This study investigates whether more female representation always leads to better ESG performance using European STOXX 600 firms from 2010 to 2023. Across firms, higher female representation in the top management team is associated with better ESG performance. We find limited evidence that this association is non-linear; if anything, the relationship appears to weaken at high levels of representation. Within firms over time, increases in board female representation weaken the positive association between top management female representation and ESG performance, suggesting substitution across governance layers. Overall, our findings suggest that more female representation is not always better for ESG performance.

Top management team, female representation, gender diversity, ESG performance, corporate governance, board–management interaction

The study highlights that adding more women to executive teams does not automatically improve ESG outcomes. Beyond numerical targets, firms should foster meaningful participation and cross-layer coordination between boards and management. Policymakers and organizations must design governance frameworks that empower diverse leadership to drive sustainability strategically and effectively.

Prior research finds that firms with high ESG scores tend to experience strong financial performance and access to finance (Luo and Bhattacharya 2006; Cheng et al. 2014; Eccles et al. 2014; Velte 2017). Therefore, understanding what drives a firm’s ESG performance has long been a subject of academic interest, with corporate governance characteristics identified as important determinants (e.g., Shrivastava and Addas 2014; Martiny et al. 2024). Within these governance characteristics, female leadership has emerged as a notable factor, as researchers increasingly examine how women’s participation in strategic and oversight roles influences firms’ social and environmental outcomes (e.g., Manner 2010; Velte 2016; Romano et al. 2020). Many studies report a positive association between female representation and ESG outcomes (e.g., Glass et al. 2016; Jiang and Akbar 2018; Naveed et al. 2021; Provasi and Harasheh 2021). However, other research reports mixed or insignificant effects (e.g., Rao and Tilt 2016), partly reflecting differences in data sources and ESG rating providers (Aabo and Giorici 2023). Moreover, several studies emphasize the importance of a critical mass effect, suggesting that a meaningful influence emerges only when women constitute around 30% of board members or more than three individuals (Post et al. 2011; Jouber 2022; Al-Shaer et al. 2024). Thus, while greater female representation in leadership is generally viewed as beneficial, it remains unclear whether more is always better. In this paper, we ask the following question: Is greater female representation in leadership roles always linked to higher ESG performance?

Despite progress in recent years, women remain underrepresented in corporate leadership positions. According to the European Institute for Gender Equality (EIGE 2024), women held 33.8% of board seats across the European Union in 2023, but only 22.2% of top management roles, highlighting a persistent gap in executive representation between the two layers. This gap implies that female leadership is not uniform across governance layers, with women serving on boards and in top management teams likely affecting ESG strategies through different decision-making processes. We specifically focus on top management teams (TMTs), defined as the group of a firm’s most senior leaders, typically holding C-suite or equivalent positions, who directly influence the firm’s policies, performance, and strategic direction. TMTs play an important role in translating the board’s ESG objectives into actionable plans, managing relevant KPIs, and overseeing the flow of ESG-related information. In particular, key executives, such as the Chief Financial Officer or Chief Sustainability Officer, can improve the quality of sustainability reporting (Thun and Zülch 2023) and strengthen ESG policies (Peters et al. 2019).

Using multiple regressions on a sample of STOXX 600 companies, we examine two aspects:

1. The non-linear effects of female representation in TMT on ESG performance, and;
2. The role of female representation across governance layers (TMT vs. board).

Overall, our findings provide limited evidence that the positive impact of female representation in the TMT diminishes as the number of women increases, and more robust evidence that strong female representation on the board lessens the additional effect of having more women in the TMT—highlighting that more is not always better.

We have selected firms from the STOXX 600 Index, following prior studies (e.g., Bifulco et al. 2023; Priem and Gabellone 2024). The index includes 600 listed firms across 17 European countries, providing a broad and diversified representation of European corporate activity. The sample reflects the index composition as of March 1, 2025. ESG, corporate governance and financial variables are obtained from the London Stock Exchange Group (LSEG, formerly Refinitiv) for the period 2010–2023, as firms disclosed little non-financial information before 2010 (Lin et al. 2024) and the quality of ESG data was also limited at that time (Bermejo Climent et al. 2021).

The dataset initially includes 8,400 firm-year observations; after excluding those with missing values, 6,701 remain. To assess potential sample selection bias arising due to missing data, we compare included and excluded observations on key firm characteristics (company size, ROA, and leverage) using unpaired t-tests. Untabulated results indicate that firms with missing data are significantly smaller and exhibit higher asset profitability.

We present definitions of all our variables in Table 1. The primary dependent variable is the ESG score (ESGS). Developed by LSEG, this measure evaluates a company’s relative ESG performance, commitment, and effectiveness across ten key categories, based on self-reported data (LSEG Data & Analytics 2024). The ESG score aggregates three pillars (Environmental, Social, and Governance) capturing performance across these dimensions. Scores range from 0 to 100, with higher values indicating stronger ESG performance and greater transparency in reporting on material ESG issues. Because female representation in top management may influence ESG outcomes through pillar-specific mechanisms, its effects need not be uniform across ESG dimensions. Consistent with prior evidence that TMT female representation positively affects social scores but may negatively influence environmental scores (Dong et al. 2025), we also consider the environmental (ENS) and social (SOS) pillar scores as alternative dependent variables. The governance pillar score is excluded because it might incorporate gender diversity indicators (i.e., female representation), which could introduce reverse causality concerns.

