Is Environmental Governance Substantive or Symbolic? An Empirical Investigation

Abstract

The emergence of environmental governance practices raises a fundamental question as to whether they are substantive or symbolic. Toward that end, we analyze the relationship between a firm’s environmental governance and its environmental management as reflected in its ultimate outcome, environmental performance. We posit that substantive practices would bring changes in organizations, most notably in terms of improved environmental performance, whereas symbolic practices would portray organizations as environmentally committed without making meaningful changes to their operations. Focusing on a sample of environmentally sensitive firms, results are consistent with environmental governance mechanisms being predominantly part of a symbolic approach to manage stakeholder perceptions on environmental management, having little substantial impact on organizations. Statistical analyses show mostly that there is no relation between environmental governance mechanisms and environmental performance, measured in terms of regulatory compliance, pollution prevention, and environmental capital expenditures. However, there is some indication that environmental incentives are associated with pollution prevention. Interviews with corporate directors shed further light on these results by underlining that environmental governance mechanisms are employed at the board level to protect the organization from reputational and/or regulatory harm, but are not necessarily intended to proactively improve environmental performance.

This is a preview of subscription content, log in to check access.

Notes

  1. 1.

    For example, both Alcoa and DuPont had former World Wildlife Fund executives on their boards in 2009 (Alcoa proxy statement, March 16, 2009; DuPont proxy statement, March 20, 2009).

  2. 2.

    The Social Investment Forum (2010) reports that more than 10 % of assets under management in the United States (close to $3 trillion out of $25 trillion) are now invested under SRI criteria.

  3. 3.

    The monitoring function induces directors to protect shareholders’ (stakeholders’) interests by monitoring managers’ behavior. The advice function implies that board members shape and evaluate strategic decisions that will help facilitate access to the resources necessary for corporate success (Fama and Jensen 1983; Johnson et al. 1996; Zahra and Pearce 1989).

  4. 4.

    Environmental strategy is defined as an action plan “intended to manage the interface between business and the natural environment” (Sharma 2000, p. 682). The environmental literature depicts the environmental strategy construct as a continuum with a reactive strategy at one end, and a proactive strategy at the other (Aragón-Correa 1998). The objective of a firm with a reactive strategy is compliance with legal requirements, while a firm pursuing a proactive strategy aims for environmentally sustainable development (Hart 1995).

  5. 5.

    Environmental responsibility and good governance are significant elements of corporate reputation (Bebbington et al. 2008).

  6. 6.

    The generalizability of our results is limited to firms with characteristics similar to those of our sample firms.

  7. 7.

    In order to avoid noise caused by changes in governance policies following the introduction of the U.S. Sarbanes–Oxley Act (SOX), data was collected for post-SOX years, 2003–2008.

  8. 8.

    KLD conducts a detailed assessment of corporate social, environmental, and governance performance each year for almost 3,000 companies (KLD 2009). Environmental criteria examined in this assessment are listed in Appendix 1.

  9. 9.

    In some sense, this dichotomy in environmental performance parallels the distinction being drawn between mandatory and voluntary environmental disclosure (Berthelot et al. 2003).

  10. 10.

    The existence of an audit committee, financial expertise on the board and financial incentives in executive compensation were all shown to impact financial outcomes (e.g. see Bushman and Smith 2001; Goh 2009; Vafeas 2005).

  11. 11.

    These pieces of legislation cover energy, air, water, and chemical issues. A detailed list of the environmental regulations encompassed by the database is provided in Appendix 2.

  12. 12.

    The average ECE of $150.1 million is similar to the 2005 average ECE of $167.8 million reported by Cho and Patten (2008). These authors also reported that, on average, ECEs in their 2005 sample made up 0.57 % of the assets. ECEs in our sample roughly correspond to 0.49 % of assets ($150.1 million/$30,752 million), in line with these previous findings.

  13. 13.

    These results are in line with prior literature showing that greater cash flows are typical of corporations deciding to improve their environmental performance (Clarkson et al. 2011).

  14. 14.

    We also conducted logistic regression tests for each separate year and found a large increase in the model’s explanatory power when ECE and other economic variables are added. Hence, this appears to confirm the interpretation of our findings.

  15. 15.

    We also conducted logistic regression tests for each separate year and found a large increase in the model’s explanatory power when ECE and other economic variables are added. Hence, this appears to confirm the interpretation of our findings.

