The ESG–financial performance relationship: Does the type of employee board representation matter?

Abstract

Research Question/Issue We examine the impact of two differing types of employee board representation (i.e., labor board representation and employee shareholder board representations) on environmental, social, and corporate governance components of ESG performance and the moderating role of each type of employee board representation on the relationship between ESG performance and the firm's market value. Research Findings/Insights Using a propensity score matching approach on a sample of French firms listed in the SBF 120 index from 2007 to 2017, our findings reveal that labor board representatives act in the opposite direction to employee shareholder board representatives by focusing exclusively on improving social performance and reducing environmental and corporate governance performance. The way employees are represented on the board of directors also moderates the corporate ESG–financial performance relationship differently. Theoretical/Academic Implications Employee directors are not a homogenous group. The differentiation between the two types of employee directors (i.e., labor board representatives and employee shareholder board representatives) brings a deeper understanding of the effect of stakeholders' representation on the board. Practitioner/Policy Implications Our results are of interest to governance policymakers because they provide them with a fresh understanding of the key role of employee board representation. A meaningful inference to be drawn from our findings is that employee ownership and the representation of employees on the board as employee shareholders may bring about fundamental changes in employees' attitudes and behavior on the board and may, in this regard, be considered as a credible way of generating social harmony and constructive relationships between employees and shareholders. Video Abstract https://youtu.be/GqB_6GxtH2A

Does CSR Governance Improve Social Sustainability and Reduce the Carbon Footprint: International Evidence from the Energy Sector

“…It includes different dimensions that are working for the economy such as product responsibility, climate change, emission reduction, and promoting green technologies [35,36]. Thus, an improvement in the mentioned factors shows a positive contribution towards the environmental quality [16].…”

“…Social responsibility encompasses many aspects of the firms, how these firms affect the economy in terms of competition, community, employment quality, training, and development. Hence, social performance is the key factor for setting up a relationship between the business and society [16].…”

“…A most recent study shows that CSR committees are positively associated with community performance, human rights performance, and overall corporate social performance (CSP) [30]. As a result, it increases the profitability of the company as well as increases the shareholder's wealth and enhances social performance [16,25]. However, the research has consistently shown that the CSR committee has a positive relationship with social performance.…”

“…The prior grounds show a gap between the approach to the CSR committee and actual CSR performance towards the two key pillars (environmental and social) of sustainable development [15][16][17]. We aimed to test the effect of the CSR committee in particular, on the environmental and social development.…”

Bringing the User Back in the Building: An Analysis of ESG in Real Estate and a Behavioral Framework to Guide Future Research

“…The catchall statement that any improvement in ESG would automatically lead to higher investment value is untrue. Conclusions range from finding no correlation at all between ESG and financial performance [9][10][11], to mixed results [12][13][14], with several cases even showing an inverse relationship [5,15,16]. However, some studies do give evidence of a positive relationship, often emerging in the long run [17,18].…”