Board Diversity and Corporate Social Irresponsibility

Abstract

Our study aims to examine the impact of board diversity on socially irresponsible actions (corporate social irresponsibility [CSI]). Using a sample of Spanish firms listed from 2014 to 2022, our results evidence a negative effect of diversity on CSI. This suggests that diversity in corporate decision-making promotes a more ethical and accountable organisational culture. Our research has significant implications for internal agents, since incorporating board diversity emerges as an effective instrument that can constrain CSI practices. Moreover, diversity is an advantage for directors who are sensitive to threats to their reputational capital. By reducing CSI, directors consolidate their reputation as trusted overseers, which in turn protects their current and potential appointments.

JEL CLASSIFICATION G34: M14

Keywords

board diversity corporate social irresponsibility dominant owners

Introduction

Landmark cases – ranging from the Enron scandal to the Volkswagen and Theranos fraud – have highlighted the magnitude of corporate social irresponsibility (CSI), as well as its devastating impact on society and on the environment when corporations neglect their social and ethical duties (Alcadipani & de Oliveira Medeiros, 2020). Ernest & Young (2022) show that 42% of surveyed board members agree that unethical behaviour in senior or high performers is tolerated in their organisation (up from 34% in 2020), and in a survey of 1,296 companies in 53 countries, PwC (2022) finds that 46% have experienced fraud, corruption or other types of economic wrongdoing. CSI involves making unethical decisions that harm different stakeholders – both internal and external to the company – which can result in penalties and reputational damage (Brammer et al., 2021; Nardella et al., 2023). This behaviour is linked to incidents such as human rights abuses, tax evasion and corruption scandals, resulting in increased financial risk and reduced firm performance (Barnett, 2014; Lange & Washburn, 2012; Oikonomou et al., 2012). Furthermore, the erosion of reputational capital undermines relationships with stakeholders, adversely affecting firm value (Becchetti et al., 2023; Harjoto et al., 2021; Pfarrer et al., 2010). This is especially critical in settings where reputation serves as a disciplinary mechanism for internal agents’ actions, given the vulnerabilities of the legal system in safeguarding the interests of external investors (La Porta et al., 2000).

Despite the clear disadvantages that CSI presents to society, it is concerning that in business, there is no consistent disincentive for socially irresponsible actions (Barnett, 2014; Carroll & Olegario, 2020; Davis, 2021; Nardella et al., 2023; Surroca et al., 2013). Companies can exhibit both ‘positive’ and ‘negative’ behaviours simultaneously. In other words, viewing CSI as the exact opposite of corporate social responsibility (CSR) is an inaccurate assumption (Clark et al., 2022; Harjoto et al., 2022; Iborra & Riera, 2023; Nardella et al., 2020). This implies that a firm can engage in certain socially responsible initiatives – such as environmental sustainability or labour responsibility – while at the same time engaging in socially irresponsible ones, such as tax evasion or environmental pollution (Clark et al., 2022). However, the scientific community has been more interested in explaining CSR rather than CSI (Lange & Washburn, 2012). This has increased interest in advancing current knowledge of firms’ unethical actions, making it a prominent topic on the research agendas of academic and professional communities worldwide.

In this context, the board of directors is crucial for controlling irresponsible conduct, as directors play a key role in management and strategic decision-making (Gallego-Álvarez & Rodriguez-Dominguez, 2025). Directors’ attributes are closely linked to the quality of governance within the firm and the effectiveness of corporate governance practices (Beji et al., 2021; Boulouta, 2013; Hafsi & Turgut, 2013). In this regard, board diversity not only enhances corporate governance by enabling the board to be more effective overseers (Adams & Ferreira, 2009; Baker et al., 2020; Husted & de Sousa-Filho, 2019) but also contributes to greater market knowledge, which is reflected in improved financial, environmental, social and governance (ESG) performance (Campbell & Mínguez-Vera, 2008; Harjoto & Rossi, 2019). Consequently, diverse boards might reduce the risk of experiencing CSI episodes by offering enriching perspectives thanks to their diversity in human capital regarding knowledge, experience and networks (Kabongo & Okpara, 2019; Kaczmarek et al., 2014). Moreover, board diversity might decrease incentives to participate in CSI episodes because of the costs associated with corporate hypocrisy (Z. Chen et al., 2020; Nardella et al., 2020; Shim & Yang, 2016). As a result, the inconsistent performance linked to the use of diversity while engaging in unethical behaviours may lead to further penalties from stakeholders (P. Chen & Dagestani, 2023; Fleitas-Castillo et al., 2024; Gallego-Álvarez & Rodriguez-Dominguez, 2025). However, little is still known about the role boards of directors may play in a firm’s unethical conduct. Thus, Jain and Zaman (2020) show that board size, the presence of CSR committees, a higher representation of independents and women, and the frequency of board activity are associated with lower CSI. Godfrey et al. (2024) find that gender diversity on boards diminishes irresponsible behaviour, while the study by Fleitas-Castillo et al. (2024) indicates an inverted U-shaped relationship between the presence of female directors and CSI. Dharwadkar et al. (2021) report that firms more involved in CSI tend to have more directors with legal experience on the board in subsequent years.

Therefore, the influence of multi-dimensional board diversity on the socially irresponsible performance of firms remains an unclear area of knowledge. To address this gap in the literature, our study aims to examine how multi-dimensional diversity on boards of directors affects socially irresponsible actions. Examining the impact of diversity on boards regarding firms’ socially irresponsible behaviour is relevant because, in recent years, companies have concentrated on increasing diversity on their boards. Diversity has become, beyond an ethical imperative, a key element of modern corporate governance (Aguilera & Ruiz Castillo, 2025). Accordingly, Spencer Stuart’s report ‘2023 S&P 500 New Director and Diversity Snapshot’ highlights this trend. While female representation in 2012 was below 24%, minority representation was only 14%. Ten years later, women have surpassed parity at 46%, and minorities have increased to 36%, reflecting a significant rise in board diversity – from 38% in 2012 to 67% in 2023. Moreover, according to the report ‘Improving the Ethnic Diversity of UK Boards’, the proportion of directors from minority ethnic backgrounds in leading U.K. companies has seen a gradual, albeit limited, increase from 1.4% in 2014 to 8% in 2021 (The Parker Review Committee, 2021).