  16. 16.

    As indicated in Tables 3, 4, and 5, the sample size for models 1 and 2 is n = 180 while n = 219 for model 3. This is due to the fact that we lose at least one year’s observations in models 1 and 2 because they use lagged independent variables.

  17. 17.

    These results contrast with prior findings showing that economic performance is a driver of environmental performance and disclosure (Cormier and Magnan 2003; Al-Tuwaijri et al. 2004; Clarkson et al. 2011). This contrast might be explained by the specific nature of ECE in comparison to the broad scope of environmental performance or disclosure.

  18. 18.

    Interviews provide a deeper understanding of complex realities such as environmental governance (Miles and Huberman 1994). They also also allow for partial corroboration and triangulation of our above findings through qualitatively informed explanations (Modell 2005). In addition, they highlight the relationship between environmental governance, environmental performance, and ECEs from the perspective of those who have been directly exposed to these issues (Patton 2002).

  19. 19.

    Ashforth and Gibbs (1990) suggest that legitimacy management practices often exist in a gray area between substantive and symbolic.

Abbreviations

CEO:

Chief Executive Officer

CEPD:

Corporate Environmental Performance Database

ECE:

Environmental capital expenditure

GLS:

Generalized least squares

OLS:

Ordinary least squares

PPE:

Property, plants, and equipment

R&D:

Research and development

RCRA:

Resource Conservation and Recovery Act

ROA:

Return on assets

SEC:

U.S. Securities and Exchange Commission

SIC:

Standard Industrial Classification

SOX:

U.S. Sarbanes–Oxley Act

SRI:

Socially Responsible Investing

References

  1. Abbott, L. J., Parker, S., & Peters, G. F. (2004). Audit committee characteristics and restatements. Auditing: A Journal of Practice and Theory, 23(1), 69–87.

    Article  Google Scholar 

  2. Adams, R., Hermalin, B. E., & Weisbach, M. S. (2010). The role of boards of directors in corporate governance: A conceptual framework & survey. Journal of Economic Literature, 48(1), 58–107.

    Article  Google Scholar 

  3. Adams, C. A., & McNicholas, P. (2007). Making a difference: Sustainability reporting, accountability and organisational change. Accounting, Auditing & Accountability Journal, 20(3), 382–402.

    Article  Google Scholar 

  4. Aerts, W. (2005). Picking up the pieces: Impression management in the retrospective attributional framing of accounting outcomes. Accounting, Organizations and Society, 30(6), 493–517.

    Article  Google Scholar 

  5. Al-Tuwaijri, S. A., Christensen, T., & Hughes, K. E. (2004). The relations among environmental disclosure, environmental performance, and economic performance: A simultaneous approach. Accounting, Organizations and Society, 29(5–6), 447–471.

    Article  Google Scholar 

  6. Aragón-Correa, J. A. (1998). Strategic proactivity and firm approach to the natural environment. Academy of Management Journal, 41(5), 556–567.

    Article  Google Scholar 

  7. Armstrong, C., Guay, W., & Weber, J. (2010). The role of information and financial reporting in corporate governance and debt contracting. Journal of Accounting & Economics, 50(2–3), 179–234.

    Article  Google Scholar 

  8. Ashforth, B. E., & Gibbs, B. W. (1990). The double-edged of organizational legitimation. Organization Science, 1(2), 177–194.

    Article  Google Scholar 

  9. Bansal, P., & Clelland, I. (2004). Talking trash: Legitimacy, impression management, and unsystematic risk in the context of the natural environment. Academy of Management Journal, 47(1), 93–103.

    Article  Google Scholar 

  10. Bansal, P., & Kistruck, G. (2006). Seeing is (not) believing: Managing the impressions of the firm’s commitment to the natural environment. Journal of Business Ethics, 67(2), 165–180.

    Article  Google Scholar 

  11. Beasley, M. S., Carcello, J. V., Hermanson, D. R., & Lapides, P. D. (2000). Fraudulent financial reporting: Consideration of industry traits and corporate governance mechanisms. Accounting Horizons, 14(4), 441–454.

    Article  Google Scholar 

  12. Bebbington, J. (2007). Changing organizational attitudes and culture through sustainability accounting. In J. Unerman, J. Bebbington, & B. O’Dwyer (Eds.), Sustainability accounting and accountability (pp. 226–242). New York: Routledge.

