This paper extends and enriches the current research on CSR, CEO compensation contracts and characteristics of the board of directors by examining an underexplored question related to the potential impact of independent board members on the share of CSR criteria in executive compensation. It also considers a potential moderating effect of gender diversity in this relationship. Empirical analyses of a sample French firms listed on the SBF120 index between 2014 and 2021 show that independent directors have (...) no impact on the inclusion of CSR criteria in the annual bonus of senior executives. They also reveal that gender diversity can strengthen the role of independent directors in indexing executive compensation to CSR criteria. The findings can be useful for corporate boards and policymakers seeking to boost the adoption of CSR criteria in executive compensation contracts. They provide empirical support for the Zimmermann law (2011) and urge the policymakers to boost the appointment of female directors on boards. (shrink)

The present global financial crisis has revived the notion that competitive markets may lead some directors and executives to behave in opportunistic ways considered unethical and even illegal, through the pursuit of self-interest. This article proposes and tests an integrated model that offers new insights into the relationship between board structure, independence and firm value. By incorporating the proportion of independent directors on the board as a moderating factor in this relationship, this study contributes to a better (...) understanding of the entrenchment and convergence-of-interests hypotheses. Using empirical data obtained from 114 Spanish listed companies in a context of economic crisis, from 2007 to 2010, we conclude that having a board with a greater proportion of independent directors reduces the negative association existing between firm value and a large board size and significant board share ownership. (shrink)

We investigate the regulatory sanctions imposed on independent directors for their firms’ financial frauds in China. These regulatory sanctions are prima-facie evidence of significant lapses in business ethics. During the period 2003–2010, 302-person-time independent directors were penalized by the regulator, and the two stock exchanges. We find that the independent directors with accounting experiences are more likely to be penalized by the CSRC, though they do not suffer more severe penalties than do the other (...) sanctioned independent directors. We also find that independent directors suffer less severe penalties than do the insider directors. These results are consistent with the hypothesis that the sanctions on independent directors are tied to their assumed ethical and legal responsibilities. Following a regulatory sanction, penalized independent directors experience a significant decline in the number of other board seats held. However, they can gain board seats in better quality firms. We find that interlocked firms that share penalized independent directors with the fraud firm do not suffer from a valuation decline. Overall, our results suggest that regulatory sanctions have not triggered further sanctions on the penalized directors in the labor market but they have, instead, created a disincentive for these directors to serve on the company boards of high-risk firms. (shrink)

In this paper we investigate whether independent directors’ attendance at board meetings enhances investor protection using a difference-in-difference approach. We find that independent directors’ attendance alleviates tunneling. This effect is more pronounced in non-state-owned enterprises than in state-owned enterprises. The reinforcement of external supervision substitutes for the role of independent directors’ attendance and this substitution effect is more significant in non-SOEs. Together, these results imply that independent directors’ attendance at board meetings can (...) play an important role in protecting investors, especially in non-SOEs and when external supervision is weak. This paper sheds new light on independent directors’ function in corporate governance, and has implications for institutional improvements. (shrink)

This paper mainly explores the effect of naive independent directors on firm performance. Using hand-collected data on Chinese listed companies, this study finds that the proportion of naive independent directors is positively associated with firm performance, and an increased proportion of naive independent directors reduce the probability of tunneling of controlling shareholders and financial distress. The findings are robust after using alternative explanatory variables and retro-causality tests. Furthermore, the relation between naive independent (...) class='Hi'>directors and firm performance mainly existed in firms with lower shareholdings of the largest shareholder and firms with lower financial leverage. Moreover, this paper finds that firm size, corporate ownership type, and equity balance degree are important factors affecting the appointment of naive independent directors. This paper offers further empirical evidence to the existing research related to naive independent directors and provides an effective way to improve corporate board governance. (shrink)

Green innovation plays a critical role in mitigating environmental issues and balancing the interaction between economic growth and the natural environment. Drawing on social network and resource-dependence theory, this article scrutinises the relationship between independent director interlocks and corporate green innovation. Using the data from listed Chinese companies from 2010 to 2022, this study finds that independent director interlocks can significantly promote corporate green processes and product innovation. This research further finds that internal corporate contexts can also influence (...) the relationship between independent director interlocks and green innovation. Moreover, the results indicate that corporate environmental commitment positively moderates the relationships between independent director interlocks and corporate green innovation. This study also provides significant implications for firms seeking green innovation performance and for policymakers seeking ways to fulfill the mission of carbon dioxide abatement. (shrink)

As global warming has received widespread attention, the disclosure of firms’ carbon information has been expected by increasing stakeholders. This study extends the previous literature on the determinants of firms’ carbon information disclosure by examining the influence of academic independent directors and Confucianism on the quality of carbon information disclosure. Using a sample of Chinese listed firms in the CSI 300 Index during the period of 2012–2018, our empirical results show that academic independent directors have a (...) significantly positive association with the quality of carbon information disclosure. The results also reveal that Confucianism positively affects the quality of carbon information disclosure. Moreover, Confucianism positively moderates the relationship between academic independent directors and the quality of carbon information disclosure. The results imply that Confucianism, as an informal system, can promote the governance effect of academic independent directors on firms’ carbon information disclosure behaviour. Our findings offer shareholders, regulators, and other stakeholders an integrating perspective on motivating firms to disclose high quality carbon information. (shrink)

