The influence of board composition on CSR quality: Comparison of stakeholder and shareholder-oriented countries

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Society has become increasingly aware of the environmental, societal, and ethical consequences of activities of companies. This awareness is strengthened by major social and environmental scandals. Companies may publish a corporate sustainability report (CSR) in order to signal that they take care of their environmental, social, and ethical responsibilities or to preserve their legitimacy towards society. While these CSR could potentially be a very useful, the quality of these reports is, due to its voluntary nature, often taken into question. This study explores the role of the composition of the board of directors on the CSR quality. It is argued that board diversity, board independence, and board expertise gives new insights and other perspectives and therefore increases the monitoring ability of the board of directors and CSR quality. Using data from 215 companies listed on the major European indices in the period 2013-2016, this study investigates the relationship between measures of the composition of the board of directors and the CSR quality. In order to measure the company’s CSR quality, the application of the (external) assurance standards and references to sustainability guidelines in the CSR, collected by the Global Reporting Initiative (GRI) database, are used. The results suggest that board diversity, board independence, and board expertise individually rarely increase the CSR quality, but interactions between these board composition characteristics can increase the CSR quality. In particular, board independence and board expertise are useful in these interactions effects in order to increase CSR quality. In addition, companies located in stakeholder-oriented countries have higher CSR quality compared to companies located in shareholder-oriented countries.
Faculteit der Managementwetenschappen