    Google Scholar 

  13. Bebbington, J., Larrinaga, C., & Moneva, J. M. (2008). Corporate social reporting and reputation risk management. Accounting, Auditing and Accountability Journal, 21(3), 337–361.

    Article  Google Scholar 

  14. Bebchuk, L. A., & Weisbach, M. S. (2010). The state of corporate governance research. Review of Financial Studies, 23(3), 939–961.

    Article  Google Scholar 

  15. Bédard, J., & Gendron, Y. (2010). Strengthening the financial reporting system: Can audit committees deliver? International Journal of Auditing, 14, 174–210.

    Google Scholar 

  16. Bédard, J., Marrakchi-Chtourou, S., & Courteau, L. (2004). The effect of audit committee expertise, independence and activity on aggressive earnings management. Auditing: A Journal of Practice and Theory, 23(2), 13–35.

    Article  Google Scholar 

  17. Berrone, P., & Gomez-Mejia, L. R. (2009). Environmental performance and executive compensation: An integrated agency-institutional perspective. Academy of Management Journal, 52(1), 103–126.

    Article  Google Scholar 

  18. Berthelot, S., Cormier, D., & Magnan, M. (2003). Corporate environmental disclosure: Review and synthesis. Journal of Accounting Literature, 22, 1–44.

    Google Scholar 

  19. Birkin, F., Edwards, P., & Woodward, D. (2005). Accounting’s contribution to a conscious cultural evolution: An end to sustainable development. Critical Perspectives on Accounting, 16(3), 185–208.

    Article  Google Scholar 

  20. Boone, A. L., Casares Field, L., Karpoff, J. M., & Raheja, C. G. (2007). The determinants of corporate board size and composition: An empirical analysis. Journal of Financial Economics, 85(1), 66–101.

    Article  Google Scholar 

  21. Brennan, N. M., & Solomon, J. F. (2008). Corporate governance, accountability and mechanisms of accountability: An overview. Accounting, Auditing and Accountability Journal, 21(7), 885–906.

    Article  Google Scholar 

  22. Buhr, N. (1998). Environmental performance, legislation and annual report disclosure: The case of acid rain and Falconbridge. Accounting, Auditing and Accountability Journal, 11(2), 163–190.

    Article  Google Scholar 

  23. Bushman, R. M., & Smith, A. J. (2001). Financial accounting information and corporate governance. Journal of Accounting and Economics, 32(1–3), 237–333.

    Article  Google Scholar 

  24. Buysse, K., & Verbeke, A. (2003). Proactive environmental strategies: A stakeholder management perspective. Strategic Management Journal, 24(5), 453–470.

    Article  Google Scholar 

  25. Cadbury, A. (1992). Report of the committee on the financial aspects of corporate governance. London: Gee Publishing.

    Google Scholar 

  26. Campbell, K., & Mínguez-Vera, A. (2008). Gender diversity in the boardroom and firm financial performance. Journal of Business Ethics, 83(3), 435–451.

    Article  Google Scholar 

  27. Cerbioni, F., & Parbonetti, A. (2007). Exploring the effects of corporate governance on intellectual capital disclosure: An analysis of European biotechnology companies. European Accounting Review, 16(4), 791–826.

    Article  Google Scholar 

  28. Cheng, S. (2008). Board size and the variability of corporate performance. Journal of Financial Economics, 87(1), 157–176.

    Article  Google Scholar 

  29. Chhaochharia, V., & Grinstein, Y. (2009). CEO compensation and board structure. Journal of Finance, 64(1), 231–261.

    Article  Google Scholar 

  30. Cho, C. H. (2009). Legitimation strategies used in response to environmental disaster: A French case study of Total S.A.’s Erika and AZF incidents. European Accounting Review, 18(1), 33–62.

    Article  Google Scholar 

  31. Cho, C. H., Freedman, M., & Patten, D. M. (2012). Corporate disclosure of environmental capital expenditures: A test of alternative theories. Accounting, Auditing and Accountability Journal, 25(3), 486–507.

    Article  Google Scholar 

  32. Cho, C. H., & Patten, D. M. (2007). The role of environmental disclosures as tools of legitimacy: A research note. Accounting, Organizations and Society, 32(7–8), 639–647.

    Article  Google Scholar 

  33. Cho, C. H., & Patten, D. M. (2008). Did the GAO get it right? Another look at corporate environmental disclosure. Social and Environmental Accountability Journal, 28(1), 21–32.