The Organization Department of the Communist Party of China announced the Opinions on Further Regulation on Party and Political Leaders and Cadres Working Part-Time in Enterprises to force the resignation of government officials holding the position of independent director in listed companies. This paper empirically examines the impact of the GID resignation on firm performance using a difference-in-differences model, which is an exogenous event with a “natural experiment.” The study finds that after the promulgation of the Opinions, firms that (...) lose some of their political resources and their corporate performance decreases significantly compared to firms that do not experience GID resignations. A good external governance environment, while somewhat weakening, is not sufficient to offset the negative impact of the loss of political resources on firm performance. This paper further explores the mechanism by which the GID resignation affects firm performance: one important way in which the resignation of GIDs cause the loss of political resources on which the firm's development depends is that the loss of the firm's tax benefits after GID resignation directly leads to a decline in performance; it also leads to a reduction in the firm's financial subsidy income and a reduction in the amount of bank loans, but both of these do not have a significant effect on the decline in firm performance. The study suggests that GIDs play more of a resource-providing “official” role than an “independent director's” supervisory and advisory role in Chinese listed companies. The findings of this paper reveal the phenomenon of “Political-Business Spin” in China, which has some implications for developing countries, represented by China, to improve the independence of the board of directors and the corporate governance. (shrink)

Institutional investors, policy makers, and researchers have advocated for greater director independence in hopes of improving corporate governance and discouraging unethical behaviors such as corporate frauds, accounting irregularities, and other organizational failures. However, increasing demands upon directors and sitting CEOs, as well as constraints on the number of boards on which they can serve, has resulted in a dramatic increase in the use of retired independent directors. Compared to other directors with full-time job demands, we argue (...) that RIDs have lesser time constraints and greater attentional capacities with which to discharge their responsibilities, thereby improving overall board “bandwidth.” Using S&P 1500 firms for the period of 2000–2012, we find that enhanced board bandwidth associated with an increased proportion of RIDs on the board relates to greater resource provisioning through reducing costs of capital, improved monitoring through reducing disclosure-related weaknesses, and better accounting and market performance. We thereby advance traditional board bandwidth research by contemplating the available time that independent directors would have by virtue of being retired and relating this to board effectiveness. (shrink)

On August Business Roundtable, the Business Roundtable redefined the purpose and social responsibility of the corporation. Yet, this statement must be followed by substantial changes in the business models of corporations for it to avoid becoming empty rhetoric. We believe that the figure of the independent director may be one of the catalysts needed for this change of paradigm for corporations. In spite of the positive correlation between Corporate Social Responsibility and board independence, the development of the independence of (...) boards during the last decade has not lead to the expected CSR results. Academics and regulators point to a weak definition and the non-standardized measurement of both independence and board independence as one possible explanation, and agree that a broader definition is needed. This paper aims to contribute to this debate. We develop a second-generation definition of independence based on a positive approximation to the concept by integrating an Aristotelian perspective of virtue ethics with the best practices of corporate governance. Thus, we define independence as a virtue guided by practical wisdom, that implies autonomy and autarky and which enables a person to act with integrity, fairness and truthfulness. In the context of corporate governance, independence is associated with an honest disposition to serve. Our proposal has political implications for supervisors that make decisions relating to the suitability of board members. (shrink)

This paper investigates the relationship between director independence and firm performance, as well as ownership of firms and firm performance in Malaysia. We find that independent outside directors and foreign directors have a significant positive effect on firm performance after controlling for the influence of other corporate governance variables such as firm ownership and board sizes. The study demonstrates that when a critical mass of outside directors' independence is achieved, this has a significant economic impact on (...) the firm performance. The results have implications for rethinking board composition requirements in the emerging markets. [PUBLICATION ABSTRACT]. (shrink)

This paper examines whether independent directors who have social ties to management (inside directors) can effectively perform their fiduciary duty to monitor management on behalf of shareholders. Ex ante, it is not clear whether social ties will enhance or obstruct the quality of board performance. Theory suggests that directors who are socially tied to management are ineffective and would make decisions favoring management. However, social ties can increase trust and information sharing between management and independent (...) directors, improving directors' ability and effectiveness in governing the company (Westphal, J. D.: 1999, The Academy of Management Journal 42(1), 7-24). To examine these contradicting predictions I use social network analysis and construct proxies for social ties between management and independent board members. Using these proxies, I first demonstrate that social ties are associated with higher managerial compensation. Further analyses reveal that these results are driven by social ties that include members of the compensation committee. Conversely, I demonstrate that financial reporting quality is improved when social ties exist. Specifically, I find that the likelihood of material weaknesses in internal controls and the likelihood of financial restatements are lower in companies with social ties. I further observe that this improved quality of financial reporting holds only when social ties include members of the audit committee. I conclude that ethically, socially tied independent directors should disqualify themselves from serving on compensation committees where social independence is essential. However, in tasks where collaboration with management is essential, directors with social links to each other can be of added value to shareholders. (shrink)

