The Role of Stakeholder E-Engagement on the Relation between Board Independence and Environmental Disclosure. Toward a Cohesive Corporate Governance. Evidence from Italian Listed Companies

Abstract

Companies worldwide increasingly engaged in corporate social responsibility disclosure, particularly corporate environmental disclosure (CED) has gained increasing importance since the 1980s. Reporting environmental performance has become a fundamental corporate governance mechanism to improve relationship with stakeholders, enhancing companies’ image, consensus, trust and social legitimacy, particularly in a period of great change like this, where people are demonstrating a very high attention to environmental issues, due to different phenomena, like the pandemic emergency of COVID-19, the sustainable capitalism, etc.. The importance of CED has been enormously amplified in the last decades since the development of the Internet and social media (SM) as universal interaction tools useful for stakeholder engagement. Through SM stakeholder can easily ask for information, express and share requests, organize and coordinate interventions. Indeed, SM have become an important source of institutional pressure for firms and board of directors. They acts as a resonance chamber for stakeholder opinions, in which institutional pressure grows and is continuously transmitted from society to firm, influencing the firm legitimacy and the directors’ reputation. The aim of this paper is to investigate the relationship between board independence and CED, deepening the moderating role of stakeholder e-engagement through Facebook, LinkedIn and Twitter. The effectiveness of the board of directors as a monitoring mechanism is crucial to corporate transparency, especially in an institutional environment where other corporate governance mechanisms fail to guarantee stakeholder rights. We analyse a sample of 218 firm-year observations related to Italian non-financial listed companies for the period 2017-2018 and found that board independence and stakeholder e-engagement positively influence CED, whereas institutional pressure due to stakeholder e-engagement through SM play an important role on independent directors’ preferences and imply that external directors better consider the interest of external stakeholders, stimulating the company’s environmental disclosure.

Keywords: board independence, social media, stakeholder e-engagement, corporate social responsibility, environmental disclosure, sustainable capitalism

JEL Classification: M14 M41 G34 O16 O35 Q01 Q56