    Article  Google Scholar 

  34. Cho, C. H., Roberts, R. W., & Patten, D. M. (2010). The language of US corporate environmental disclosure. Accounting, Organizations and Society, 35(4), 431–443.

    Article  Google Scholar 

  35. Clarkson, P. M., Li, Y., & Richardson, G. D. (2004). The market valuation of environmental capital expenditures by pulp and paper companies. The Accounting Review, 79(2), 329–353.

    Article  Google Scholar 

  36. Clarkson, P. M., Li, Y., Richardson, G. D., & Vasvari, F. P. (2008). Revisiting the relation between environmental performance and environmental disclosure: An empirical analysis. Accounting, Organizations and Society, 33(4–5), 303–327.

    Article  Google Scholar 

  37. Clarkson, P. M., Li, Y., Richardson, G. D., & Vasvari, F. P. (2011). Does it really pay to be green? Determinants and consequences of proactive environmental strategies. Journal of Accounting and Public Policy, 30(2), 122–144.

    Article  Google Scholar 

  38. Cohen, J., Krishnamoorthy, G., & Wright, A. (2004). The corporate governance mosaic and financial reporting quality. Journal of Accounting Literature, 23, 87–152.

    Google Scholar 

  39. Collier, P. M. (2008). Stakeholder accountability: A field study of the implementation of a governance improvement plan. Accounting, Auditing and Accountability Journal, 21(7), 933–954.

    Article  Google Scholar 

  40. Conference Board of Canada. (2008). The role of boards of directors in corporate social responsibility. Canada.

  41. Cooper, D., & Morgan, W. (2008). Case study research in accounting. Accounting Horizons, 22(2), 159–178.

    Article  Google Scholar 

  42. Cormier, D., Gordon, I., & Magnan, M. (2004). Corporate environmental disclosure: Contrasting management’s perceptions with reality. Journal of Business Ethics, 49(2), 143–165.

    Article  Google Scholar 

  43. Cormier, D., & Magnan, M. (2003). Environmental reporting management: A continental European perspective. Journal of Accounting and Public Policy, 22(1), 43–62.

    Article  Google Scholar 

  44. Cormier, D., & Magnan, M. (2004). The impact of the web on information and communication modes: The case of corporate environmental disclosure. International Journal of Technology Management, 27(4), 393–416.

    Article  Google Scholar 

  45. Daily, C. M., Dalton, D. R., & Cannella, A. A, Jr. (2003). Corporate governance: Decades of dialogue and data. The Academy of Management Review, 28(3), 371–382.

    Google Scholar 

  46. Dechow, P. M., Sloan, R. G., & Sweeney, A. P. (1996). Causes and consequences of earnings manipulations: An analysis of firms subject to enforcement actions by the SEC. Contemporary Accounting Research, 13(1), 1–36.

    Article  Google Scholar 

  47. Deegan, C. (2002). The legitimising effect of social and environmental disclosures—A theoretical foundation. Accounting, Auditing & Accountability Journal, 15(3), 282–311.

    Article  Google Scholar 

  48. Deloitte. (2011). Directors’ Alerts: 11 issues for 2011. http://www.corpgov.deloitte.com/site/CanEng/board/.

  49. Deutsch, Y. (2005). The impact of board composition on firms’ critical decisions: A meta-analytic review. Journal of Management, 31(3), 424–444.

    Article  Google Scholar 

  50. Deutsch, Y. (2007). The influence of outside directors’ stock-option compensation on firms’ R&D. Corporate Governance: An International Review, 15(5), 816–827.

    Article  Google Scholar 

  51. Dowling, J., & Pfeffer, J. (1975). Organizational legitimacy: Social values and organizational behaviour. Pacific Sociological Review, 18(1), 122–136.

    Article  Google Scholar 

  52. Elkington, J. (2006). Governance for sustainability. Corporate Governance: An International Review, 14(6), 522–529.

    Article  Google Scholar 

  53. Faleye, O., Hoitash, R., & Hoitash, U. (2011). The costs of intense board monitoring. Journal of Financial Economics, 101(1), 160–181.

