It Matters Who You Know: Board Advising and CSR Performance

• In Event: CSR and Enforcement

Abstract

We examine the advisory role of boards of directors on the performance of firms with respect to corporate social responsibility (CSR), using independent directors’ network as a proxy for measuring advisory roles, closely following Coles et al. (2012). A well-connected board has access to information from different stakeholders, which allows it to advise managers to recognize various stakeholder needs and interests. To the extent that CSR performance proxies for managerial performance in balancing the need of various stakeholders, a highly networked board connected to a broad range of potential stakeholder groups should drive CSR performance through their superior advisory competency. After controlling for the monitoring role of boards, we show that boards’ advisory capacity has a positive effect on firms’ CSR activities. Further, our findings show that the positive effect of board advising on CSR activities for firms operating in complex business environments is more pronounced. Our study establishes the importance of isolating the advisory and monitoring roles of independent directors while exploring their influence on CSR activities.

Authors

• Mahfuja Malik, Sacred Heart University

• Syed Kamal, Austin College

• Abu Amin, Central Michigan University

• Lamia Chourou, University of Ottawa