Empowering change: The role of gender diversity in steering ESG integration into executive compensation

Ammad Ahmed · Abiot Mindaye Tessema · Atia Hussain

23 citations0/0 files storedCorporate Social Responsibility and Environmental Management

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Gender Diversity and Inequality Corporate Finance and Governance Corporate Social Responsibility Reporting

Abstract

Abstract This study investigates the influence of boardroom gender diversity (BGD) on the adoption of Environmental, Social, and Governance (ESG) metrics in executive compensation, a concept emerging from the stakeholderism debate. Prior research has focused on the impact of BGD on traditional compensation metrics, but the role of BGD in ESG‐linked compensation remains underexplored. Our research fills this gap by examining whether BGD contributes to the incorporation of ESG considerations in executive pay structures. Additionally, we analyze how board members' external affiliations might moderate this relationship, considering that these affiliations can provide diverse perspectives and insights into ESG issues. Using data from 14 countries, our findings reveal a positive and significant association between BGD and ESG metrics in executive compensation, suggesting that women directors significantly influence the integration of sustainability and ethical considerations in corporate strategic planning. Moreover, the impact of BGD on ESG‐linked compensation is found to be more pronounced with higher levels of board members' affiliations. Our results are robust to alternate estimation techniques such as propensity score matching (PSM) and generalized methods of moments (GMM). Our study contributes to the existing literature on gender diversity, corporate governance, and sustainability, offering insights for policymakers and corporate boards on aligning corporate strategies with ESG goals.

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2025From diversity to sustainability: How board meeting frequency, financial performance and foreign members enhance the board gender diversity – ESG performance link

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