    Article  Google Scholar 

  54. Fama, E., & Jensen, M. (1983). Separation of ownership and control. Journal of Law and Economics, 26(3), 301–325.

    Article  Google Scholar 

  55. Goh, B. (2009). Audit committees, boards of directors, and remediation of material weaknesses in internal control. Contemporary Accounting Research, 26(2), 549–579.

    Article  Google Scholar 

  56. Graves, S. B., & Waddock, S. A. (1994). Institutional owners and corporate social performance. Academy of Management Journal, 37(4), 1034–1046.

    Article  Google Scholar 

  57. Haniffa, R. M., & Cooke, T. E. (2005). The impact of culture and governance on corporate social reporting. Journal of Accounting and Public Policy, 24(5), 391–430.

    Article  Google Scholar 

  58. Hart, S. L. (1995). A natural resource-based view of the firm. Academy of Management Review, 20(4), 986–1014.

    Google Scholar 

  59. Healy, P. M., & Whalen, J. M. (1999). A review of the earnings management literature and its implications for standard setting. Accounting Horizons, 13(4), 365–383.

    Article  Google Scholar 

  60. Henriques, I., & Sadorsky, P. (1996). The determinants of an environmentally responsive firm: An empirical approach. Journal of Environmental Economics and Management, 30(3), 381–395.

    Article  Google Scholar 

  61. Henriques, I., & Sadorsky, P. (1999). The relationship between environmental commitment and managerial perceptions of stakeholder importance. Academy of Management Journal, 42(1), 87–99.

    Article  Google Scholar 

  62. Hillman, A. J., & Dalziel, T. (2003). Boards of directors and firm performance: integrating agency and resource dependence perspectives. Academy of Management Review, 28(3), 383–396.

    Google Scholar 

  63. Hillman, A. J., Keim, G. D., & Luce, R. A. (2001). Board composition and stakeholder performance: Do stakeholder directors make a difference? Business and Society, 40(3), 295–314.

    Article  Google Scholar 

  64. Hoitash, U., Hoitash, R., & Bedard, J. (2009). Corporate governance and internal control over financial reporting: A comparison of regulatory regimes. The Accounting Review, 84(3), 839–867.

    Article  Google Scholar 

  65. Hoskisson, R. E., Johnson, R. A., & Moesel, D. D. (1994). Corporate divestiture intensity in restructuring firms: Effects of governance, strategy, and performance. Academy of Management Journal, 37(5), 1207–1251.

    Article  Google Scholar 

  66. Hughes, S. B., Anderson, A., & Golden, S. (2001). Corporate environmental disclosures: Are they useful in determining environmental performance? Journal of Accounting and Public Policy, 20(3), 217–240.

    Article  Google Scholar 

  67. Hunt, C. B., & Auster, E. R. (1990). Proactive environmental management: Avoiding the toxic trap. Sloan Management Review, 31(2), 7–18.

    Google Scholar 

  68. Ibrahim, N. A., Howard, D. P., & Angelidis, J. P. (2003). Board members in the service industry: An empirical examination of the relationship between corporate social responsibility orientation and directorial type. Journal of Business Ethics, 47(4), 393–401.

    Article  Google Scholar 

  69. Johnson, J. L., Daily, C. M., & Ellstrand, A. E. (1996). Boards of directors: A review and research agenda. Journal of Management, 22(3), 409–438.

    Article  Google Scholar 

  70. Johnson, R. A., & Greening, D. W. (1999). The effects of corporate governance and institutional ownership types on corporate social performance. Academy of Management Journal, 42(5), 564–576.

    Article  Google Scholar 

  71. Johnston, D. (2005). An investigation of regulatory and voluntary environmental capital expenditures. Journal of Accounting and Public Policy, 24(3), 175–206.

    Article  Google Scholar 

  72. Johnston, D., & Rock, S. (2005). Earnings management to minimize superfund clean-up and transaction costs. Contemporary Accounting Research, 22(3), 617–642.

    Article  Google Scholar 

  73. Johnston, D. M., Sefcik, S. E., & Soderstrom, N. S. (2008). The value relevance of greenhouse gas emissions allowances: An exploratory study in the related United States SO2 market. European Accounting Review, 17(4), 747–764.

    Article  Google Scholar 

  74. Kassinis, G., & Vafeas, N. (2002). Corporate boards and outside stakeholders as determinants of environmental litigation. Strategic Management Journal, 23(5), 399–415.