Using a sample of Spanish firms listed in the period 2014–2022, our results evidence a negative effect of diversity on CSI, showing that the presence of greater board diversity reduces the likelihood of organisations undertaking CSI. This suggests that diversity in corporate decision-making not only fosters more efficient and equitable governance due to the varied knowledge and skills it brings, but that it also promotes a more ethical and accountable organisational culture. Furthermore, it considers the potential additional reputational costs that could arise from engaging in irresponsible behaviour with a diverse board. We test the robustness of our results using different procedures to address different endogeneity issues.

Our research makes several contributions. First, we enrich the emerging literature on CSI by extending the knowledge gained from studies on ethical behaviour in concentrated ownership contexts. While previous literature has focused on the role of dominant owners in CSR actions (Barnea & Rubin, 2010; Bona Sánchez et al., 2023; Dam & Scholtens, 2013; Ducassy & Montandrau, 2015; López-Iturriaga & López-de-Foronda, 2011; Oh et al., 2017; Pucheta-Martínez & López-Zamora, 2018), we shed light on the role of board diversity in CSI in a setting where dominant owners play a leading part in the decision-making process. Second, we analyse diversity from a wider perspective, given that the study of how diversity impacts CSI has thus far been confined to looking at board diversity in terms of gender (Fleitas-Castillo et al., 2024; Godfrey et al., 2024; Jain & Zaman, 2020). Thus, Bernile et al. (2018) suggest that it is unclear whether gender is the most important trait for analysing the role of directors, as there is little research analysing the role of other aspects of board membership. Our research thus addresses a gap in the literature by spotlighting the drivers of CSI episodes, with particular focus on the role of multi-dimensional board diversity. While previous research on CSI has examined the consequences for firms, less attention has been paid to what drives these episodes (Iborra & Riera, 2023). Third, we adopt a multi-theoretical approach when examining the relationship between diversity and CSI. Finally, we contribute to the growing literature advocating a modern approach to corporate governance, where firm performance is no longer evaluated solely from a financial perspective but also considers social and environmental factors (Aguilera & Ruiz Castillo, 2025). In this context, we demonstrate that board diversity, viewed from a multi-dimensional standpoint, significantly influences the unethical conduct of firms, opening avenues for exploring its impact on other non-financial corporate actions.

Following this introduction, the rest of the document is organised as follows. Section ‘Literature Review’ presents the theoretical arguments supporting our hypothesis. The methodological design is outlined in section ‘Research Design’. Section ‘Results’ reports the results obtained. Finally, section ‘Discussion and Conclusion’ discusses the findings and summarises the main conclusions of the study.

Literature Review

CSI is characterised by making unethical and morally unpleasant decisions that cause harm to various stakeholders – both inside and outside the firm (Alcadipani & de Oliveira Medeiros, 2020; Brown & Mitchell, 2010; Mena et al., 2016). Engaging in such activities involves taking actions perceived as damaging to stakeholders, diverging from expectations and regulations, which can lead to both governmental and societal penalties and sanctions (Brammer et al., 2021; Nardella et al., 2023). Irresponsible behaviour is therefore frequently linked to incidents that negatively affect stakeholders – whether intentionally or unintentionally – such as human rights abuses, tax evasion, environmental disasters, corruption scandals and corporate actions that negatively impact customers and employees (Alcadipani & de Oliveira Medeiros, 2020; Barnett, 2014; Carroll & Olegario, 2020; Fu et al., 2011; Lange & Washburn, 2012; Lin-Hi & Müller, 2013; Luna-Arocas & Danvila-del-Valle, 2024). Such incidents cause reputational damage (Armour et al., 2017; Harjoto et al., 2021; Lange & Washburn, 2012; Nardella et al., 2020), hinder stakeholder relations and are associated with higher financial risk and lower firm and asset portfolio performance (Antonetti & Maklan, 2018; Armour et al., 2017; Becchetti et al., 2023; Berkan et al., 2021; Harjoto et al., 2021; Oikonomou et al., 2012; Köbel et al., 2017; Sun & Ding, 2021). The erosion of reputational capital resulting from episodes of social irresponsibility significantly affects the firm’s connections with its stakeholders, thus positioning reputational risk as a key driver of firm value (Becchetti et al., 2023).

The literature on the antecedents of CSI indicates that the primary external factors include challenges in accessing resources for the firm (Gao & Yang, 2021), mostly related to environments with weak institutions (Boudier & Bensebaa, 2011; Surroca et al., 2013), institutional corruption (Keig et al., 2015) or sectoral traits, such as the degree of competitiveness (Atay & Terpstra-Tong, 2020; Boudier & Bensebaa, 2011). Conversely, some research on the antecedents of CSI has concentrated on internal corporate governance mechanisms, such as the role of the CEO (Bouslah et al., 2018; Hafenbrädl & Waeger, 2017; Lee et al., 2018; Oh et al., 2017; Markoczy et al., 2023) or the ownership structure (Block & Wagner, 2014; Jain & Zaman, 2020).

In this context, previous research has focused on the impact of board diversity on CSR, examining how the presence of diverse members (in terms of gender, age, ethnicity, professional experience, etc.) might positively influence corporate decision-making and promote more ethical and socially responsible practices within the firm (P. Chen & Dagestani, 2023; Gallego-Álvarez & Rodriguez-Dominguez, 2025; Maurer et al., 2011). However, few studies have analysed the role of the board of directors in the unethical behaviour of firms. Jain and Zaman (2020) show that board size, the presence of CSR committees, the higher occurrence of independents and women, and the frequency of board activity are related to lower CSI. Godfrey et al. (2024) find that board gender diversity reduces irresponsible behaviour, while the study by Fleitas-Castillo et al. (2024) shows an inverted U-shaped relationship between the presence of female directors and CSI. Dharwadkar et al. (2021) report that firms more involved in CSI have more directors with legal experience on the board in subsequent years. Therefore, the influence of the board of directors on socially irresponsible corporate behaviour remains a murky area, especially regarding board diversity, and even more so in a context such as continental Europe, where reputational damage is crucial due to low investor protection, low litigation risk and high ownership concentration (Cuervo, 2002; Djankov et al., 2008; La Porta et al., 1999). In such a setting, corporate social actions become highly significant because of the vital role that reputation plays in contracting processes, both in financial markets and in relations between insiders and external investors (La Porta et al., 2000). In this context, dominant owners not only have the ability but also the incentive to influence firms’ social behaviour (Barnea & Rubin, 2010; Bona Sánchez et al., 2023; Dam & Scholtens, 2013; Ducassy & Montandrau, 2015; López-Iturriaga & López-de-Foronda, 2011) and may engage in episodes of social irresponsibility in pursuit of private benefit (Gao & Yang, 2021). Moreover, socially irresponsible behaviour can serve as a tool that helps perpetuate control by dominant owners, especially in environments characterised by weak institutions and high levels of corruption (Keig et al., 2015).