This paper presents an analysis of the opinions of U.K. Finance Directors – also known as Chief Financial Officers (CFOs) in North America – on factors which may effect the roles and responsibilities of the external auditor to the organization. A number of proposals have been put forward over the years to enhance auditor independence and these were treated as dependent variables in this study. A questionnaire was mailed to 3 000 named Finance Directors and 776 useable replies (...) were received. From the responses to the questionnaire, three independent variables were identified: opinions on the value of the audit in general; opinions on the impact of the audit on the organization; and the relationship between the Finance Director and the auditor. The results reveal that those Finance Directors concerned in general about the value of auditing favoured the banning of non-audit work and the rotation of auditors. In addition, those Finance Directors with good relationships with their external auditors preferred the banning of non-audit services and the rotation of external auditors. Those respondents favouring the separate regulation of auditors were also concerned about the impact of the audit on the organization. The results of this study shed some light on the sensitivity of U.K. Finance Directors to ethical issues regarding external auditor independence. (shrink)

Business Ethics: A European Review, EarlyView.

This study empirically examines the association between certain director characteristics and the extent of voluntary audit committee disclosure in annual reports. Results suggest that Singapore's publicly traded firms are more likely to voluntarily disclose audit committee related information as: the number of board members increases; different individuals occupy the roles of CEO and board chairperson; and the proportion of independent directors serving on the board increases. Findings, however, fail to show any association between the amount of voluntary audit (...) committee disclosure and the percentage of executive directors' ownership. Documented findings are of interest and benefit to various parties including regulators, corporate governance reformists, and corporate management. For instance, findings imply that a positive by-product of implementing major corporate governance reforms currently championed by corporate governance reformists will be an increase in audit committee disclosures. As a result, there will be less pressure on regulators to develop, introduce, and enforce mandatory audit committee disclosures that may be potentially intrusive to a firm's management. (shrink)

Using listed firms in China over the period 2010–2018, we investigate the association between directors’ network and quality of corporate social responsibility (CSR) disclosure from the lens of resource-based view. We find a significantly positive effect of directors’ network centrality on the CSR disclosure quality, and the effect is more pronounced when the firm (1) invests less in advertising; (2) is followed by less analysts; (3) is less financially constrained; and (4) has no assurance of sustainability report. Furthermore, (...) we document that independent directors’ network centrality is positively associated with CSR disclosure quality. Our findings have important implication for practitioners, policy makers, and regulators. (shrink)

Business ethics is one of the most significant demands made by institutional and individual investors, who usually require the participation of the board of directors in the planning and implementation of ethical behaviour in corporations. This is done by drawing up an ethics code and then monitoring its fulfilment. This study has a dual objective: first, to analyse the role played by the composition of the board of directors, and by that we mean its independence and the diversity (...) of its members, on the implementation and scope of an EC, and, second, to detect whether the corporate governance system moderates the level of involvement of the board in ethical issues. The findings obtained from a data panel sample made up of 760 listed companies from 12 countries for the years 2003–2009 show that the largest companies with large-sized and diverse boards implement the most developed ECs. Nevertheless, the extent of involvement of the independent directors is conditioned by the level of shareholder orientation characteristic of the system of CG in the corporation’s country of origin. (shrink)

This study explores the realm of sustainability by examining the influence of female directors' foreign experience on green innovation across various industry sectors and corporate board structures. Specifically, the research focuses on the impact of female directors' foreign experience on green innovation in Chinese listed firms from 2004 to 2021. Our findings show that female directors with foreign experience have a positive and significant effect on green innovation. Further analysis indicates that this relationship is positively and significantly (...) moderated by state-owned enterprises, larger firms, firms operating in polluting industries, environments with low market competition, and the presence of foreign directors on the board. The robustness of our results is confirmed through the use of different econometric techniques, alternative measures of dependent and independent variables, and addressing endogeneity concerns. Overall, our study suggests that female directors with foreign experience enhance the transfer of environmental and sustainable knowledge and practices, thereby fostering green innovation within Chinese listed firms. (shrink)

This paper makes the case for using the independent non-executive directors of a company listed in the United Kingdom exclusively as monitors and regulators of management, particularly as regulators of executive directors’ conflicts of interest, rather than as participants in management who also have a control function. It is suggested that these proposals can be accommodated within current corporate law in the United Kingdom, that they are practicable, and that they are desirable. The proposals are made against (...) the background of a continued strong emphasis in the United Kingdom on non-executive directors’ dual role both as managers of a company’s business and as monitors of its executive directors. It is suggested that this dual role for non-executive directors tends significantly to undermine the effectiveness of their control function, and that consequently the dual role should be abandoned in favor of the more focused role proposed in the paper. Improving the effectiveness of non-executive directors as regulators of executive directors’ conflicts of interest is vitally important to corporate governance in the United Kingdom: as the paper explains, other legal methods of controlling those conflicts in the United Kingdom suffer from serious deficiencies. (shrink)

This study examines the impact of corporate tax avoidance on board of directors and chief executive officer reputation. Our regression results show that when firms engage in tax avoidance, both directors and CEOs, on average, are rewarded by improvements in their reputations as proxied by an increased number of outside board seats. In particular, both independent directors and non-CEO executive directors undergo positive changes in reputation. We also find that CEOs of tax-aggressive firms experience enhanced (...) reputations by gaining extra board seats. Our main regression results hold based on additional analyses. Overall, this study provides important empirical evidence confirming an association between tax avoidance and the individual reputations of directors and CEOs. (shrink)

