Female Directors Improve the Environment (VIDEO)
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Hannes Wagner, Bocconi University, Milan, finds that governance mechanisms that help align the interests of investors and board members enhance the environmental performance of firms. This is true also if a woman is appointed to a previously all male board. Wagner’s investigation is joint with his coauthors Alexander Dyck (University of Toronto), Karl V. Lins (University of Utah), Lukas Roth (University of Alberta), and Mitch Towner (University of Arizona). The authors identified two potential board renewal mechanisms: the adoption of majority voting and the introduction of a female director. Majority voting for board members is different from plurality voting. It gives investors more power. “And what we show is that majority voting rules lead to better environmental performance,” Professor Wagner says. So, giving investors more power, and improving corporate governance leads to another outcome, which is improving environmental performance of a firm. This is very important for a lot of investors, since while they care about financial performance, many of them increasingly care about these other non-financial aspects of the performance of a firm. The appointment of a female director to an all-male board has an even stronger effect. “We analyze in detail how female board members differ in their characteristics from male board members, since we know for example that female directors tend to have higher education levels,” Wagner explains. “What is interesting is that once we control for any differences such as education and prior executive experience, the female effect continues to show up. So, appointing female directors to all-male boards improves environmental performance and this is directly related to gender.”
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Bocconi University, Milan
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