According to resource dependence theory (Pfeffer & Salancik, 1978), board diversity – including factors such as gender, age, background and nationality, as well as varied knowledge and skills – brings a heterogeneous perspective to decision-making, making it more creative, innovative and effective (Adams et al., 2015; Katmon et al., 2019; Wernerfelt, 1984). Board diversity enhances corporate governance by providing access to a broader range of knowledge and skills essential for tackling challenges and seizing opportunities (Erhardt et al., 2003; Liao et al., 2015; Post et al., 2011; Wellalage et al., 2018). J. Li et al. (2019) contend that diversity improves corporate governance and the quality of strategic decisions, as a greater concentration of competencies enables board members to actively contribute to corporate strategy (Post et al., 2011) and effectively monitor organisational performance across social domains (Harjoto et al., 2015). Similarly, Katmon et al. (2019) propose that board diversity encourages the adoption of sustainable strategies, thereby boosting corporate performance (Harjoto & Rossi, 2019). Diversity is thus linked to increased concern for external corporate issues, such as environmental and social responsibility concerns (Cambrea et al., 2023; Klineberg et al., 1998; Liu et al., 2020). Firms with more diverse boards are likely to have a wider range of perspectives and a broader knowledge base for decision-making on social responsibility matters (Gallego-Álvarez & Rodriguez-Dominguez, 2025). Consequently, acquiring and developing knowledge and skills may help diminish the likelihood of engaging in socially irresponsible actions – either actively or passively – since a higher level of skill and understanding fosters greater awareness of the importance of preventing and addressing situations that could harm society.

Stakeholder management theory (Freeman, 1984) contends that stakeholder participation in business decisions is both an ethical obligation and a strategic resource that enhances the firm’s competitive advantage (Vurro & Perrini, 2011). Diversity improves board decision-making by better recognising and considering the needs of different stakeholders and by helping to resolve conflicts stemming from conflicting interests (Gallego-Álvarez & Rodriguez-Dominguez, 2025; Harjoto et al., 2015). In addition, recognising the importance of stakeholders in decision-making establishes a framework that seeks to balance the interests of controlling shareholders, minority shareholders, and other stakeholders. Board diversity also fosters increased sensitivity to environmental, social and ethical issues (Beji et al., 2021; Hafsi & Turgut, 2013; Islam et al., 2022). This ethical approach materialises in greater attention to social and environmental concerns, along with a more democratic approach to decision-making (Gallego-Álvarez & Rodriguez-Dominguez, 2025; Pucheta-Martínez & Gallego-Álvarez, 2019). Such qualities on the board strengthen the ethical, environmental and social responsibility ethos of organisations, especially those that adopt a stakeholder-oriented perspective (Geletkanycz & Black, 2001; O’Neill et al., 1989; Post et al., 2011). Furthermore, board diversity not only motivates managers and dominant owners to maintain high ethical standards and to oversee firm discipline (Cacioppe et al., 2008) but also enhances the firm’s capacity to plan and execute sustainable initiatives, thereby increasing stakeholder awareness and engagement in fostering an ethical corporate culture and improving stakeholder reporting quality. Consequently, board diversity fosters an appreciation of the ethical and social ramifications of business decisions, promotes greater corporate ethics and responsibility, and diminishes the risk of socially irresponsible behaviour.

According to agency theory (Jensen & Meckling, 1976), board diversity offers a wide range of skills, experiences and knowledge that help reduce agency conflicts by enhancing oversight and decision-making for the benefit of shareholders and companies alike (Mohy-ud-Din, 2023). A diverse board becomes a crucial element in corporate governance by providing effective oversight to minimise irresponsibility, as it encourages board discussion and improves the quality of governance in the firm (Adams & Ferreira, 2009; Gul et al., 2011). This increased contestability and greater control over internal actors will lower incentives for irresponsibility while strengthening corporate reputation – a vital asset for social approval and firm value (Fombrun & Rindova, 1996; Fombrun & Shanley, 1990; Nardella et al., 2023; Pfarrer et al., 2010).

Furthermore, board diversity may decrease incentives to participate in CSI episodes because of the costs linked to corporate hypocrisy (Z. Chen et al., 2020; Nardella et al., 2020; Shim & Yang, 2016; Wagner et al., 2009). From this view, increasing board diversity positively influences corporate reputation (Bear et al., 2010; Brammer et al., 2009; Cucari et al., 2018) and firm legitimacy (Srikant et al., 2021). However, maintaining reputation and legitimacy requires consistent behaviour between business choices and societal expectations (Gallego-Álvarez & Rodriguez-Dominguez, 2025; Nurhayati et al., 2016). Cohesive performance, achieved through appointing a diverse board of directors, limits the scope for socially irresponsible decisions (Arfken et al., 2004; P. Chen & Dagestani, 2023). Corporate hypocrisy – that is, the inconsistency involved in using diversity while engaging in unethical actions (Baselga-Pascual et al., 2018; Bear et al., 2010; Brammer et al., 2009; P. Chen & Dagestani, 2023; Gallego-Álvarez & Rodriguez-Dominguez, 2025; Mallin & Michelon, 2011) – may thus lead to more severe reputational penalties than those faced by firms failing to meet stakeholder expectations, which in turn reduces incentives to undertake socially irresponsible actions (Bae & Cameron, 2006; Fleitas-Castillo et al., 2024). Based on these different arguments, we formulate our hypothesis:

H1. Board member diversity reduces corporate social irresponsibility.

Research Design

Sample

Our sample includes 107 non-financial firms listed in Spain from the OSIRIS (Bureau Van Dijk) database, covering the period from 2014 to 2022. The selection procedure resulted in 765 firm-year observations used in the fundamental regression analyses. The sample represents 97% of the total market capitalisation of the Spanish market in 2022. To mitigate the influence of outliers in the continuous variables, we winsorised at the 1st and 99th percentiles.

