The Effect of Board Roles on Firm Environmental Governance

Abstract

In recent years much attention has been paid to firms' environmental profile. Implementing and improving firm's environmental profile are twofold. First, launching the environmental governance is a foundation for firm's environmental profile. Second, the characteristics of board of directors directly affect the decisions made by board on all firm's performance. Drawing on the resourcedependence theory and agency theory, board characteristics represent board resource-provision role and board monitoring role.This paper aims to understand how the board monitoring and board resource-provision roles influence firm's environmental governance for 267 US firms from 2010 to 2012. The findings confirm that effective boards increase their monitoring of management when there are more independent directors on the board, higher CEO-chairman duality, higher share ownership for insiders and the CEO and finally lower share ownership for outsider-directors. Boards with strong social network connections, larger board size and lower board tenure are classified as resource-rich boards. The results also confirm that resource-rich boards with effective monitoring roles tend to have a board, or a committee appointed by the board that is responsible for environmental initiatives, paying incentives for the management of climate change issues, publishing information in annual reports, voluntary communications and other regulatory filings.

How board diversity and ownership structure shape sustainable corporate performance

“…Thus, educationally diverse boards in Turkish firms play a critical role in making the firms behave similarly about their stakeholders' ecological and social concerns. This finding aligns with prior empirical studies (Elm et al, 2001;Hafsi & Turgut, 2013;Harjoto & Laksmana, 2018;Shahgholian, 2017).…”

“…Previous studies also report a positive relationship between educational diversity and societal and environmental matters (Elm et al, 2001;Hafsi & Turgut, 2013). According to Shahgholian (2017), highly educated directors are more likely to acknowledge the environmental issues that help sustain a firm. Consistent with the arguments in the literature, we hypothesize that:…”

CSR: What Does Board Diversity Bring to the Table?

“…For instance, Gadenne et al [136] and Vives [137] show that post graduated directors are able to generate a greater level of commitment to CSR activities. Also, Shahgholian [138] put forward that highly-educated directors are more likely to have knowledge of environmental issues, which may help the board to develop environmental activities. Regarding education's type, Sleeper et al [139] find a positive relationship between CSR and business education.…”

Corporate Social Responsibility and Corporate Governance: A Cognitive Approach

“…Moreover, Finkelstein et al [2009], Goll and Rasheed [2004]; and Grimm and Smith [1991] suggest that high-educated directors are more likely to adjust their strategies in response to deregulation and other changes, and display different and rational decision-making processes, in comparison with other directors. Furthermore, several studies argue that high-educated directors tend to be more concerned about environmental issues and international markets, to better understand problems that may affect the environment [Shahgholian, 2017;Ewert et al, 2001;and Hines et al, 1987]. For instance, Shahgholian [2017] put forward that highly educated directors are more likely to help the board to develop environmental activities, as they have more knowledge of environmental issues.…”

“…Furthermore, several studies argue that high-educated directors tend to be more concerned about environmental issues and international markets, to better understand problems that may affect the environment [Shahgholian, 2017;Ewert et al, 2001;and Hines et al, 1987]. For instance, Shahgholian [2017] put forward that highly educated directors are more likely to help the board to develop environmental activities, as they have more knowledge of environmental issues.…”