The US Securities and Exchange Commission recently proposed rules relating to shareholder (independent) director nominations to publicly-traded companies. While shareholder groups, such as institutional investors, consumer groups, and shareholder activists, generally support the proxy reform, the business community, including The Business Roundtable and the US Chamber of Commerce, are critical of the proposal, arguing that it will 'open the door' to special interest directors, e.g., labour unions or other groups having a social or political agenda contrary to the (...) economic interests of the shareholder owners of the corporation. An analysis of the proposed rules, however, show that the mechanisms offered to nominate and elect independent directors offer little or no threat of any shareholder group placing special interest directors on the board of a publicly-traded company in the USA. The article concludes with a recommended managerial course of action for executives and boards to follow in the unlikely event that shareholders are seriously threatening to place a special interest director(s) on the proxy ballot. (shrink)

In today's world, the corporate image of the largest companies is closely linked to their performance in the field of corporate social responsibility and the disclosure of information on that topic, specifically, on climate change. Since the Board of Directors is the body responsible for this process, the aim of this article is to show the role that companies' Boards of Directors play in the accountability process vis-à-vis stakeholders in relation to one specific aspect which has enormous significance (...) in environmental information: practices used to monitor greenhouse gas emissions. In order to achieve this, we shall verify certain business characteristics, in addition to the size and activity of the Board of Directors, and we shall take different dependence models into consideration. These models will include variables related to the level of independence and diversity of the Board of Directors, which interact with dummy variables representing the company's litigation risks regarding environmental behavior and the institutional macro-context of the organization's country of origin. The results make it clear that Boards of Directors are basically focused on the traditional responsibility of creating economic value, instead of dealing with today's broader business world concepts, which include social responsibility. This focus, therefore, does not favor the accountability process before other stakeholders, if this makes it more difficult to protect the interests of shareholders. (shrink)

In this article, we examine the factors determining the representation of women on boards of directors by considering three main questions. The first question deals with the relationship between characteristics of ownership and governance on one side, and female directorship on the other. The second major question concerns the demographic attributes of women directors, such as nationality, foreign experience, educational level, business expertise, and connections to external sources. The third important question refers to women in senior positions on (...) French boards (e.g., as independent members or board subcommittee members) in relation to firm characteristics and women’s demographic attributes. Our study focuses on French large- and mid-capitalized companies belonging to the SBF120 stock market index during a 5-year period running from 2000 to 2004. First, our results give evidence that the appointment of women directors is strongly related to family ownership and board or firm size. Second, the appointment of women directors is related to their professional services, valuable skills, and network links. Furthermore, we show that women face a double glass-ceiling problem, and note that French firms rely more on the demographic attributes of their women directors when they are appointed to senior board positions. Our study sheds light on issues concerning the law that comes into force in 2016, which imposes quotas of women members on boards of directors in French companies. (shrink)

As a public director of a NASDAQ stock exchange listed public corporation, I have seen how quickly the reforms in corporate governance imposed by the Sarbanes-Oxley Act have changed procedures and policies in public corporations. In areas such as transparency of financial records and other financial matters including compensation of top executives and conflict of interest policies affecting both corporate boards of directors and employees of the corporation the reforms of this new federal law have quickly changed corporate practices (...) in many corporations. Many persons who have studied this new law believe that these changes will benefit the public, shareholders, employees, and other stakeholders in the modern corporation by increasing the reputation of these organizations for integrity and transparency. Stock exchanges such as NASDAQ and the New York Stock Exchange now require all listed companies to have (after a transition time) a majority of independent directors on their boards of directors. Only independent directors may serve on the audit, nominating and compensation committees of boards in most cases. Some exceptions are made to these rules for foreign and domestic issues of companies where a majority of the voting power is held by one person. According to Morrison & Foster LLP, Corporate Board Advisory March , 2004, NASDAQ requires that the board of directors of a listed company determine that an independent director does not have a relationship that would “interfere with the exercise of independent judgment” in carrying out the responsibilities of a director. (shrink)

The Code of Best Practice produced by the Cadbury Committee on the Financial Aspects of Corporate Governance may be viewed as an ethical code in that it prescribes standards of board behaviour. The Code’s specific recommendations with regard to audit committees appear to offer a practical mechanism for the promotion of ethical behaviour through the inhibition of potentially unethical influences exerted by executive directors over external auditors. The rationale for these recommendations centres on the independence of audit committee members, (...) implying that independence is a prerequisite for ethical behaviour. This paper questions the assumptions regarding the role of independence through an exploration of conceptions of independence held by individuals involved in the activities of audit committees in major UK public limited companies. It suggests that audit committees may have an unarticulated role in providing an arena for the display of independence by the participants. This display forms a part of the ceremonial performance which builds confidence in corporate governance mechanisms. (shrink)

Outside directors’ regular board meeting attendance is important in improving the effectiveness of a governance system. Such attendance is evidence of their commitment to the firm as key other players in monitoring and decision making. Using a unique dataset for Korean firms, and three-level random coefficients models, we find that, foreign outside directors, an independent appointment process, professional knowledge of business operations and accumulated firm-specific knowledge are important factors that affect outside directors’ attendance of board meetings. (...) The results also confirm that both outside directors’ personal characteristics and the social context are crucial in understanding their board meeting attendance. Further analysis shows that a positive corporate environment that supports the outside director system encourages outside directors’ attendance at board meetings. (shrink)

