Strategic obfuscation: How firms respond to disclosure regulations for women on boards

The Institute of Economics will hold a webinar meeting as part of its Seminar Series on Tuesday, April 20, 2021: Sarah Kaplan from the Rotman School of Management of the University of Toronto will present the paper "Strategic obfuscation: how firms respond to disclosure regulations for women on boards".

Abstract:

Many environmental and social regulations emphasize disclosures as a means to hold organizations accountable for their progress. Strategically, organizations may want to comply with the regulations or not. To mitigate the negative impacts of non-compliance, organizations may use strategic obfuscation tactics in their disclosures. This paper investigates how organizations make disclosures about social issues and whether their disclosure behavior is associated with change. The authors address this question by examining disclosures that respond to a mandatory “comply-or-explain” regulation for women’s representation on boards and executive levels in which organizations must disclose their practices and targets or provide explanations for not doing so. The authors find that disclosures from organizations that do not comply substantively are more obfuscating in their language. Further, these organizations with harder-to-read disclosures do not significantly improve women’s representation on their boards in the ensuing years. Second, we explore how the legal liability of transparency shapes which practices are adopted. The authors find that organizations using legal templates in their disclosures are associated with adopting a written diversity policy for selecting women candidates for their boards but not with the adoption of more binding constraints such as targets. This paper contributes to the literatures on decoupling and diversity by suggesting that external pressures solely based on transparency are not sufficient to improve on the status quo.

All interested participants are welcome to join online at the following link. External participants need to contact the organisers via email to grant access to the seminar.