors. This

percentage will be calculated by dividing the number of women directors by the total number of board members. While analysing the reports of the 34 organizations it was noticed that different names are used for the board of directors. The following names were found: board of directors, management board, and executive board. Due to the fact that these boards often consist of only two or three persons this research also examines the influence of women on the supervisory board on the extent of impression management in (sustainability) report. Of the 34 organizations there are 19 with women on the board of directors and 30 organizations with women on the supervisory board. In the appendix the exact percentages are displayed. By means of a regression analysis the influence of women directors (in both the board of directors as in the supervisory board) on the use of impression management in (sustainability) Value of x Bias

-1 Completely negatively biased

-1<x>0 Negatively biased

0 No bias

0<x>1 Positively biased

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15 report will be measured. The next formula is used to determine the relationship between the independent and depend variables.

Bias score (impression management)= constant + β1*% Women directors on managing board + β2*% Women on supervisory board + β3*Female CEO

The results will only give one model because of the fact that this research does not include the testing of control variables during the regression analysis. Also the fact that this research is mainly a content analysis and therefore mostly of a qualitative nature is a reason why the results will give only one model.

Female CEO

As was said above of the 34 organizations in the population only 5 organizations have a female CEO (15%). This research will compare the bias scores from organizations with a female CEO with the scores of organizations without a female CEO. Also a One-way ANOVA will be carried out to examine if there are differences between these two groups.

4. Results

For all the organizations in the population the bias score is determined. See appendix 4 for the bias score of every organization. In the appendix the population is divided into two groups, namely organizations with and without a female CEO. During the content analysis a number of things occurred. When an organization appointed a good performance the message was repeated frequently. On the other hand, for bad performance often one message was

published. This research also finds that most bad performances were published at the end of the report or at the end of the section in which the subject was explained. This is in line with the above mentioned primacy effect. For some organizations this research did not use the three most material subjects because in some cases the most material subjects (according to the materiality matrix) were not explained in the report. So in these cases this research looked beyond the three most material subjects and examined for example also the fourth most material subject and so on. Finally, some reports were so big (ABN AMRO, 488 pages) that it was hard to analyse the report because information about the material subjects was spread throughout the whole report.

This section will first give the descriptive statistics of the whole population. Second it will give the results of the regression analysis for the influence of the presence of women on the managing board and the supervisory board. Finally the results with regard to the presence of a female CEO are presented.

4.1 Descriptive Statistics

Table 5 gives a summary of the descriptive statistics of the variables % women on managing board, % women on supervisory board and bias score used in this research. The organizations score on average 0,4740 on the bias score (impression management). This means that on average all (sustainability) reports of the organizations in the population are positively biased. What also stands out is the fact that the minimum of the bias score is 0,00. This means that at least one of the organizations got a bias score of 0,00. Appendix 4 presents the bias score per organization and it is noted that DSM N.V. and Ontwikkelingsmaatschappij Oost Nederland

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16 N.V. got such a 0,00 bias score. The reason they got this score is because these organizations describe their results in a ‘normal’ way. They barely did not use visual techniques,

unnecessary repetitions, and the performances were mainly described in the plain text of the reports. Also all titles in the report were from the same size and the sections were classified in the same way.

On average, the managing boards and the supervisory boards of the organizations consist for respectively 21,40% and 31,51% of women. For both boards there is a minimum of 0,00% and a maximum of 100,00%. Ontwikkelingsmaatschappij Oost Nederland N.V. is the only organization with a 100,00% score on the managing board. This is due to the fact that the managing board is only consisting of the CEO which in this case is a female. For both boards, there are several organizations with a score of 0,00. These are also presented in appendix 4. Note that table 5 gives the descriptive statistics of the total population. This research will also show the statistics of only the organizations with a female CEO and organizations without a female CEO further in this section. In the population there are 29 (85%) organizations without a female CEO and 5 (15%) with a female CEO. From this it can be concluded that the

population mainly consist of organizations without a female CEO and that organization with a female CEO are underrepresented.

