Female representation on boards and corporate ethical behavior in Latin American companies

• Published date: 01 January 2022
• Author: Guadalupe del Carmen Briano‐Turrent
• Date: 01 January 2022
• DOI: http://doi.org/10.1111/corg.12416

SPECIAL ISSUE ARTICLE

Female representation on boards and corporate ethical

behavior in Latin American companies

Guadalupe del Carmen Briano-Turrent

Center of Research and Postgraduate Studies,

Accounting and Business School, Universidad

Aut

onoma de San Luis Potosí, San Luis Potosí,

Mexico

Correspondence

Guadalupe del Carmen Briano-Turrent, Center

of Research and Postgraduate Studies,

Accounting and Business School, Universidad

Aut

onoma de San Luis Potosí, 550 Sierra

Leona, San Luis Potosí, S.L.P., Mexico.

Email: guadalupe.briano@uaslp.mx

Funding information

Consejo Nacional de Ciencia y Tecnología,

Mexico, Grant/Award Number: CB-

257211-201

Abstract

Research Question/Issue: Based on the resource dependence theory and the ethics

of care theory, this study aims to analyze whether female representation on boards

enhances corporate ethics performance in listed companies.

Research Findings/Insights: Using a study sample composed of 1285 company-year

observations from Argentina, Brazil, Chile, and Mexico during the 2004–2014 period,

empirical results reveal a positive effect of female representation in boardrooms over

the board's ethical functioning, the conflicts of interest transparency index, the crea-

tion of ethics codes, and the adoption of a stakeholder orientation. Moreover, the

research evidences a greater effect in some ethical dimensions when women on the

board make up a critical mass of three women.

Theoretical/Academic Implications: This paper motivates the ethical side of corpo-

rate governance in a setting where women's rates on top positions are low, corrup-

tion and bribery are high, and cultural environment inhibits gender parity in terms of

reaching higher positions in an organization. It can be specifically deduced that a

higher female representation as board members may have an essential role in esta-

blishing and advocating a business ethics culture.

Practitioner/Policy Implications: For boards, having more female directors can

enhance corporate ethical practices. For practitioners and regulators, this study

shows that female directors tend to be more ethically responsible, emphasizing the

necessity of mitigating gender imbalance on corporate boards.

KEYWORDS

corporate governance, business ethics, ethics of care theory, resource dependence theory,

women directors

1|INTRODUCTION

Recent corporate scandals around the world show a lack of ethical

practices, which have led to a mass of distrust in the business integrity

and a very sharp decline in the capital market (Blodget, 2008). In this

context, business ethics is one of the most significant demands made

by institutional and individual investors, who usually require the par-

ticipation of the board of directors in the implementation of ethical

behavior in companies (García-Sánchez et al., 2015). Business ethics is

composed of a set of moral principles in order to reach a decision

within the corporate values (Holme, 2008) and is reflected through

the adoption of good governance practices (DeGeorge, 2005).

Female representation on boards is increasingly viewed as a sig-

nificant factor in the board effectiveness (DeBoskey et al., 2018).

Women directors show greater diligence and independence and are

stricter monitors (Adams & Ferreira, 2009; Post & Byron, 2015); bring

different perspectives, experience, and networks to the boardroom

(Rose, 2007; Terjesen et al., 2009); and exhibit less overconfidence

promoting stricter ethical standards (Pan & Sparks, 2012). Several the-

ories support the relationship between female representation on

Received: 6 June 2020 Revised: 27 October 2021 Accepted: 29 October 2021

DOI: 10.1111/corg.12416

80 © 2021 John Wiley & Sons Ltd Corp Govern Int Rev. 2022;30:80–95.wileyonlinelibrary.com/journal/corg

boards and business ethics. For instance, the Resource Dependence

Theory (RDT) offers the rationale for the board's function of providing

critical resources to the company including legitimacy, advice, and

counsel (Hillman & Dalziel, 2003). These board resources offer the

corporation support in understanding and responding to its environ-

ment that can help manage ethical issues in a better way

(Boyd, 1990). For instance, increasing the number of women as board

members may improve decision making, as a broader variety of per-

spectives and outcomes are considered and assessed (Daily &

Dalton, 2003). Similarly, the Ethics of Care Theory (ECT) argues that

female representation on boards constitutes a driver for social and

ethical responsibility and promotes a more inclusive style of leader-

ship, democratic, and attentive to stakeholders needs (Tong &

Williams, 2009).