The aim of this study is to examine whether gender diversity on audit committees influences financial reporting quality by using panel data of Spanish listed firms. The financial reporting quality of firms is measured by the type of opinion received in the audit report. We estimate various panel data models of audit opinions and control for factors that are traditionally found to impact audit opinions. This study provides evidence to support the hypotheses that the percentage of females on ACs reduces (...) the probability of qualifications due to errors, non-compliance or the omission of information. Furthermore, the results also find that the percentage of female directors on ACs, the percentage of independent female directors on ACs and ACs chaired by females increase the likelihood of further transparency by disclosing audit reports with uncertainties and scope limitation qualifications. (shrink)

This study examines whether the gender of the directors on fully independent audit committees affects the ability of the committees in constraining earnings management and thus their effectiveness in overseeing the financial reporting process. Using a sample of 525 firm-year observations over the period 2003 to 2005, we are unable to identify an association between the proportion of female directors on audit committees and the extent of earnings management.

Representations of women, or more exactly of gender, and the presence and works of women filmmakers constitute an important area of analysis for gender studies and feminist film theories. In Turkey the presence and the participation of women in the public sphere have been one of the important objectives of the Kemalist modernization project since the founding of the modern nation-state in 1923. However, despite the modernizing efforts to empower women in different spheres of life there was no woman director (...) in Turkish commercial feature cinema until the beginning of the 1950s. Since the beginning of the 2000s the number of women directors has increased significantly, reaching a number well above that of the entire period before. This article investigates the reasons behind this increase based on quantitative data gathered from secondary sources and in-depth interviews with women producers and directors. It also questions whether and to what extent the increase in the number of women film directors contributed to the production of ‘women’s films’, based on a qualitative analysis of films produced by women directors between the years 2004 and 2013. The results show that in addition to technological and aesthetic changes in the industry, the increase in the availability of international and national public funding for low-budget independent film productions and the enlargement of the women’s movement allowed more women directors to enter the film industry. While half of the films made by women directors in the 2000s could be qualified as ‘women films’, the other half remained, largely due to market forces, within the conventions of popular or art house cinema. (shrink)

The purpose of this study was to assess the degree of editorial independence at a sample of medical journals and the relationship between the journals and their owners. We surveyed the editors of 33 medical journals owned by not-for-profit organizations (“associations”), including 10 journals represented on the International Committee of Medical Journal Editors (nine of which are general medical journals) and a random sample of 23 specialist journals with high impact factors that are indexed by the Institute for Scientific Information. (...) The main outcome measures were the authority to hire, fire, and oversee the work of the editor; the editor’s tenure and financial compensation; control of the journal’s budget; publication of material about the association; and the editor’s perceptions about editorial independence and pressure over editorial content. Of the 33 editors, 23 (70%) reported having complete editorial freedom, and the remainder reported a high level of freedom (a score of ≥8, where 10 equals complete editorial freedom and 1 equals no editorial freedom). Nevertheless, a substantial minority of editors reported having received at least some pressure in recent years over editorial content from the association’s leadership (42%), senior staff (30%), or rank-and-file members (39%). The association’s board of directors has the authority to hire (48%) or fire (55%) the editor for about half of the journals, and the editor reports to the board for 10 journals (30%). Twenty-three editors (70%) are appointed for a specific term (median term =5 years). Three-fifths of the journals have no control over their profit, and the majority of journals use the association’s legal counsel and/or media relations staff. Stronger safeguards are needed to give editors protection against pressure over editorial content, including written guarantees of editorial freedom and governance structures that support those guarantees. Strong safeguards are also needed because editors may have less freedom than they believe (especially if they have not yet tested their freedom in an area of controversy). (shrink)

This study examines the influence of board independence on firm agency cost among listed firms in Bangladesh, which feature concentrated ownership and high insider representation on corporate boards. This study uses three measures of agency cost: the ‘expense ratio’, the ‘Q-free cash flow interaction’ and the ‘asset utilization ratio’. The finding of the study is that board independence can reduce the firm agency cost only under ‘asset utilization ratio’ measure of agency cost. These findings are robust to several robustness tests. (...) Furthermore, the non-linearity tests suggest that the benefit of outside independent directors is generally plausible as a factor controlling agency costs in the case of a medium level of board independence. Overall, these findings do not reject the validity of agency theory, supporting the Anglo-American orthodoxy promoting outside independent directors as good monitors. (shrink)

This study addresses a gap in the literature on corporate governance and corporate social responsibility by investigating whether and how board independence and institutional ownership moderate the relationship between digital transformation and corporate social performance. We find that digital transformation increases CSP using a panel dataset of Chinese publicly listed firms between 2014 and 2018. Moreover, we show that this positive impact is more pronounced when firms have higher proportions of independent directors on the board and institutional owners. (...) These findings contribute to a better understanding of CSR dynamics, supporting the formulation and implementation of efficient CSR strategies in the digital era. (shrink)

