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Study: Board gender diversity reduces environmental suit exposure

(mariakraynova / Depositphotos.com)

(mariakraynova / Depositphotos.com)

New research finds that firms that have a balance of men and women on their boards can reduce their exposure to environmental lawsuits.

The study from the University of Adelaide and published in the Journal of Corporate Finance also found that companies with a gender balance on their boards are less likely to be sued for environmental law violations.

The study’s author, Chelsea Liu, a senior lecturer at Adelaide Business School, examined 1893 environmental lawsuits filed against S&P 1500 firms in the United States between 2000 and 2015 and found direct links between gender diversity and corporate environmental violations. Companies that had more women on their boards had fewer environmental lawsuits.

Among Liu’s findings: Each female on a board of directors reduces the average lawsuit exposure by 1.5 percent relative to a board that has one fewer female directors. On an average environmental lawsuit of $204 million, that 1.5 percent drop in exposure could mean a savings of $3.1 million.

“Gender diversity is what’s important,” said Liu in a statement about her research. “Female representation on boards is most important where the CEO is male, and less important if the CEO is female.”

Liu said the finding can be attributed to diversity theory, which holds that a group of people from more diverse backgrounds tend to make better collective decisions because the people have a wider range of perspectives.

“Gender socialization and ethics theories suggest that girls are brought up to be more caring towards others which can enhance environmental decision-making in the boardroom,” Liu said.

The finding supports a bottom-line case for a more diverse board, Liu said.

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