Directors And Corporate Sustainability

51 Pages Posted: 24 Apr 2020 Last revised: 29 Dec 2022

See all articles by Peter Iliev

Peter Iliev

Pennsylvania State University - Department of Finance

Lukas Roth

University of Alberta - Department of Finance and Statistical Analysis; European Corporate Governance Institute (ECGI)

Date Written: December 28, 2022

Abstract

We show that the board of directors drives U.S. firms’ sustainability performance when directors acquire sustainability expertise at foreign firms where they serve on the board. This increase in sustainability comes both from improvements in environmental and social practices. Boards implement policy changes consistent with targeting greater sustainability by forming sustainability committees, linking executive pay to sustainability, and improving sustainability oversight and accountability. Directors also consider the tradeoffs between sustainability improvements and firm characteristics, with boards having a stronger impact on sustainability in firms from clean industries and firms that face less operational and financial constraints. Our findings are robust to alternative sustainability measures, board expertise proxies, and empirical specifications.

Keywords: Sustainability, Environmental, Social, E&S, Directors, Boards, Regulation

JEL Classification: F30, G15, G34

Suggested Citation

Iliev, Peter and Roth, Lukas, Directors And Corporate Sustainability (December 28, 2022). Available at SSRN: https://ssrn.com/abstract=3575501 or http://dx.doi.org/10.2139/ssrn.3575501

Peter Iliev

Pennsylvania State University - Department of Finance ( email )

348 Business Building
University Park, PA 16802
United States

Lukas Roth (Contact Author)

University of Alberta - Department of Finance and Statistical Analysis ( email )

2-32E Business Building
Edmonton, Alberta T6G 2R6
Canada
780-492-4431 (Phone)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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