This paper reports the first stage of our research agenda concerning the factors that influence the appointment of individuals to Canadian boards of directors. This particular study begins our examination of the role of women on boards. We focus on three interrelated aspects: the characteristics of the women who are appointed to boards, the characteristics of the firm that appoints a woman to an all-male board of directors, and the relationship, if any, between female directors and corporate (...) social behaviour. The results of our study indicate that (1) women who are currently of the boards of publicly traded companies in Canada are independent and powerful directors, and (2) the firms that appoint a woman to an all-male board tend to be less socially responsible and have small boards of directors. The paper concludes with indications for where we think our research should now proceed. (shrink)

In this paper, we examine whether ethics officers are able to perform their assigned duties independently of organizational management. Specifically, we investigate whether inherent conflicts of interest with company management potentially hinder the ability of ethics officers to serve as an effective monitor and deterrent of unethical activity throughout the organization. As part of our analysis, we conducted 10 detailed phone interviews with current and retired ethics officers in order to determine whether practicing ethics officers feel the need for additional (...) independence protection from management. We propose that the current system in which ethics officers report to management must be changed in order for ethics officers to effectively perform their jobs. Specifically, we maintain that ethics officers should (1) be hired by, (2) be fired by, and (3) report directly to the corporate board of directors rather than company management. Such a change in the reporting environment would greatly enhance the independence of ethics officers. (shrink)

As a result of recent corporate scandals, several rules have focused on the role played by Boards of Directors on the planning and monitoring of corporate codes of ethics. In theory, outside directors are in a better position than insiders to protect and further the interests of all stakeholders because of their experience and their sense of moral and legal obligations. Female directors also tend to be more sensitive to ethics according to several past studies which explain (...) this affirmation by early gender socialization, the fact that women are thought to place a greater emphasis on harmonious relations and the fact that men and women use different ethical frameworks in their judgments. The goal of this paper is to determine the influence of these characteristics of the Board in terms of promoting and hindering the creation of a code of ethics. Our findings show that a greater number of female directors does not necessarily lead to more ethical companies. Moreover, within Europe as a continent, board ownership leads to an entrenchment of upper-level management, generating a divergence between the ethical interests of owners and managers. In light of this situation, the presence of independent directors is necessary to reduce such conflicts. (shrink)

Enterprises seem to entirely operate on their management. But behind the scenes directors play a very important role. On a strategic level (in the long term) they will determine the direction of the company.Even though on the level of daily management a great deal of quality instruments and control systems exist, this is not the case on the highest level, the board. It is in this specific area that the idea of corporate governance must be situated.

In this article, we use a sample of Norwegian quoted companies in the period of 2001–2010 to explore whether the gender quota requiring 40 % female directors on corporate boards changes the likelihood of women being appointed to top leadership roles as board chairs or corporate CEOs. Our empirical results indicate that the gender quota and the resulting increased representation of female directors provide a fertile ground for women to take top leadership positions. The presence of female board (...) chairs is positively associated with female directors’ independence status, age and qualification, whilst the presence of female CEOs is positively related to the average qualification of female directors. Firms with older and better educated female directors are more likely to appoint female board chairs. The likelihood of female CEOs’ appointment increases with the percentage of independent directors and directors’ qualifications, especially those for female directors. Furthermore, the gender gaps with respect to qualification, board interlocks and nationality between female and male board chairs vanishes after Norwegian companies’ full compliance to the quota in January 2008. However, the gender quota has no significant impact on the gender gaps between female and male directors after its full compliance. Our article thereby contributes to understanding how gender quotas, presence of female directors, percentage of female directors on boards and other board characteristics can determine the gender of top leaders of organizations. (shrink)

This study analyzes how the board’s characteristics could be associated with globally corporate social responsibility CSR and specific areas of CSR. It is drawn on all listed firms, in 2016, on the SBF120 between 2003 and 2016. Our results provide strong evidence that diversity in boards and diversity of boards globally are positively associated with corporate social performance. However, they influence differently specific dimensions of CSR performance. First, we show that large boards are positively associated with all areas of CSR (...) performance, while specific and overall CSR scores are negatively associated with CEO-chair structures. Second, board gender diversity is positively associated with human rights and corporate governance dimensions. Third, age diversity is positively associated with corporate governance, human resources, human rights, and environmental activities. Also, our results provide evidence that outside directors care about CSR performance. Specifically, the presence of foreign directors is positively associated with environmental performance and community involvement, whereas CSR-Governance dimension is positively associated with the presence of independent directors. Regarding the director’s educational level, post-graduated directors are positively and significantly associated with overall CSR score and all CSR sub-scores, except the corporate governance one. When directors have multiple directorships, they are more concerned about human resources, environmental performance, and business ethics. Finally, our findings are robust only in non-family firms. In fact, family boards are less diverse than non-family ones; specifically, they have a lower number of independent, foreign, and high-educated directors. (shrink)