Table 5 Descriptive statistics from total population

4.2 Testing the propositions

4.2.1 Presence of women directors

To test proposition 1a a regression analysis was used in this research. Table 6 shows the results of the regression analysis between the variables % women on managing board, % women on supervisory board and the bias score. Also appendix 5 gives some details about the results of this regression. The outcome of this analysis for the influence of women on the managing board, R= -0,334, B= -0,004, t(33)= -1,997, p<.1, shows that there is a significant, negative relationship between the % women on managing board and the use of impression management in (sustainability) reports. However the outcome for the influence of women on the supervisory board, R= -0,161, B= -0,003, t(33)= -0,961, p>.1, shows that there is no significant, negative relationship between the % women on supervisory boards and the use of impression management in (sustainability) reports.

% women on managing board % women on supervisory board Bias score Mean 21,3959% 31,5059% 0,4740 Median 0,154762 33,3333% 0,4884 Std. Deviation 24,1722% 15,9162% 0,2552 Minimum 0,00% 0,00% 0,0000 Maximum 100,00% 100,00% 0,9630

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17 Variable

Intercept 0,63***

% Women on managing board (1a)

-0,004*

% Women on supervisory board (1a)

-0,003

Adjusted R- Square 0,078

F-Value 2,404

Highest VIF 1,001

Table 6 Results regression analysis

***, ** and * coefficients are statistically significant at 1, 5, and 10 percent. 4.2.2 Female CEO

The first manner to analyse if the presence of a female CEO influences the use of impression management in (sustainability) reports this research executed a One-way ANOVA of female CEO/no female CEO on bias score (impression management). The analysis researches a direct influences. This One- way ANOVA was not significant, F(1, 32) = 2,297, p= 0,139. The presence of a female CEO does not affect the use of impression management in

(sustainability) reports. For the details of this One-way ANOVA see appendix 5.

To research the moderating effect of the presence of a female CEO, this research separated the population into two groups. Namely organizations with a female CEO and organizations without a female CEO. As was said above the total population exists of 29 organizations without a female CEO and 5 organizations with a female CEO. Table 7 shows the descriptive statistics for both groups.

% Women on managing board % Women on supervisory board Bias score Female CEO No female CEO Female CEO No female CEO Female CEO No female CEO Mean 56,6667% 15,3147% 28,2857% 32,0611% 0,3173 0,501 Median 50,0000% 0,00% 28,5714% 33,3333% 0,3472 0,5464 Std. Deviation 25,2763% 18,3552% 19,7018% 15,5222% 0,2209 0,2542 Minimum 33,33% 0,00% 0,00% 0,00% 0 0 Maximum 100,00% 50,00% 50,00% 71,43% 0,584 0,963

Table 7 Descriptive statistics for separated groups

Although organizations with a female CEO have on average a higher percentage of women on the managing board (female CEO; 56,67%, no female CEO; 15,31%), the results do not show a higher bias score average (female CEO; 0,3173, no female CEO; 0,501). Also the presence of a female CEO and the percentage of women on the supervisory board do not have a positive influence on the bias score. It is remarkable that organizations with a female CEO tend to have less women on the supervisory board (female CEO; 28,29%, no female CEO; 32,06%). Just like the One-way ANOVA test the comparison of the descriptive statistics do not support the influence of a female CEO on the use of impression management.

