Corporate Social Responsibility Committee: International Evidence

Abstract

We provide worldwide large-sample evidence of a recent innovation in corporate governance: the voluntary creation of a separate board committee to oversee corporate social responsibility (CSR) activities. Our evidence suggests that a firm’s decision to voluntarily adopt a CSR committee is shaped by external demands from shareholders and other stakeholders, as well as internal needs and costs associated with forming a separate CSR committee. Upon the formation of CSR committees, firms enhance their internal CSR management practices and experience improvements in future environmental and social outcomes. Notably, the environmental improvements are more pronounced among firms operating in industries where environmental concerns are material and in countries with stronger environmental efforts. Overall, our evidence suggests that CSR committees represent a substantive corporate governance mechanism in improving firms’ environmental and social impact.

Keywords: corporate social responsibility (CSR), CSR committee, board, corporate governance, stakeholder, regulation.

JEL Classification: G34, M14, M41