A growing body of work suggests that the presence of women and of independent directors on boards of directors is associated with higher corporate environmental performance. However, the mechanisms linking board composition to corporate environmental performance are not well understood. This study proposes and empirically tests the mediating role of sustainability-themed alliances in the relationship between board composition and corporate environmental performance. Using the population of public oil and gas firms in the United States as the sample, (...) the study relies on renewable energy alliances to measure sustainability-themed alliances and longitudinally analyzes lagged data for independent and control variables. The study found that the higher the representation of women on a firm’s board, the more likely the firm is to form sustainability-themed alliances, and the higher the representation of independent directors on a firm’s board, the more likely the firm is to form sustainability-themed alliances. Such alliances, in turn, positively contribute to corporate environmental performance. This paper discusses the study’s contributions to the board composition-social performance literature. (shrink)

In this paper, we investigate the link between audit committees and earnings management providing a more comprehensive simultaneous analysis of the influence of audit committee features using a sample of 485 firm-years from Singapore's publicly traded firms during the 2000 2001 calendar period. Empirical findings indicate firms with a higher proportion of independent audit committee members are more effective at constraining earnings management. Firms with audit committees that are more diligent and/or lack the presence of independent directors (...) serving simultaneously on a substantial number of boards and committees are more effective at constraining earnings management. These findings are robust to alternative income-incentives facing corporate management. Overall, our findings have implications for stakeholders, regulators, and corporate governance. For example, our findings infer policymakers may need to focus on other audit committee characteristics to strengthen the committee's ability to constrain earnings management rather than continue the present fixation with independence. (shrink)

Scholars have long suggested that CEOs can benefit from corporate philanthropy. However, little is known about this relationship in contexts of authoritarian capitalism such as China, where the state not only uses its control of economic entities to pursue social goals but also plays a key role in CEOs’ careers. We theorize how corporate philanthropy among state-controlled firms increases the CEO’s likelihood of receiving career benefits from the state in the form of outside directorships. Outside directorships represent an important form (...) of social capital in the Chinese context, and corporate philanthropy is an important mechanism through which social capital can be acquired. In addition, we theorize how two factors—the degree of state ownership and the number of independent directors on the CEO’s board—moderate this relationship. Analyzing a 12-year panel of state-controlled, publicly-listed firms in China comprising 6,594 firm-year observations, we find general support for our ideas. In so doing, we contribute to scholarship on the business–society relationship and corporate governance in the context of authoritarian capitalism. (shrink)

Issues of social justice underlie the clamour for greater gender balance in top-management. The present study reveals that pursuit of such social justice is also value-enhancing in relation to the longer-run performance of initial public offerings stocks, especially where female board members are unencumbered by family-connection with other directors. This study examines the economic benefits of board gender diversity for state- and privately controlled firms in the Hong Kong IPO market. Gender board diversity is much less common in state-run (...) IPO firms. Within the subset of privately controlled IPO firms, distinction exists between entities that accommodate family-connected board officers and those that do not. Specifically, this study focuses on family-ties between board members. This issue allows for finer-grained assessment of family influence on firm performance. Stronger post-listing stock, return-on-assets and sales-on-assets performance arise in privately controlled firms without family-connected board members and in state-run entities. Gender diversity thus serves as a positive, but only when female director presence is untrammelled by family associations between directors. However, there is little evidence of a link between female board representation and IPO underpricing. Relative to state-backed issuers, privately controlled firm boards accommodate more women, younger officers and a broader mix of nationalities, but appear more-inclined to unify CEO and chair positions. Board duality, the fraction of independent directors and directors’ age and nationality exhibit little relation with initial and aftermarket stock returns. In prescriptive terms, minority investors gain from the inclusion of female directors, especially when IPO firm directors are unencumbered by family-affiliation with other board members. Results therefore add to the clarion of calls for greater female board presence. (shrink)

The readability of 10-K reports, in terms of linguistic complexity, determines the usefulness of information disclosure for stakeholders, particularly individual investors. Since investors largely depend on the financial communication in 10-K reports, firms have an ethical and legal responsibility to present disclosures in a language investors can understand. However, motivated by self-interest, managers obfuscate such disclosures to mask their own actions and hide unfavourable information. Building on the managerial obfuscation hypothesis grounded in stakeholder-agency and ethical-sensitivity theories, I hypothesize and empirically (...) test the relationship between board gender diversity and the readability of narrative disclosure in 10-K reports. Based on a relatively large sample of Russell 3000 firms for the years 2002–2018, I find a significant positive impact of BGD on 10-K reports’ readability, which in turn improves firm performance. Channel analysis reveals that the findings are driven by female independent directors, and their representation on audit and compensation committees; however, board activity does not appear to drive this relationship. Finally, I find that although gender discrimination in the appointment of directors spurs complex readability, the BGD-readability relationship is consistent in gender-biased and non-discriminant firms. I also check the robustness of our main empirical results in several ways. My study has important regulatory and managerial implications in that corporate governance is an important determinant of the readability of disclosure documents. (shrink)