Variables and Research Model

CSI

Dyck et al. (2010) demonstrate that identifying CSI actions is not contingent on conventional corporate governance entities such as investors, regulators and auditors. Instead, it is predominantly the media that possess sufficient economic and reputational incentives to actively uncover CSI actions, particularly in major cases. In this context, the media assume a pivotal role in determining whether a detrimental act captures widespread attention (Mena et al., 2016). Consequently, the extent to which an issue resonates and is prioritised by the media significantly influences stakeholder perception of a company’s CSR or CSI (Clark et al., 2022). Furthermore, compared to other measures of unethical firm performance based on indices that combine various episodes of social irresponsibility, using news items enables the identification of the specific source of each controversy. Consistent with prior research (Berkan et al., 2021; Conyon & He, 2016; Köbel et al., 2017; Nardella et al., 2020), we use the database of Fleitas-Castillo et al. (2024), which collects news stories showing episodes of CSI. Specifically, using the FACTIVA database, the authors collect news related to crime, fraud and corruption (covering financial, social, environmental or governance issues) published in leading national and international media such as the Financial Times, Reuters, the Wall Street Journal, Dow Jones, Business Wire, Expansión, El Economista and Cinco Días. Accordingly, we define the variable IRRE as the natural logarithm of one plus the number of news items associated with CSI events for each firm and year.¹

Board Diversity

Consistent with the previous literature (An, 2022; Asad et al., 2023; Hoang et al., 2017; Y. X. Li & He, 2023; Pandey et al., 2023; Yang & Xue, 2023), board diversity is analysed through the BLAU variable, defined as the sum of the different Blau indices (Blau, 1977) for each of the board members’ characteristics (age, gender, education, tenure and nationality).

B l a u i n d e x = 1 - \sum_{i = 1}^{k} P_{i}^{2}

The Blau index is thus used to measure diversity in terms of the variety of board member characteristics since it considers their distribution among the individuals composing the board in order to assess how much variation exists in these characteristics within the board. We might therefore obtain a quantitative measure of diversity, indicating the proportion of board members who display different characteristics. The five Blau indices are calculated as follows:

BLAU_AGE: Blau index for age diversity (age is classified into four age categories).

BLAU_GENDER: Blau index for gender diversity (gender is 1 if the board member is female, and 0 otherwise).

BLAU_EDU: Blau index for educational area diversity (educational areas are classified into seven categories).

BLAU_TENURE: Blau index for tenure diversity (tenure is classified into two categories: 1 = <3 years’ tenure, 2 = >3 years’ tenure).

BLAU_NATION: Blau index for nationality diversity (nationality is classified into 45 categories, one for each of the countries of origin of the board members surveyed).

where P_i is the percentage of board members in category i for the given attribute, and k is the number of categories in each attribute. The Blau index of each attribute is then normalised with its theoretical maximum value (k − 1)/k. The total diversity index is obtained by adding the standardised Blau indices of the five attributes as shown:

\begin{array}{l} B L A U = B L A U_A G E + B L A U_G E N D E R \\ + B L A U_E D U + B L A U_T E N U R E \\ + B L A U_N A T I O N \end{array}

A higher Blau index suggests greater diversity in the characteristics assessed.

Control Variables

The remaining variables comprise distinct characteristics previously examined in research, which are expected to influence corporate social behaviours. These are: SIZE, measured as the natural logarithm of assets, given that larger companies are more prone to participating in CSI activities (Godfrey et al., 2024; Markoczy et al., 2023); BOARD, measured as the natural logarithm of the total number of directors, could influence the company’s social conduct, with the potential for the relationship to exhibit a negative direction (Coles et al., 2008; Kock et al., 2012; Zubeltzu-Jaka et al., 2020); DEBT, defined as the sum of short and long-term debt divided by total assets, with the relationship between debt and CSI being unclear, since part of the literature shows greater incentives to engage in socially ethical behaviour in more leveraged firms (Gong et al., 2021; Tan et al., 2020; Xu et al., 2020), although higher levels of debt will increase financial risk – and thus short-term earnings pressure – and may increase irresponsibility (Köbel et al., 2017); DIVI, is the dividend payout ratio, measured as the ratio of total dividends to net income before extraordinary items, where we anticipate negative coefficients since a company with greater resources to distribute dividends is better positioned to prevent CSI episodes (Godfrey et al., 2024); PRESIDUAL, measured as a dummy variable equal to 1 if the CEO is the chair of the board, and 0 otherwise, showing that CEO duality can lead to negligence in involvement in social or community activities (Khan et al., 2013), we assume a positive impact on irresponsibility; ROA, return on assets, calculated as earnings before interest, taxes, depreciation and amortisation divided by total assets, with firms expected to decrease irresponsibility the more profitable they are (Gao & Yang, 2021; Markoczy et al., 2023). We therefore control for the power of dominant owners through the variable VOTING, calculated as the voting rights of the companies’ largest shareholders. Earlier research has shown inconclusive results vis-à-vis how the presence of large shareholders impacts firms’ social behaviour (Barnea & Rubin, 2010; Bona Sánchez et al., 2023; Dam & Scholtens, 2013; Ducassy & Montandrau, 2015; López-Iturriaga & López-de-Foronda, 2011; Oh et al., 2017; Pucheta-Martínez & López-Zamora, 2018). Furthermore, we took into account the company’s socially responsible behaviour, and we considered the ESG variable, defined as the natural logarithm of the ESG score by Moody’s, taken from the Orbis database. We therefore anticipate that companies demonstrating a higher level of socially responsible behaviour are less likely to be involved in CSI episodes, in line with the findings of Markoczy et al. (2023). Finally, industry and year dummy variables were incorporated. Detailed definitions for all variables can be found in Appendix 1.