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18

5. Conclusion

5.1 Findings

Prior research shows that having women directors translates into financial successes (Bernardi and Threadgill, 2010), higher CSR performances and higher levels of CSR reporting (Setó-Pamies, 2015). But never was the relationship between the presence of women directors and the use of impression management in (sustainability) reports examined. In addition to this, the research also examined the influence of a female CEO on the use of impression management and the influence on the relationship between women directors and the use of impression management. These relationships could possibly be explained by the several theories discussed in the theoretical framing of this research. Due to for example information asymmetry sustainability reporting is used to provide information that intends to influence society’s perceptions about the organizations in such a way that the behaviour of the

organization is legitimised (Hooghiemstra, 2000). In these cases reports do not present a true and fair value of the performances of the organization. However the presence of women directors should correct the use of impression management in these reports. This research contributes to the existing literature by determining the extent of impression management in a report and especially by the use of visual techniques like tables and graphs. It also involves the influence of a female CEO which have not been examined before. This research aimed to answer the following research question:

To what extent has the presence of women directors influence on the use of impression management in sustainability reports of Dutch companies?

The results of the content analysis do not indicate a significant relationship between the presence of women directors (or CEO) and the use of impression management in sustainability reports of Dutch companies.

These results can be explained by the fact that it is not the CEO or someone else of the board of directors who is preparing the (sustainability) report, neither is the supervisory board. Interviews of the study of Farneti and Guthrie (2009) show that the environment units within organizations are the ones who most frequently prepare the sustainability reports. The study also mentioned that the responsibility of the preparation of financial, and more recent, the sustainability report lies with the corporate development division of an organization. This may be the reason why this research did not find a significant relationship between women on the board of an organization and the use of impression management in reports. Another result of Farneti and Guthrie (2009) was that from the perspective of the preparer, ‘’ disclosure of sustainability information in the annual report was for the purpose of informing stakeholders, but mainly internal ones.’’ This study only looked for reasons to alter the impression of external stakeholders to legitimise the actions of an organization.

Another explanation for the non-significant results may be the stewardship theory. It could be that, in this case, the manager who is in charge of the preparation of the (sustainability) report just wants to do a good job because it believes that serving the organization’s interests is the best way to achieve its own goals and therefore will not use techniques to alter the impression of the public.

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19 Besides de non- significant findings, proposition 1a got partly supported by the results in this study. The significant negative relationship between the percentage of women in the

managing board indicates that when the percentage of women on de managing board

increases the use of impression management in (sustainability) reports decreases. This result is interesting because it indicates that it’s just the day-to-day management of the organization that has influence or control over the composition of the reports. It also partly supports the results of prior research because the higher the percentage of women on the managing board the more the report gives a true and fair value of the performances (Setó-Pamies, 2015).

5.2 Limitations and future research

This research is subject to some limitations. First, this research used a very small dataset. Due to the short period in which this research had to be carried out only 34 of 485 organizations that participated in the Transparency Benchmark are included. This reduces the

representativeness of the study, but also made it possible to conduct a very precise content analysis on the reports. However for future research it is recommended to use a bigger dataset as time permits.

Second, the dataset only exists of Dutch listed firms. This is a consequence of the small dataset that is used for this research. This means that the results mentioned in the previous section might not be generalizable to organizations in other countries. It also might be interesting for the Transparency Benchmark to extend its dataset with organizations in other countries. Especially for the results in this research it is interesting to see the impact of a bigger and more diverse population on the now still non-significant findings.

Third, this research has a very subjective nature. This is due to the contents analysis used as a method to measure impression management. Despite the use of a framework the judgement of the researcher is needed to decide whether a disclosure can be used for the research and how to classify the disclosure into the framework. Another limitation of the research method is the use of the ‘ctrl f’ function to search for specific words in a report. The risk with this search method is that not all relevant sections will be included in the research. When synonyms or other descriptions of a certain subject that was searched for are used in the report, they may not be found with the ‘ctrl f’ function. In this case they are left out of the research which make the research partly incomplete.

