The Effect of Board Composition on Corporate Social Responsibility Decoupling

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In the last decades, corporate social responsibility (CSR) has become increasingly important for companies in order to deal with pressure from stakeholders and society. Accordingly, more and more firms communicate and report about their CSR efforts. However, for some firms their external actions are not in balance with their internal actions. This gap is called CSR decoupling and could be divided into brownwashing and greenwashing. According to the literature, the board of directors, as an essential corporate governance mechanism could influence this practice. Therefore, this study investigated the relationship between the composition of the board and the engagement in CSR decoupling. In addition, the moderating effect of country orientation is examined. This study used a fixed-effect regression model with a total of 44.690 firm-year observations from 2010 until 2019. In contrast to the expectations, a positive significant relationship was found between board monitoring effectiveness and CSR decoupling. The characteristics board gender diversity and board expertise also showed a positive significant relationship with CSR decoupling, while board independence did not show any significant results. The additional analysis provides an explanation by showing the significant positive effect of board monitoring effectiveness on the internal actions a firm undertakes, which leads to brownwashing practices. This study can be considered as exploratory in nature, and future research should investigate more about the corporate governance drivers of CSR decoupling.
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