This study utilises higher objectives postulated in Islamic moral economy or themaqasid al-Shari’ahtheoretical framework’s novel approach in evaluating the ethical, social, environmental and financial performance of Islamic banks.Maqasid al-Shari’ahis interpreted as achieving social good as a consequence in addition to well-being and, hence, it goes beyond traditional (voluntary) social responsibility. This study also explores the major determinants that affectmaqasidperformance as expressed through disclosure analysis. By expanding the traditionalmaqasid al-Shari’ah,, we develop a comprehensive evaluation framework in the form of amaqasidindex, which (...) is subjected to a rigorous disclosure analysis. Furthermore, in identifying the main determinants of themaqasiddisclosure performance, panel data analysis is used by including several key variables alongside political and socio-economic environment, ownership structures, and corporate andShari’ahgovernance-related factors. The sample includes 33 full-fledged Islamic banks from 12 countries for the period of 2008–2016. The findings show that although during the nine-year period the disclosure ofmaqasidperformance of the sampled Islamic banks has improved, this is still short of ‘best practices’. Through panel data analysis, this study finds that the Muslim population indicator, CEO duality,Shari’ahgovernance, and leverage variables positively impact the disclosure ofmaqasidperformance. However, the effect of GDP, financial development and human development index of the country, its political and civil rights, institutional ownership, and a higher share of independent directors have an overall negative impact on themaqasidperformance. The findings reported in this study identify complex and multi-faceted relations between external market realities, corporate andShari’ahgovernance mechanisms, andmaqasidperformance. (shrink)

We examine three characteristics of audit committees and their impact on the financial reporting quality for Singapore-listed companies. The main finding is that financial reporting quality will be higher if audit committees have mixed expertise in accounting, finance, and/or supervisory. In addition, we do not find evidence that incremental independence of audit committees enhances financial reporting quality because audit committees already consist of a majority of independent directors. Finally, we fail to find any impact of overlapping membership on (...) audit and remuneration committees on financial reporting quality. Overall, the results have policy implications on improving corporate governance effectiveness in terms of financial reporting quality. (shrink)

On 19 October 2013, the Chinese government issued the Opinions on Further Regulation on Party and Political Leaders and Cadres Working Part-Time in Enterprises, also known as the 18th Decree, to regulate government officials’ employment with businesses. The 18th Decree is widely perceived as having had a significant impact on the use of independent directors with political backgrounds by firms, given the prevalence of this business practice. This paper examines the market reaction to the 18th Decree to ascertain (...) the value effect of political connections in China. We note a negative relationship between the political connections of independent directors and market reaction. We also note that the negative relationship between political connections and market reaction is moderated by ownership type and state of regional development. Specifically, we find that the negative relationship holds only for private firms in less developed regions. These results support our prediction that political connections add value to Chinese firms and that the value effect of political connection is contingent on institutional factors. (shrink)

This study examines the impact of board gender diversity on financial performance of listed Indian firms in a dynamic modelling framework. Using a firm-year unit of analysis, a sample of 148 publicly listed firms across multiple industries have been studied over a period of five financial years namely FY 2008–2009 to FY 2012–2013. Employing panel data analysis, percentage of women directors is taken as the independent variable and firm performance measured by return on assets and Tobin’s Q as (...) the dependent variables. The primary results of the study using ordinary least squares and fixed effects estimation models point towards a positive and significant relationship between percentage of independent women directors and firm performance. However, results are reversed when the theoretically superior Arellano Bond estimation is used. Findings of the study indicate that the number of companies with no IWDs is reducing across the 5 years of study. This may be due to external pressure created by stakeholders. Also, the number of companies with one IWD is increasing over the period of the study, while the number of companies with two or three or more directors is more or less the same. The number of two or three IWD companies remaining the same could arguably be due to lack of availability of independent directors who are women. (shrink)

Whether corporate strategic Environmental, Social, and Governance (ESG) disclosure can be effectively screened by external markets still needs more empirical support. Despite numerous studies confirming the positive impact of ESG, the issue of strategic ESG disclosure has yet to receive sufficient attention. This study examines the impact of ESG greenwashing on the cost of debt financing and stock returns using panel data of Chinese A-share listed corporates from 2012 to 2021. The study finds that external markets fail to recognize ESG (...) greenwashing in the short term, leading to a temporary reduction in the cost of debt financing and an increase in stock returns, but these effects are not lasting. Mechanism analysis shows that ESG greenwashing enhances corporate reputation and reduces the cost of debt financing through the reputation effect, stimulates investor sentiment, and improves stock returns through the sentiment effect. The study identifies management myopia, excessive power, financial distress, and information asymmetry as the main drivers. However, strong oversight by independent directors, involvement of Big Four audit firms, investor site visits, and high industry competition can mitigate these misleading effects. This research expands the understanding of the causes and economic consequences of corporate ESG greenwashing and provides empirical evidence for managing this phenomenon. (shrink)

AbstractBoardroom backscratching, or cronyism, is an unethical practice where CEOs conspire with directors to receive remuneration beyond performance- and market-related factors. Premised on the theory of planned behavior, this study investigates whether CEO generalist experience magnifies the likelihood of boardroom backscratching. Using 9482 firm-year observations spanning 1999–2018, our analysis shows that firms with greater CEO generalist managerial experience are more likely to engage in boardroom backscratching, via both cash- and equity-based compensation. We provide further evidence that backscratching firms with (...) CEOs that possess greater generalist experience tend to overinvest, particularly via non-capital expenditure, as a channel for empire building and private rent extraction. We also find that a higher portion of female independent directors sitting on the board and the compensation committee mitigates the positive relationship between CEO generalist managerial experience and boardroom backscratching, which we attribute to greater ethicality of, and increased monitoring exercised by, female independent directors. (shrink)