Fourth, this research does not control for any other variables that could impact the results. However, there are variables that probably have influence on the results and have to be controlled for in future research. As was said above the disclosure of sustainability

performances is largely non-regulated, whereby the potential for organizations to engage in impression management is increasing. Hahn and Lülfs (2014) acknowledge the fact that disclosure on sustainability performances is sensitive to interpretation and ‘greenwashing’ tendencies. Hence, ‘’the GRI provides standardized reporting guidelines challenging companies to report positive and negative aspects of an organization’s sustainability

performance (Hahn and Lülfs, 2014).’’ When an organization uses these reporting guidelines it is most likely that the report produced by this organization will give a more true and fair value of the performances and will included less impression management techniques. So, it is recommended that organizations in future research are controlled for the use of GRI

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20 Finally, as was mentioned above, one of the reasons why the results show no significant relations may be due to the fact that neither the board of directors (including the CEO) or the supervisory board prepare the (sustainability) report. It is recommended to future research on this subject to take into consideration the parties that do prepare the reports of an

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21

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24

Appendix

Appendix 1 Companies with a graphical representation of material issues

136 organizations have disclosed a graphical representation of their material issues Criteria 3 TB: In the report a graphical representation of material issues is included, for example in the form of a materiality matrix

Alliander N.V. Triodos Bank N.V.

NS Eneco Holding N.V.

Schiphol Group VimpelCom Ltd.

Royal BAM Group Industriebank LIOF N.V.

DSM N.V. Ordina N.V.

Nederlandse Gasunie N.V. Radboudumc

Siemens Nederland Coöperatie VGZ U.A.

ABN AMRO Group N.V. Joh. Mourik & Co. Holding B.V.

Havenbedrijf Rotterdam N.V. TBI Holdings

KPN Universitair Medisch Centrum

Groningen

Rabobank Corbion N.V.

Unilever N.V. Bavaria N.V.

Van Lanschot Bankiers Bidvest Deli XL

Heineken N.V. KPMG N.V.

Vodafone Perfetti v. Melle

Aegon N.V. Jumbo Groep Holding B.V.

Bank Ned. Gemeenten N.V. SUEZ Recycling & Recovery

Netherlands B.V.

ING Groep RELX Group N.V.

Koninklijke Philips N.V. Beelen Groep B.V.

Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden NV

Regionale Ontwikkelingsmaatschappij InnovationQuarter B.V.

Vitens N.V. Royal HaskoningDHV

Heijmans Deloitte Holding B.V.

Air France - KLM TNT Express

AKZO Nobel N.V. Ontwikkelingsmaatschappij Oost

Nederland NV

SNS Bank N.V. Royal Dutch Shell

TenneT Holding B.V. Vreugdenhil Groep B.V.

VolkerWessels Wolters Kluwer N.V.

Rockwool Benelux Holding Arcadis N.V.

Royal Ahold Delta Lloyd Groep

PricewaterhouseCoopers Sligro Food Group N.V.

Holding Nationale Goede Doelen Loterijen N.V. Koninklijke Ten Cate N.V.

Koninklijke Wessanen N.V. Koninklijke Vopak N.V.

NV NOM Investerings- en

Ontwikkelingsmaatschappij voor Noord-Nederland

HEMA

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25

COVRA NV USG People N.V.

Enexis Holding N.V. Nidera B.V.

Nederlandse Waterschapsbank NV Holland Casino

MN Aperam

Vivat Verzekeringen GVB Amsterdam

NN GROUP Beter Bed Holding N.V.

PostNL Wereldhave Manag. Holding B.V.

Menzis Holding B.V. Atradius N.V.

N.V. HVC CoMore

Achmea DOW Benelux B.V.

Facilicom Services Group Stichting Exploitatie Nederlandse

Staatsloterij

Koninklijke Boskalis Westminster N.V. Stern Groep N.V.

EBN Van Oord

Koninklijke FrieslandCampina N.V. Gemalto N.V.

Q-Park NV Vos Logistics Beheer B.V.

Westland Infra Core Laboratories N.V.

NIBC Bank N.V. IHC Merwede Holding B.V.

SBM Offshore Unibail Rodamco

De Nederlandsche Bank N.V. Brunel International N.V.

VanDrie Group Vebego International N.V.

Ernst & Young Nederland Damen Shipyards Group N.V.

