Abstract
Manuscript type: Empirical
Research Question/Issue: The current ecological crisis requires boards of directors to tackle environmental concerns and manage dependencies with the external environment in highly dynamic conditions. Proactive environmental strategies seek to establish alternative and innovative processes and products that create new market opportunities. By mobilizing the notion of board demographic faultlines, we investigate their link with proactive environmental strategies and the influence of the internal board dynamics and
environmental factors on this relationship.
Research Findings/Insights: The multilevel regression analysis of a seven-year sample of UK boards reveals that demographic faultlines hinder their information processing in adopting proactive environmental strategies. The results also show that the negativerelationship between demographic faultlines and PESs is attenuated by the social similarity of the CEO and chair in the same subgroup and by the financial materiality of the natural environment.
Theoretical/Academic Implications: This study draws on faultline theory to analyze how the structure of board diversity through the alignment of multiple directors’ demographic attributes affects board dynamics by creating polarized boards that shape sustainability decisions. This study underscores the disruptive effect of having socially distanced subgroups within the board and the salience of board leaders’ social similarity and environmental factors in attenuating their dysfunctional effects.
Practitioner/Policy Implications: Board diversity is considered key to improving board decision-making. By situating our empirical investigation in a country with a corporate governance model that fosters diversity in a dual leadership board structure that has influenced other countries’ governance models, this study provides insights for policymakers and market participants on the unintended effects of the global call for board diversity on firms’ proactive environmental stance. Our results call for establishing procedures to incentivize board socialization and facilitate directors’ information processing.
Research Question/Issue: The current ecological crisis requires boards of directors to tackle environmental concerns and manage dependencies with the external environment in highly dynamic conditions. Proactive environmental strategies seek to establish alternative and innovative processes and products that create new market opportunities. By mobilizing the notion of board demographic faultlines, we investigate their link with proactive environmental strategies and the influence of the internal board dynamics and
environmental factors on this relationship.
Research Findings/Insights: The multilevel regression analysis of a seven-year sample of UK boards reveals that demographic faultlines hinder their information processing in adopting proactive environmental strategies. The results also show that the negativerelationship between demographic faultlines and PESs is attenuated by the social similarity of the CEO and chair in the same subgroup and by the financial materiality of the natural environment.
Theoretical/Academic Implications: This study draws on faultline theory to analyze how the structure of board diversity through the alignment of multiple directors’ demographic attributes affects board dynamics by creating polarized boards that shape sustainability decisions. This study underscores the disruptive effect of having socially distanced subgroups within the board and the salience of board leaders’ social similarity and environmental factors in attenuating their dysfunctional effects.
Practitioner/Policy Implications: Board diversity is considered key to improving board decision-making. By situating our empirical investigation in a country with a corporate governance model that fosters diversity in a dual leadership board structure that has influenced other countries’ governance models, this study provides insights for policymakers and market participants on the unintended effects of the global call for board diversity on firms’ proactive environmental stance. Our results call for establishing procedures to incentivize board socialization and facilitate directors’ information processing.
| Original language | English |
|---|---|
| Pages (from-to) | 833-855 |
| Number of pages | 23 |
| Journal | Corporate Governance: An International Review |
| Volume | 32 |
| Issue number | 5 |
| Early online date | 6 Feb 2024 |
| DOIs | |
| Publication status | E-pub ahead of print - 6 Feb 2024 |
Bibliographical note
Funding Information:We appreciate the comments received from participants at the 30th International Congress on Social and Environmental Accounting Research and the EURAM 2021 Conference, as well as a seminar held at the Universidad de Burgos. We are also grateful for the feedback received from Alessandro Zattoni during the 2021 CGIR/ICGS Doctoral Colloquium and Paper Development Workshop, and Francesca Cuomo on early versions of the paper. Nicolas Garcia‐Torea acknowledges the financial support provided by the Spanish Ministry of Science and Innovation (TED2021‐129520B‐I00), Agencia Nacional de Investigación (PID2021‐122389OB‐I00), and Junta de Castilla y León (BU069P20).
Publisher Copyright:
© 2024 The Authors. Corporate Governance: An International Review published by John Wiley & Sons Ltd.
Research Groups and Themes
- AF Accountability Sustainability and Governance