Prior research suggests that women as board members may favor

economic and ethical practices, because women and men are tradi-

tionally, culturally, and socially different (Liao et al., 2015). From an

economic dimension, female members are positively associated with

financial performance (Reguera-Alvarado et al., 2017; Yap

et al., 2017). From an ethical point of view, a board with more women

is likely to increase the information needs of a diversified range of

stakeholders (DeBoskey et al., 2018), which suggests that female

members usually have a higher perception of risks and they are social-

ized to care for stakeholders' needs, representing these qualities a

closer feeling towards an ethical behavior (Harjoto et al., 2015).

Women have stronger moral standards and are socially more sensi-

tive, emotional, and empathic than men (Boulouta, 2013). It has been

recognized that women possess a more sustainable conscience in

their private sphere, and this should be projected into their public

activity (Bernardi et al., 2009).

Although a vast body of literature has examined how women rep-

resentation on boards positively affects corporate information disclo-

sure (García-Sánchez & Martínez-Ferrero, 2018), corporate social

responsibility performance (Ben-Amar et al., 2017; Cuadrado-

Ballesteros et al., 2017; Rao & Tilt, 2016), corporate reputation

(Baselga-Pascual et al., 2018; Bear et al., 2010), company's environ-

mental policies (Li et al., 2016), and social capital (Rigolini &

Huse, 2021); much less is known about their impact on ethical busi-

ness practices. In this context, this work aims to analyze if the female

representation on boardrooms increases business ethical behavior

through its monitoring role for potential fraudulent and unethical con-

ducts, as well as the compliance of corporate governance practices,

such as the creation of ethics codes or the presence of a corporate

governance committee (García-Sánchez et al., 2015).

Using a large sample composed of 1285 company-year observa-

tions (2004–2014 period) that belong to the most liquid stock indices

of Argentina (Merval), Brazil (Ibovespa), Chile (IPSA), and Mexico

(IPyC), which account for more than 80% of the market capitalization

in Latin America (Briano-Turrent et al., 2020), this study contributes

to the debate on whether women on boards have a significant effect

on ethical practices. Differently from other studies, we model the

direct effect of women directors over five corporate governance ethi-

cal dimensions: (1) board ethical functioning, (2) adoption of ethics

codes, (3) presence of a corporate governance committee, (4) conflicts

of interest transparency index, and (5) adoption of a stakeholder ori-

entation. Our key finding is that female representation enhances the

corporate ethical behavior, mainly in the board ethical functioning, the

adoption of ethics codes, and the orientation to stakeholders.

This study makes several novelty contributions to management

research. First, it motivates the ethical side of corporate governance

in a setting where the underrepresentation of women in leadership

positions is most notorious in the private sector, and breaking the

glass ceiling to hold leadership positions becomes more difficult for

women (Heller & Gabaldon, 2018). Second, drawing on the RDT and

the ECT, we argue that women are more likely to avoid unethical

practices (Pan & Sparks, 2012). Recent studies have concluded that

women are more risk averse to violating norms and policies; there-

fore, a higher representation of women on boards can strengthen

governance, corporate social responsibility (CSR) ratings, and busi-

ness ethics (Vittone & Vaquer, 2020). Third, to the best of our knowl-

edge, this is the only study researching the relationship between

female representation on boards and ethical business practices in a

comparative context from Latin America. Several studies have

focused on individual companies and industry characteristics, but few

have linked female representation on boards to a country-level

(Brieger et al., 2019).

Our findings have useful insights for regulators and policy makers

in Latin America, a region characterized by institutional weakness and

poor legal protection systems. Therefore, good governance codes and

business ethics are essential for the long-term business success (Allen

et al., 2005). For practitioners, this study shows that female directors

motivate to a higher ethical performance, emphasizing the necessity

of mitigating gender imbalance on corporate boards (Gabaldon

et al., 2016). Our conclusions are also relevant to prospective inves-

tors who wish to consider gender representation in their investment

decisions.

The rest of the paper is structured in the following way: Section 2

provides an overview of the literature, and the hypotheses of study

are established. Section 3 describes the sample, data, and methodol-

ogy. Section 4 shows descriptive and empirical results. Section 5 pre-

sents the discussion and conclusion.

2|LITERATURE REVIEW AND

HYPOTHESES DEVELOPMENT

2.1 |Women on boards in Latin America

Board membership is one of the highest levels of corporate decision

making. The representation of women in boardrooms for publicly

listed companies on the world's stock markets has become relevant

since the low number of women in this role has caused a concern

(International Labour Organization, 2017). Countries have enacted

quota laws or voluntary initiatives for greater gender balance in

boardrooms leading to a growth in the number of women in such

positions (Heller & Gabaldon, 2018).

BRIANO-TURRENT 81