Van Gansewinkel Groep Koninklijke Coöperatieve

Bloemenveiling FloraHolland U.A.

CZ groep Forbo Flooring B.V.

Wageningen UR Tele2 Netherlands Holding N.V.

Albron Nederland B.V. Unica Groep B.V.

ASR Nederland N.V. UMC Utrecht

Kendrion N.V. PGGM

TKH Group N.V. Allianz Nederland Groep N.V.

GasTerra B.V. Brab. Ontw. Maatschappij N.V.

ASML Dela Coöperatie U.A.

ProRail B.V. VvAA groep B.V.

TMG - Telegraaf Media Groep KAS BANK N.V.

Zeeman Groep B.V. Farm Frites Beheer B.V.

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26 Appendix 2 Organizations with a female CEO

Organization Ranking

Vitens N.V. 22

PostNL 42

Wageningen UR 59

Ontwikkelingsmaatschappij Oost Nederland N.V. 95

Wolters Kluwer N.V. 98

Appendix 3 Example data collection model impression management Organization Material subject 1 2 3 Total Positive amounts Emphasis location Most Next-most Least-emphasised Positive composite score Negative amounts Most Next-most Least-emphasised Negative composite score Total composite score Bias score

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27 Appendix 4 Data of the population

Organizations without a female CEO

Organization % Women on managing board %Women on supervisory board Bias score Alliander N.V. 33% 60% 0,69152 NS 40% 40% 0,383172 Schiphol Group 50% 38% 0,077053

Royal BAM Group 33% 17% 0,775068

DSM N.V. 33% 43% 0

Nederlandse Gasunie N.V. 0% 33% 0,398212

Siemens Nederland 0% 25% 0,809939

ABN AMRO Group N.V. 0% 43% 0,483871

Havenbedrijf Rotterdam N.V. 0% 40% 0,237692

KPN 0% 29% 0,688627

Rabobank 14% 33% 0,26126

Unilever N.V. 0% 71% 0,704455

Van Lanschot Bankiers 0% 33% 0,794179

Heineken N.V. 50% 27% 0,244595

Vodafone 0% 33% 0,395381

Aegon N.V. 0% 25% 0,806677

Bank Ned. Gemeenten N.V. 0% 33% 0,393418

ING Groep 0% 38% 0,565939 Koninklijke Philips N.V. 14% 33% 0,750476 Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden NV 33% 40% 0,677778 Heijmans 0% 20% 0,406322 Air France - KLM 33% n.v.t. 0,962963 AKZO Nobel N.V. 50% 38% 0,57278 SNS Bank N.V. 20% 40% 0,493025 TenneT Holding B.V. 0% 33% 0,025937 VolkerWessels 0% 0% 0,546398

Rockwool Benelux Holding 22% n.v.t. 0,597247

Royal Ahold 0% 21% 0,604257

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28 Organizations with a female CEO

Organization % Women on managing board % Women on supervisory board Bias score Vitens N.V. 50% 50% 0,222222 PostNL 50% 29% 0,432875 Wageningen UR 33% 0% 0,347222 Ontwikkelingsmaatschappij Oost Nederland NV 100% 20% 0 Wolters Kluwer N.V. 50% 43% 0,584012

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29 Appendix 5 Regression analysis and One-way ANOVA

Regression analysis between % women on managing board, % women on supervisory board and the bias score

Standardized coefficients Beta t Sig. % Women on managing board -0,334 -1,997 0,055 % Women on supervisory board -0,161 -0,961 0,344 One-way ANOVA Sum of squares df Mean squares F Sig. Between groups 0,144 1 0,144 2,297 0,139 Within groups 2,005 32 0,063 Total 2,149 33

The relationship between women directors and the degree of impression management in sustainability reports

The relationship between women directors and the degree of impression

management in sustainability reports

The relationship between women directors and the degree of impression

management in sustainability reports

Table of contents

1. Introduction

2. Theoretical framing

3. Research design

4. Results

5. Conclusion

References

Appendix