The implication of board diversity on the ‘S’ of ESG: insight from the Italian Listed companies

The study aims to examine the influence of cultural and gender diversity within the Board of Directors (BoD) on the social per-formance of ESG disclosure, with a particular focus on a selected sample of Italian listed companies. The study aims to fill the gap in the literature on the role of BoD diversity on environmental, social and governance (ESG) performance in the Italian cor-porate governance context. Drawing on resource dependence theory and human capital theory, the research examines whether gen-der and cultural diversity within the board positively affect the social dimension of ESG disclosure. This social dimension includes employee relations, human rights and community responsibility. The study uses a quantitative methodology, analysing data from Italian listed companies from 2021 to 2023. Secondary data was collected from annual reports and the Thomson Reuters Ei-kon™ database, focusing on gender diversity (measured by the percentage of female directors) and cultural diversity (measured by the percentage of foreign directors). The social aspect of ESG performance, which serves as the dependent variable, is assessed using social scores provided by the same database. The study uses regression analysis to examine the relationship between board diversity and social ESG performance, controlling for company size, leverage and profitability. The results show that board gender diversity has a positive effect on social performance, supporting the hypothesis that female directors contribute to improved corporate social re-sponsibility. Conversely, the study reveals no notable correlation between cultural diversity and social performance. This indicates that the mere presence of foreign directors does not inherently enhance a firm's social outcomes. Moreover, larger firms tend to ex-hibit superior performance in the social domain, whereas leverage and profitability do not demonstrate a significant impact on ESG performance. This research corroborates the positive impact of gender diversity on social performance, thereby reinforcing the importance of gender quotas and diversity initiatives in corporate governance. However, the study prompts further investigation into the direct impact of cultural diversity, suggesting that additional research is necessary to ascertain the circumstances under which cultural diversity may positively influence social performance. The originality of this contribution lies in its focus on the Italian context, which has hitherto been the subject of limited academic exploration regarding the relationship between BoD diversity and ESG performance. The findings offer valuable insights for policymakers and companies seeking to enhance their social responsibility through board composition.