Corporate misconduct includes practices such as fraud, accounting manipulation, corruption, environmental violations, and serious breaches of labor laws.
“These violations can lead to massive financial losses, catastrophic environmental disasters, and even loss of human life,” says associate professor Muhammad Azeem Qureshi at Oslo BusinessSchool at OsloMet.
“The severe consequences show why we need research on how to reduce such misconduct,” he adds.
Fewer corporate penalties
Azeem has previously shown that companies with a higher proportion of women on their boards are better at complying with sustainability reporting requirements. These reports disclose how companies impact the environment and social conditions, as well as their internal governance.
Other studies have found that board size and composition can influence how ethically a company behaves.
“That’s why we wanted to examine whether having more women on the boards can reduce corporate misconduct,” says Azeem.
The answer was clear:
“Companies with more female board members receive fewer fines and penalties for misconduct.”
Women as sentry eyes
The study is based on U.S. companies, but Azeem believes the insights are highly relevant for other countries as well.
“Research shows that women tend to be more ethically conscious and caring. They place greater emphasis than men on the interests of the broader community.,” he explains.
These qualities also emerge when women make decisions in the boardroom.
“Women provide ‘sentry eyes’ on boards and pay close attention. They take responsibility for ensuring the company complies with laws and regulations and meets expectations from customers, owners, and other stakeholders.”
Azeemi also points to research showing that men often behave more informally when meeting alone:
“When women are present, the dynamic changesMen become more disciplined and act more professionally.”
When women are present, the dynamic changes. Men become more disciplined and act more professionally– Muhammad Azeem Qureshi
Independence matters
However, not all women contribute equally positively.
“The effect is much stronger when we’re talking about independent board members with no ties to the company,” Azeem explains.
Results are less favorable when women are employees of the company or appointed due to personal relationships.
“In those cases, they’re not as free in their roles.”
Three is the magic number
The study also shows that a certain number of women is needed on the board to influence decisions.
“If there’s only one woman, she often goes along with the majority and gives in to group pressure.
With two women, they start voicing concerns and have some influence,” Azeem says.
But the turning point comes when there are three women on the board. Azeem describes it as the critical mass – the minimum needed to make a difference.
“Only then do they gain real authority and influence. And that’s when we clearly see fewer company violations and fines.”
Taking extra ethical responsibility
The Researchers also found that the effect of women on boards is especially strong in sensitive industries where mistakes can have severe consequences, such as oil and gas.¨
The same applies to sectors under heavy public scrutiny and media pressure.
“In those cases, women take extra ethical responsibility. They don’t settle for meeting minimum requirements. They often go beyond what the law demands and help strengthen the company’s reputation.”
Ethics pays off
Azeem emphasizes that this is vital knowledge for future business leaders.
“For companies that want to reduce the risk of corporate misconduct and strengthen their reputation the recipe is clear: You need at least three independent women on the board.”
He also stresses that taking ethical responsibility does not conflict with profitability.
“Society cares about how large companies behave. Consumers value ethics and accountability. That’s why it pays for companies – both in the short and long term – to actively work on sustainability and social responsibility.”
References
- Muhammad Azeem Qureshi, Ammar Ali Gull,Tanveer Ahsan (2025). «Sentry eyes? Women directors and corporate penalties» (scinecedirect.com). Journal of Cleaner Production .
- Muhammad Azeem Qureshi, Sina Kirkerud, Kim Theresa, Tanveer Ahsan (2019): «The impact of sustainability (environmental, social, and governance) disclosure and board diversity on firm value: The moderating role of industry sensitivity» (onlinelibrary.wiley.com). Business Strategy and the Environment.