Baseline Model

Equation (1) represents the baseline estimation model, where δ represents the sector effect, ϴ represents the time effect, and ε represents the error term:

\begin{array}{l} I R R E_{i, t} = α + β_{1} B L A U_{i, t} + β_{2} S I Z E_{i, t} \\ + β_{3} B O A R D_{i, t} + β_{4} D E B T_{i, t} \\ + β_{5} V O T I N G_{i, t} + β_{6} E S G_{i, t} \\ + β_{7} D I V I_{i, t} + β_{8} P R E S I D U A L_{i, t} + δ_{j} + θ_{t} + ε_{i, t} \end{array}

(1)

Results

Distribution of the Sample

To start the analysis, we examine how the main variables evolve. In Figure 1, we observe a notable increase in diversity in Blau’s index of board diversity in Spain over the period from 2014 to 2022. This pattern reflects a significant change in the composition of Spanish company boards, showing a growing commitment to inclusion and equity. The positive evolution of diversity in these areas highlights the recognition of the importance of diverse perspectives in strategic decision-making and the drive towards greater representativeness in senior corporate positions.

Figure 1.

Blau index of board of director diversity.

Figure 2 illustrates the percentage of firms involved in at least one episode of CSI. An increasing trend is observed, since while in 2014, one in five companies committed at least one unethical act, this proportion increased to approximately one in three in 2022. Furthermore, the data show an increase in socially irresponsible companies since the emergence of the COVID crisis, which is in line with the arguments put forward by Karpoff (2021).

Figure 2.

Firms involved in at least one episode of corporate social irresponsibility (%).

Finally, Figure 3 reveals an irregular pattern in the average number of episodes of CSI by the companies in the sample. However, as previously mentioned, from 2020 onwards, a similar increase is evident in the number of companies exhibiting unethical behaviour.

Figure 3.

Mean number of episodes of corporate social irresponsibility.

Descriptive Statistics

Descriptive statistics for all the variables are presented in Table 1. Panel A summarises the descriptive statistics of the variables used in the estimation models. Meanwhile, Panel B shows the correlation matrix of all the variables. Given that a low correlation is observed among the main variables of interest, multicollinearity is unlikely to be the cause of our regression results. This assumption is supported by the low VIF values, as confirmed by the previous literature (Studenmund, 1997).

Table 1.

Descriptive Statistics.

Panel A. Descriptive statistics.

	M	Mdn	SD	1Q	3Q
IRRE	0.361	0.000	0.722	0.000	0.693
BLAU	2.849	2.904	3.347	2.402	0.658
SIZE	14.114	14.151	2.116	12.540	15.444
BOARD	2.271	2.302	0.325	2.079	2.484
DEBT	67.653	66.958	28.486	50.271	81.711
VOTING	35.117	29.000	23.752	15.690	54.320
ESG	3.625	3.583	0.358	3.332	3.931
DIVI	1.745	0.442	3.711	0.000	2.083
PRESIDUAL	0.509	1.000	0.500	0.000	1.000
ROA	5.698	5.028	11.653	2.343	8.513

Panel B. Correlation matrix.

	IRRE	BLAU	SIZE	BOARD	DEBT	VOTING	ESG	DIVI	PRESIDUAL	VIF
BLAU	0.068*									1.21
SIZE	0.550 ***	0.350***								2.89
BOARD	0.356***	0.293***	0.668***							2.08
DEBT	0.182 ***	−0.029	0.046	−0.038						1.08
VOTING	−0.141***	0.062*	−0.134***	−0.264***	−0.0029					1.13
ESG	0.413***	0.312***	0.836***	0.646***	−0.0176	−0.114***				2.57
DIVI	−0.033	0.003	−0.048	0.039	−0.208***	0.108***	0.026			1.34
PRESIDUAL	0.112***	−0.159***	0.004	0.076**	0.005	−0.122***	0.045	0.101***		1.07
ROA	−0.046	−0.058	−0.056	−0.023	−0.198***	0.011	−0.035	0.455***	0.087**	1.30

Panel C. Firms with high and low board diversity.

	Firms with high board diversity			Firms with low board diversity
	M	Mdn	SD	M	Mdn	SD	t-Student
IRRE	0.387	0.000	0.740	0.335	0.000	0.704	0.999
SIZE	14.641	14.731	2.070	13.585	13.455	2.031	7.155***
BOARD	2.321	2.397	0.281	2.220	2.302	0.356	4.360***
DEBT	67.408	66.434	25.609	67.899	67.818	31.136	−0.239
VOTING	35.890	28.770	24.108	34.342	29.010	23.396	0.904
ESG	3.701	3.637	0.351	3.549	3.496	0.349	5.990***
DIVI	1.668	0.598	2.757	1.822	0.083	4.470	−0.573
PRESIDUAL	0.432	0.000	0.246	0.587	1.000	0.493	−4.333***
ROA	4.928	5.226	8.878	6.471	4.888	13.859	−1.841*

,** and *** indicate significance at 10%, 5% and 1%, respectively.

In addition, a mean difference analysis was conducted to initially study the relationship between board diversity and CSI. Companies were divided into subsamples according to whether they had a diversity index above or below the median (Panel C, Table 1). Data show that companies with greater board diversity are larger, have more board seats, have a higher ESG score and are less profitable and have fewer CEOs with a dual role. However, there are no significant differences in terms of social irresponsibility, dividend payouts, indebtedness and voting concentration.

Board Diversity and CSI

Regression Analysis

We first analyse the likelihood of an unethical event since the median value of the CSI variable is zero. Therefore, we define the variable D_IRRE as a dummy variable that takes the value 1 if at least one news item related to a CSI event has been published, and 0 otherwise. We then run a Probit model and an ordinary least square (OLS) with fixed effects to estimate the relationship between board diversity and CSI, which are presented in Models 1 and 2 (Table 2). Accordingly, as set out in the hypothesis, the impact of board diversity on CSI is negative and significant.

Table 2.

Board Diversity and Irresponsibility.

