Female board representation and the adoption of corporate social responsibility criteria in executive compensation contracts: International evidence

This paper examines the relation between female board representation and the adoption of corporate social responsibility (CSR) criteria in executive compensation contracts (i.e., CSR-based executive compensation) in an international setting. Considering the greater propensity of female directors to have CSR-oriented values, expertise and experience compared to male counterparts, the increased presence of female directors could breed greater board sensitivity to CSR issues and bring valuable human capital to the board that helps address CSR-related concerns. Therefore, we expect that increased board female representation is associated with an increased firm tendency to offer CSR-based executive compensation. Using a comprehensive sample of 41,236 firm-year observations from 59 countries during the period 2002–2018, we find a positive effect of female board representation on the likelihood of a firm adopting CSR-based compensation. Several methods are applied to rigorously address potential endogeneity concerns. Further, our cross-country moderating analyses indicate that the positive relation is more pronounced in countries with greater gender equity for senior positions and in countries with a lower degree of masculine culture. We also show that with greater female director representation, the use of CSR-based executive compensation is more conducive to enhancing CSR performance and firm value. Overall, this study sheds light on the effectiveness of introducing female directors in reinforcing the CSR orientation at the firm leadership level in a global context, which has implications for both business practitioners and researchers.