Do Directors Drive Corporate Sustainability?

Abstract

We use exogenous variation in the exposure of U.S. firms’ directors to the staggered introduction of sustainability reforms in foreign countries to study the role of the board of directors in shaping firms’ sustainability performance. Using a difference-in-differences design, we document that the board has a strong impact on U.S. firms’ CSR performance. We find that the board plays a stronger sustainability role in firms with less concentrated institutional ownership. The CSR performance improvements are larger for firms in ‘clean’ industries and firms with lower financial risk. Firms exposed to sustainability shocks have greater subsequent firm performance and productivity.

Keywords: Environmental, Social, E&S, CSR, Sustainability, Directors, Boards, Shocks

JEL Classification: F30, G15, G34