Dependent variable	Model 1	Model 2	Model 3	Model 4	Model 5
	D_IRRE	IRRE
	Probit	OLS	2SLS	Heckman	GMM
BLAU	−0.310*** (–2.99)	−0.116*** (–3.32)	−0.789*** (–3.01)	−0.357*** (–3.73)	−0.156*** (–3.94)
SIZE	0.494*** (7.92)	0.179*** (8.85)	0.313*** (4.79)	0.250*** (7.89)	0.123*** (10.47)
BOARD	0.334(1.24)	0.101(1.08)	0.136(0.47)	0.186(1.14)	0.031(0.44)
DEBT	0.007*** (2.91)	0.003*** (4.00)	0.002* (1.78)	0.002** (2.01)	0.003*** (7.11)
VOTING	−0.003(–1.29)	−0.003*** (–3.17)	−0.001(–0.60)	−0.002(–1.35)	−0.002** (–2.32)
ESG	−0.237(–0.78)	−0.310** (–2.57)	−0.304(–1.02)	−0.411** (–2.31)	−0.015*** (–4.09)
DIVI	0.009(0.41)	0.011* (1.80)	0.030** (2.33)	0.001(0.10)	0.006(1.07)
PRESIDUAL	0.286** (2.33)	0.099** (2.36)	0.076(0.62)	0.136** (2.03)	0.027(0.80)
ROA	−0.009(–0.14)	−0.001(–0.59)	−0.010** (–2.43)	−0.002(–0.68)	−0.020(–0.19)
CONSTANT	−7.531*** (–9.70)	−1.342(–4.86)	−1.34* (–1.94)	−2.107*** (–4.93)	−1.415*** (–4.28)
Industry effect	Yes	Yes	Yes	Yes	Yes
Year effect	Yes	Yes	Yes	Yes	Yes
Chi ²	283.28***			192.22***
F-test		22.87***	5.52***		322.23***
R-squared	0.327	0.426	0.33
LM test			19.12*
Hansen Test			1.67		69.06
Mills ratio λ				−0.248(–1.12)
M2					−1.04
Z1					67.83***
Z2					17.93***
Z3					36.78***
No. of observations	765	765	765	765	765

,** and *** indicate significance at 10%, 5% and 1%, respectively. Standard errors clustered by firms.

As for the control variables, the results indicate that firm size, level of debt and dividends have a positive impact on the occurrence of CSI episodes. In contrast, the level of voting rights of the main shareholder and socially responsible shares hurts the unethical behaviour of companies. Finally, board size, the dual role of the chair and company profitability have no statistically significant impact on the occurrence of CSI episodes.

Endogeneity

Endogeneity is a potential problem because director appointments are not randomly determined. Consequently, we use different estimation methods to address potential endogeneity. First, we use an instrumental variables approach – specifically, two-stage least squares (2SLS). To select the instrumental variable, we follow the criterion that it should correlate with board diversity but not with CSI. In accordance with Y. X. Li and He (2023), Mather et al. (2021) and Yang and Xue (2023), we use the average board diversity of other firms in the same industry for each year analysed as an instrument (I.BLAU). The rationale for using this instrument is that firms in the same industry may exhibit similar behaviour and be affected by herd psychology when defining board composition. Furthermore, there are no studies showing that the diversity of other firms in the same industry can directly influence the unethical behaviour of firms. Second, we use Heckman’s two-stage correction model to mitigate sample-selection bias. In the first stage, we estimate the determinants of diversity using a probit model, that is, we model the probability that a firm has diversity above the industry average as a function of the instrumental variable defined above, estimating the lambda coefficient or non-selection risk. In the second stage, we use our main regression model and include the lambda coefficient. The lambda coefficient describes the covariance between the unobserved factors in the selection equation and the outcome equation. A non-significant Mills ratio, therefore, indicates there is no issue of sample-selection bias. Finally, we employ the Generalised Method of Moments (GMM) developed by Blundell and Bond (1998). This technique allows us to address potential endogeneity problems arising from the simultaneity between board diversity and unaccountability, as well as from uncontrolled individual heterogeneity. This creates problems arising from the omission of unobservable firm characteristics, which could affect the appointment of directors. For example, appointments could be influenced by exogenous characteristics that in turn influence firms’ irresponsibility, such that the association between board diversity and irresponsibility might be spurious.

Table 2 (Models 3–5) shows the results of the estimations of the impact of board diversity on the occurrence of CSI episodes using 2SLS, Heckman and GMM, respectively, with similar results. The results support the existence of a negative relationship between board diversity and the number of CSI episodes. Consequently, although it is not possible to completely rule out all endogeneity problems, the results of the different methods used do confirm the main findings and indicate that the results are not determined by applying a different estimation method.

Sensitivity Analysis

In addition, to improve our understanding of the relationship between board diversity and the CSI, we focused on analysing the effect of board diversity by distinguishing news items related to crime from those related to corruption. Therefore, we define the variables D_CRIME and D_CORRUP as dummy variables that take the value 1 if at least one news item related to a CSI event involving a crime or an episode of corruption has been published, and 0 otherwise, respectively. Furthermore, we define the variables CRIME and CORRUP as the natural logarithm of one plus the number of news items associated with CSI events for each firm and year related to a crime or corrupt activity, respectively. The results presented in Table 3 (Models 6–9) align with those obtained previously, indicating that board diversity reduces both crime-related incidents and cases of corruption.

Table 3.

Board Diversity and Irresponsibility – Sensitivity Analysis.

Dependent variable	Model 6	Model 7	Model 8	Model 9
	D_CRIME	D_CORRUP	CRIME	CORRUP
	Probit		OLS
BLAU	−0.361*** (–3.00)	−0.350*** (–1.82)	−0.121*** (–3.59)	−0.031* (–1.78)
SIZE	0.405*** (5.62)	0.577*** (4.39)	0.174*** (8.87)	0.056** (2.42)
BOARD	0.537*	0.342	0.092	0.027
	(1.77)	(0.59)	(1.02)	(0.54)
DEBT	0.004(1.44)	0.004(0.97)	0.003*** (3.90)	0.002* (1.83)
VOTING	−0.005* (–1.88)	−0.001(–0.30)	−0.002*** (–3.08)	−0.002(–0.52)
ESG	−0.367(–1.00)	−0.403(–0.70)	−0.328*** (–2.80)	−0.121** (–2.14)
DIVI	0.022(0.91)	0.040(0.73)	0.009(1.57)	0.003(0.93)
PRESIDUAL	0.250* (1.82)	0.165(0.70)	0.098** (2.40)	0.035* (1.66)
ROA	−0.006(–0.81)	−0.038** (–2.94)	−0.006(–0.33)	−0.002*** (–2.79)
CONSTANT	−6.322*** (–6.79)	−9.083*** (–4.75)	−1.186*** (–4.43)	−0.269** (–2.13)
Industry effect	Yes	Yes	Yes	Yes
Year effect	Yes	Yes	Yes	Yes
Chi ²	336.58***	107.11***
F-test			20.17***	6.43***
R-squared	0.399	0.309	0.403	0.121
No. of observations	765	765	765	765

,** and *** indicate significance at 10%, 5% and 1%, respectively. Standard errors clustered by firms.

