Firms with openly LGBTQ+ directors on their boards tend to deliver stronger environmental, social and governance (ESG) performance and enjoy higher enterprise value.
That’s according to a study by Professor Ruth Aguilera, of business and law school Esade, and PhD graduate Ryan Federo. The study, published in Human Resource Management, examines 441 Fortune 500 companies and explores how visible LGBTQ+ representation shapes external perceptions and market valuation.
The importance of visible representation
Aguilera and Federo draw on signalling theory and upper echelons theory to explain their findings. They argue that directors who are open about their LGBTQ+ identity send a clear signal of the firm’s commitment to inclusivity and social responsibility. This visibility enhances the company’s reputation among investors, employees and other stakeholders, reinforcing perceptions of strong corporate social performance.
The research makes a key distinction between mere representation and visibility. It finds that having LGBTQ+ directors who are not publicly out does not significantly affect ESG indicators. Instead, the study shows that visibility – directors who are openly LGBTQ+ – is crucial for influencing stakeholders’ perceptions and driving stronger ESG outcomes.
The authors suggest that LGBTQ+ board members, drawing on personal experiences of discrimination, bring heightened awareness of social and environmental issues. However, the paper cautions that the benefits of visible representation depend on a genuine culture of inclusion. Token appointments without substantive support risk undermining trust and performance.
Attracting Gen Z and LGBTQ+ Talent
The study reveals that firms with visible LGBTQ+ directors score higher on key ESG metrics, including environmental impact, social initiatives and governance quality. These firms also report greater enterprise value, as measured by market capitalisation relative to assets. According to Aguilera and Federo, this correlation reflects stakeholders’ positive response to authentic diversity at the highest levels of leadership.
Visible representation can also help companies attract and retain talent. A 2024 study found that 64 percent of LGBTQ+ professionals and 55 percent of allies are more likely to apply to organisations that have undergone assessments for LGBTQ+ sensitivity and inclusion.
A separate survey found that reveals that 80 percent of LGBTQ+ Gen Z jobseekers would be more likely to accept job offers from companies demonstrating visible allyship, and with LGBTQ+ role models in senior leadership. Visible LGBTQ+ senior leaders play a vital role in encouraging young LGBTQ+ jobseekers, and many LGBTQ+ professionals view the presence of LGBTQ+ role models as essential to their career development.
