From attention to action: How board environmental expertise influences corporate environmental performance

Abstract

How do board environmental experts influence corporate environmental performance? Drawing on the advisory role of the board, we examine this question and propose that board environmental expertise fosters attention toward stakeholders through the development of decision-makers’ knowledge structures and the identification of opportunities to address a wider range of stakeholders, ultimately contributing to stronger stakeholder orientation. Additionally, we theorize that board environmental expertise fosters substantive actions toward environmental performance by reducing information asymmetry and accurately assessing the risks of investing in pro-environmental initiatives. We also consider how the effects unfold in different institutional contexts. We theorize and find that national stakeholder salience increases attention pressure toward stakeholders and that environment-oriented legislation adds to the action pressure toward environmental performance. Our results, based on 11,634 firm-year observations from 15 countries between 2003 and 2016, support our theoretical predictions.

Environmental, social, and governance demands in the boardroom

“…Although most research on stakeholder-orientation has been conducted at the firm level (Asad, Hennig, Oehmichen, Wolff, and Haas, 2023;Bettinazzi and Zollo, 2022), there is also evidence that individual directors vary systematically in their proclivity to consider multiple stakeholder 59 groups in boardroom decision dilemmas (Adams and Licht, 2019;Adams et al, 2011). Drawing from classic psychological theorizing on social influence processes (Asch, 1951), however, we expect that directors with a high stakeholder-orientation may not automatically impact board deliberations as intended, because as they not only likely prone to the social influence from other directors, but even more so than directors with a shareholder orientation.…”

“…As directors with higher status generally receive more confirmation and support from other directors (Park et al, 2011;Veltrop et al, 2017), highly stakeholder-oriented directors may also see less need to test their viewpoint for 'correctness' against other directors when they are in such high-status positions. Relating to the latter, recent research indicates that environmental expertise in the board can increase overall stakeholder-orientation (Asad et al, 2023). Future research may explore to what extend expertise with other stakeholder groups has similar effects and explore critical mass effects and boundary conditions.…”