Further Analysis

To provide a more detailed understanding of how each aspect of diversity influences the CSI, Table 4 assesses the effect of diversity in age, gender, education, tenure and nationality separately. Consequently, apart from gender diversity, all other types of diversity have a significant negative effect on the unethical performance of firms. This result may suggest that dominant managers and owners could use gender diversity as a symbolic strategy to mitigate the negative impact of CSI episodes (J. Li et al., 2019). For example, the firm might leverage gender diversity – due to its higher visibility and social significance – as a tool to enhance its image and stakeholder trust, leading stakeholders to react less negatively to unethical behaviour (Nirino et al., 2021). Gender diversity might also serve as moral capital that safeguards the firm during irresponsible acts, as it provides the organisation with the ‘benefit of the doubt’ regarding its intentions when faced with unethical conduct (Fleitas-Castillo et al., 2024; Godfrey, 2005; Klein & Dawar, 2004; J. Li et al., 2019; Shiu & Yang, 2017). Therefore, gender diversity on boards could act as an ‘insurance policy’, reducing the reputational costs associated with socially irresponsible behaviour.

Table 4.

Board Diversity and Irresponsibility – Further Analysis.

	Model 10	Model 11	Model 12	Model 13	Model 14	Model 15	Model 16	Model 17	Model 18	Model 19
Dependent variable	D_IRRE					IRRE
BLAU_AGE	−1.878*** (–4.73)					−0.562*** (–4.69)
BLAU_GENDER		0.254** (2.09)					0.281(1.66)
BLAU_EDU			−0.939* (–1.71)					−0.538** (–2.1)
BLAU_TENURE				−0.728* (–1.66)					−0.291* (–1.84)
BLAU_NATION					−0.444* (–1.65)					−0.184* (–1.85)
SIZE	0.367*** (5.42)	0.480*** (6.91)	0.481*** (7.72)	0.377*** (5.42)	0.498*** (10.85)	0.176*** (8.87)	0.248*** (11.39)	0.207*** (6.23)	0.240*** (11.4)	0.240*** (12.04)
BOARD	0.616** (2.05)	0.347(1.19)	0.233(0.84)	0.403(1.35)	0.170(0.70)	0.081(0.88)	0.042(0.42)	0.079(0.61)	0.061(0.61)	0.069(0.75)
DEBT	0.008*** (2.72)	0.007*** (2.59)	0.006** (2.50)	0.005* (1.64)	0.007*** (3.77)	0.003*** (4.36)	0.003*** (4.40)	0.002* (1.72)	0.003*** (3.66)	0.003*** (4.71)
VOTING	−0.002(–0.78)	−0.003** (–1.13)	−0.003(–1.21)	−0.008** (–2.43)	−0.001(–0.45)	−0.001* (–1.69)	−0.001(–0.85)	−0.001(–1.37)	−0.008(–0.81)	−0.001(–1.41)
ESG	−0.454(–1.25)	−0.694* (–1.82)	−0.352(–1.13)	−0.294(–0.81)	−0.275(–1.18)	−0.394*** (–3.29)	−0.441*** (–3.50)	−0.230(–1.15)	−0.382*** (–3.17)	−0.325*** (–2.88)
DIVI	0.023(0.96)	0.022(0.19)	0.010(0.46)	0.022(0.94)	0.011(0.39)	0.009(1.49)	0.007(0.94)	0.004(0.63)	0.001(0.22)	0.007(1.20)
PRESIDUAL	0.369*** (2.73)	0.471*** (3.53)	0.381*** (3.16)	0.346*** (2.60)	0.404*** (3.71)	0.113*** (2.74)	0.181*** (3.86)	0.136** (2.41)	0.162*** (3.45)	0.137*** (3.04)
ROA	−0.002(–0.38)	−0.002(–0.36)	−0.001(–0.18)	−0.008(–0.11)	−0.001(–0.10)	−0.001(–0.73)	−0.009(–0.45)	−0.004** (–2.43)	−0.002(–1.12)	−0.009(–0.48)
CONSTANT	−6.017*** (–6.35)	−6.802*** (–7.97)	−7.191*** (–8.79)	−6.660*** (–7.22)	−8.926*** (–6.87)	−1.132*** (–4.45)	−1.826*** (–6.57)	−1.962*** (–3.83)	−2.028*** (–7.03)	−2.127*** (–8.07)
Industry effect	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Year effect	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Wald Chi ²	355.93***	275.11***	280.84***	342.93***	253.36***	23.21***	22.90***	34.38***	34.53***	24.17***
F-test
R-squared	0.411	0.356	0.325	0.396	0.328	0.459	0.354	0.354	0.355	0.368
No. of observations	765	765	765	765	765	765	765	765	765	765

,** and *** indicate significance at 10%, 5% and 1%, respectively. Standard errors clustered by firms.

Discussion and Conclusion

What role the board might play in firms’ unethical behaviour – and in particular how diversity might affect CSI – remains an unanswered question. Previous research has focused on studying gender diversity as a driver of socially irresponsible performance (Fleitas-Castillo et al., 2024; Godfrey et al., 2024; Jain & Zaman, 2020). However, previous studies have not considered diversity beyond the question of gender. From a multi-theoretical approach, our study aims to fill this gap by investigating board diversity through different aspects such as age, gender, education, tenure and nationality.

Our results indicate that diversity reduces unethical performance in firms. This result provides support for arguments that diversity is a source of perspectives, experience and knowledge. Moreover, diversity is shown to be an instrument that encourages firms to address stakeholder demands and that reduces manager and dominant owner opportunistic performance. Moreover, diversity reduces the benefits of social irresponsibility, since the lack of consistency in corporate performance – i.e., corporate hypocrisy – means that firms with more diverse boards face more severe punishment for unethical behaviour.

From a theoretical point of view, our study broadens the scope of research on board composition as a determinant of the social performance of firms and, in particular, of an aspect which, to date, has been overlooked – social irresponsibility. In this sense, we approach the CSI–diversity relationship from different theoretical perspectives, showing that in different scenarios diversity can have a differential impact on the unethical performance of firms.

