Corporate Board Network Ties and Corporate Social Performance Alignment

Abstract

This paper examines the effect of board composition on corporate social performance (CSP). Building on social network theory, this study hypothesizes that knowledge and experience of social practices diffuse across different firms through board members. This paper also explores the properties of the board and interlocking directors as moderating factors that affect diffusion of CSP. Empirical findings indicate that CSP of two firms becomes closely aligned when the firms appoint the same members on their respective boards. The ability of interlocking directors to facilitate knowledge transfer and the receptibility of the receiving board both affect the success of the social practice diffusion. This paper is the first to document the effect of board of directs’ social network on the focal firm’s CSP. Additional findings further highlight the importance of considering both the nature of the information being transferred and the nature of network ties when studying the impact of social networks on firm behaviors.

Keywords: Corporate Governance, Corporate Social Responsibility, Board of Directors, Board Dynamics

JEL Classification: D83, D85, G34, M14