Top management female representation, the independent variable of interest, is measured as the percentage of women in the top management team (FTMT). The moderating variable, board female representation, is measured as the proportion of female directors on the board (FBOD). This variable is also included as a control variable. Other control variables account for firm characteristics that may influence ESG performance beyond FTMT and FBOD. They include firm size (SIZE) (Drempetic et al. 2020), profitability (ROA) and leverage (LEV) (Campbell 2007). We also control for corporate governance characteristics such as CEO duality (DUAL) and board size (NBOD). Finally, we control for the presence of CSR or sustainability committee (CSRC).

Table 2 reports descriptive statistics for all variables. The average ESG score (ESGS) is 64.2, while the environmental (ENS) and social (SOS) pillar scores are slightly higher than the overall ESG score. The wide range between the minimum (2.69) and maximum (95.9), combined with a high standard deviation, indicates substantial heterogeneity in ESG performance among European listed firms. The mean and median female representation in the TMT (FTMT) are 15.1% and 14.3%, respectively, which are substantially lower than the corresponding figures in the board (FBOD, 28.6% and 30%). These results indicate that women are underrepresented in TMT relative to boards, consistent with EU reports and quota regulations.

The variable NBOD, representing the natural logarithm of the number of board members, has a mean of 2.37 and varies between 0.69 and 3.64. Approximately 83% of firm-year observations report the presence of a CSR committee (CSRC), while only 11.9% exhibit CEO duality (DUAL). The average firm size (SIZE) is 16.4, with an average ROA of 6.0%. Leverage (LEV) averages 24.8%, suggesting a moderately leveraged capital structure, though some firms exhibit substantially higher leverage levels.

This paper investigates how female representation within top management teams is associated with ESG performance in European firms, with particular attention to potential non-linear effects and cross-layer interactions with boards. The study employs fixed-effect models using panel data from companies in the STOXX 600 Index between 2010 and 2023. We have used the percentage of women in the executive team as a proxy for TMT female representation, and measured ESG performance using ESG scores from LSEG. After establishing that higher female representation is associated with higher ESG performance across firms but not within firms over time, our main results are twofold.

First, there is only limited evidence of a non-linear relationship between female representation in TMTs and ESG performance. As the proportion of women increases, the improvement in ESG performance becomes marginally smaller but the coefficients are mostly not significant. If anything, our results provide no evidence in support of critical mass theory (Jouber 2022; Caby et al. 2024), which would predict a convex, rather than concave, relationship. In contrast, our results would be more consistent with the findings of Meng and Zhu (2024), who identify an inverted U-shape relationship between female representation in TMTs and ESG scores in a Chinese sample.

Second, we find that the positive association between TMT female representation and ESG performance is weaker when the board includes a higher proportion of women, suggesting a potential substitution effect between the roles of female directors and executives. This indicates that the non-linear effect of TMTs mostly operates across governance layers, and not within. More broadly, these findings enhance our understanding of how female representation interacts across different layers of corporate governance, contributing to the literature on the interdependence of those layers (Luciano et al. 2020). This could also help reconcile mixed findings in the existing literature. For instance, following the EU Directive on Gender Balance on Corporate Boards, European boards tend to have higher female representation than boards in other regions of the world. This higher baseline implies that the marginal impact of additional women in TMTs may be lower in Europe, which can help explain regional differences in results. We therefore encourage future research to more systematically consider how institutional contexts make each setting unique, potentially shaping observed relationships and outcomes. This observed pattern of diminishing returns also raises important theoretical questions about how and under what conditions female representation translates into organizational outcomes, which future research could further explore.

From a practical perspective, the observed offsetting effect between the TMT and the board suggests that increasing female representation across governance layers does not automatically generate synergies, as overlapping roles or conflicting dynamics may limit the overall benefits. Organizations should therefore aim to foster a context-sensitive and gender-balanced leadership structure that goes beyond numerical representation to consider the specific roles, responsibilities, and interactions of female leaders. Equally important is ensuring alignment between the board and the TMT to promote cohesive decision-making and reduce governance frictions that could hinder ESG performance.

This study has several limitations, which also open avenues for future research. First, while we examine the overall relationship between female representation and ESG performance, we do not investigate the underlying mechanisms through which strategic objectives are translated into concrete practices that drive ESG outcomes. Distinguishing the influence of key leadership positions, such as CEOs, CFOs, or CSOs—whose responsibilities are more directly linked to ESG—could provide a clearer understanding of how gender diversity translates into improved performance. Future research should also explore how sustainability strategies are differently designed and operationalized by women in practice. These questions may be particularly well suited for qualitative approaches, such as interviews or case studies, which can capture the processes and decision-making dynamics that quantitative analyses alone cannot fully reveal.

Second, while we empirically treat critical mass theory and diminishing marginal effects of women as opposing mechanisms, both may coexist in practice. It is possible that a minimum level of female representation is required to generate an effect, after which the marginal influence of additional women declines. We do not explicitly consider this possibility, although we remain cautious in interpreting our results. What our analyses indicate is that, in our data, a diminishing marginal influence of women, as captured by a second-degree polynomial specification and untabulated threshold regressions, is more prevalent than evidence consistent with the need of a critical mass.

Third, we acknowledge that our findings regarding governance layers may partly reflect that some women serve on both the TMT and the board. While we cannot account for this potential double counting in our sample, future research could examine whether the results hold in settings where TMT and board memberships are clearly distinct, providing a cleaner test of the interplay between women across governance layers.