In addition, our research has significant implications for managers and dominant owners, since incorporating board diversity emerges as an effective instrument that can constrain CSI practices. Moreover, diversity is an advantage for directors who are sensitive to threats to their reputational capital (Fang & Yasuda, 2009; Gilson, 1990; Huang & Teklay, 2021). By reducing episodes of CSI, directors consolidate their reputation as trusted overseers, which in turn protects their current and potential appointments. In this regard, our results suggest that policymakers and market regulators should encourage greater diversity on boards in order to reduce behaviour that can harm a firm’s stakeholders and thus its long-term sustainability. This concern for encouraging diversity on boards of directors may be particularly relevant in a setting where the use of artificial intelligence (AI) may involve the use of algorithms that contain biases in the appointment of directors, leading to a more homogeneous composition of boards of directors (Bauwens & Batistič, 2025).

The study has some limitations, especially with regard to the complexity involved in measuring episodes of CSI, since certain practices may go unnoticed despite media attention. Furthermore, although we have analysed various types of diversity, we have not considered other factors that may influence the board’s performance, such as religion or marital status. Nevertheless, the results do provide a solid basis for future research on how diversity affects firms’ irresponsible behaviour. Future enquiry might explore diversity by considering aspects of the nature of controlling owners. It might also be interesting to further examine the effect of board diversity on the social irresponsibility of firms according to sectoral characteristics, assessing possible significant disparities between, for example, technology and manufacturing firms, among others. Furthermore, we could examine the impact of board diversity by considering pyramidal structures and political connections as factors that might undermine stakeholder discipline over management and controlling owners’ actions. Finally, the results of further analysis open the door to focus our attention on the strength of stakeholder demands on socially irresponsible performance, for example, by analysing the impact of media attention on the effect of diversity on firms’ social performance.

Footnotes

Appendix 1

Table 5.

Definitions of Variables.

Measure of irresponsibility
IRRE	Natural logarithm of one plus the number of news items related to CSI events for each company and year. Specifically, through the FACTIVA database, we collected news related to crime, fraud and corruption (related to financial, social, environmental or governance issues) published in the main national and international media (Financial Times, Reuters, the Wall Street Journal, Dow Jones, Business Wire, Expansion, El Economista, Cinco Días).
D_IRRE	Dummy variable that takes the value 1 if at least one news item related to a CSI event has been published, and 0 otherwise.
CRIME	Natural logarithm of one plus the number of news items related to CSI events related to crime for each company and year. Specifically, through the FACTIVA database, we collected news related to crime, fraud and corruption (related to financial, social, environmental or governance issues) published in the main national and international media (Financial Times, Reuters, the Wall Street Journal, Dow Jones, Business Wire, Expansion, El Economista, Cinco Días).
D_CRIME	Dummy variable that takes the value 1 if at least one news item related to a CSI event related to crime has been published, and 0 otherwise.
CORRUP	Natural logarithm of one plus the number of news items related to CSI events related to corruption for each company and year. Specifically, through the FACTIVA database, we collected news related to crime, fraud and corruption (related to financial, social, environmental or governance issues) published in the main national and international media (Financial Times, Reuters, the Wall Street Journal, Dow Jones, Business Wire, Expansion, El Economista, Cinco Días).
D_CORRUP	Dummy variable that takes the value 1 if at least one news item related to a CSI event related to corruption has been published, and 0 otherwise.
Measure of board diversity
BLAU	The sum of the different Blau indices (Blau, 1977) for each of the board members’ characteristics: age, gender, education, tenure and nationality $B l a u i n d e x = 1 - \sum_{i = 1}^{k} P_{i}^{2}$ The Blau index is thus used to measure diversity in terms of the variety of characteristics among board members, since it considers their distribution to assess the extent of variation in these characteristics within the board. This allows us to obtain a quantitative measure of diversity, indicating the proportion of board members with different characteristics. The five Blau indices are calculated as follows: BLAU_AGE: Blau index for age diversity, where age is classified into four categories: 1 = ⩽45 years, 2 = 46–50 years, 3 = 51–55 years, and 4 = ⩾56 years. BLAU_GENDER: Blau index for gender diversity (gender is 1 if the board member is female, and 0 otherwise). BLAU_EDU: Blau index for educational background diversity, where educational areas are classified into seven categories: 1 = Economics-related degrees, 2 = Law-related degrees, 3 = Engineering-related degrees, 4 = Health sciences-related degrees, 5 = Other degrees, 6 = Dual degree in humanities and 7 = Dual degree in sciences. BLAU_TENURE: Blau index for tenure diversity, where tenure is classified into two categories: 1 = ⩽3 years, 2 = >3 years. BLAU_NATION: Blau index for nationality diversity (nationality is classified into 45 distinct categories, corresponding to the countries of origin of the board members surveyed). where P_i represents the percentage of board members in category i for the given attribute. k denotes the number of categories within each attribute. The Blau index for each attribute is then normalised with its theoretical maximum value (k − 1)/k. The total diversity index is obtained by adding the standardised Blau indices of the five attributes as shown below: BLAU = BLAU_AGE + BLAU_GENDER + BLAU_EDU + BLAU_TENURE + BLAU_NATION
Control variables
SIZE	The natural logarithm of total assets.
BOARD	The natural logarithm of the total number of directors.
DEBT	The sum of short- and long-term debt divided by total assets.
VOTING	The voting rights of the largest shareholders.
ESG	Natural logarithm of ESG Score by Moody’s, collected from the Orbis database.
DIVI	Payout ratio measured as the ratio of total dividends to net income before extraordinary items.
PRESIDUAL	Dummy variable that equals one if the CEO is the chair of the board, and 0 otherwise.
ROA	Return on assets, computed as earnings before interest, taxes, depreciation and amortisation divided by total assets.
Instrumental variable
I.BLAU	The average board diversity of other firms in the same industry for each year analysed.

Acknowledgements

The authors would like to thank the editor-in-chief, associate editor and reviewers for their comments and suggestions, which have greatly enriched our research. Any errors are the responsibility of the authors.

ORCID iDs

Jerónimo Pérez Alemán

Domingo Javier Santana Martín

Funding

The authors disclosed receipt of the following financial support for the research, authorship and/or publication of this article: This study was supported by the Ministerio de Ciencia e Innovación Project PID2021-124053OB-I00. Research funded by the University of Las Palmas de Gran Canaria.

Declaration of conflicting interests

The authors declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.

Data availability statement

Data will be made available on request.

Notes

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