    Article  Google Scholar 

  75. KLD. (2007). Environmental, social and governance ratings criteria. http://www.kld.com/research/data/KLD_Ratings_Methodology.pdf.

  76. KLD. (2009). KLD ESG research and ratings methodology. http://www.kld.com/research/socrates/index.html.

  77. Klein, A. (2002). Audit committee, board of director characteristics, and earnings management. Journal of Accounting and Economics, 33(3), 375–400.

    Article  Google Scholar 

  78. Kolk, A. (2008). Sustainability, accountability and corporate governance: Exploring multinationals’ reporting practices. Business Strategy and the Environment, 17(1), 1–15.

    Article  Google Scholar 

  79. Kor, Y. Y. (2006). Direct and interaction effects of top management team and board compositions on R&D investment strategy. Strategic Management Journal, 27(11), 1081–1099.

    Article  Google Scholar 

  80. Kroll, M., Walters, B., & Wright, P. (2008). Board vigilance, director experience, and corporate outcomes. Strategic Management Journal, 29(4), 363–382.

    Article  Google Scholar 

  81. Leblanc, R., & Gillies, J. W. (2005). Inside the boardroom: how boards really work and the coming revolution in corporate governance. Toronto: Wiley.

    Google Scholar 

  82. Luoma, P., & Goodstein, J. (1999). Stakeholders and corporate boards: Institutional influences on board composition and structure. Academy of Management Journal, 42(5), 553–563.

    Article  Google Scholar 

  83. Magnan, M., & St-Onge, S. (2005). The impact of profit sharing on the performance of financial services firms. The Journal of Management Studies, 42(4), 761–791.

    Article  Google Scholar 

  84. Mahoney, L. S., & Thorne, L. (2005). Corporate social responsibility and long-term compensation: Evidence from Canada. Journal of Business Ethics, 57(3), 241–253.

    Article  Google Scholar 

  85. Mallin, C. A., & Michelon, G. (2011). Board reputation attributes and corporate social performance: An empirical investigation of the US Best Corporate Citizens. Accounting and Business Research, 41(2), 119–144.

    Article  Google Scholar 

  86. Merkl-Davies, D. M., & Brennan, N. M. (2007). Discretionary disclosure strategies in corporate narratives: Incremental information or impression management. Journal of Accounting Literature, 26, 116–194.

    Google Scholar 

  87. Meyer, J. W., & Rowan, B. (1977). Institutionalized organizations: Formal structure as myths and ceremony. American Journal of Sociology, 83(2), 340–363.

    Article  Google Scholar 

  88. Miles, M. B., & Huberman, A. M. (1994). Qualitative data analysis: An expanded sourcebook. Thousand Oaks: Sage Publications.

    Google Scholar 

  89. Milnes, R. (2009). Acting in the best interests of the corporation: To whom is this duty owed by Canadian directors? The Supreme Court of Canada in the BCE case clarifies the duty. Banking and Finance Law Review, 24(3), 601.

    Google Scholar 

  90. Modell, S. (2005). Triangulation between case study and survey methods in management accounting research: An assessment of validity implications. Management Accounting Research, 16(2), 231–254.

    Article  Google Scholar 

  91. Neu, D., Warsame, H., & Pedwell, K. (1998). Managing public impressions: Environmental disclosures in annual reports. Accounting, Organizations and Society, 23(3), 265–282.

    Article  Google Scholar 

  92. Nickerson, J. A., & Silverman, B. S. (2003). Why firms want to organize efficiently and what keeps them from doing so: Inappropriate governance, performance, and adaptation in a deregulated industry. Administrative Science Quarterly, 48(3), 433–465.

    Article  Google Scholar 

  93. OECD. (2004). Principles of Corporate Governance. Paris: Organization for Economic Cooperation and Development.

    Google Scholar 

  94. Osma, B. G. (2008). Board independence and real earnings management: The case of R&D expenditure. Corporate Governance: An International Review, 16(2), 116–131.

    Article  Google Scholar 

  95. Patten, D. M. (1992). Intra-industry environmental disclosures in response to the Alaskan oil spill: A note on legitimacy theory. Accounting, Organizations and Society, 17(5), 471–475.

    Article  Google Scholar 

  96. Patten, D. M. (2002). The relation between environmental performance and environmental disclosure: A research note. Accounting, Organizations and Society, 27(8), 763–773.

    Article  Google Scholar 

  97. Patten, D. M. (2005). The accuracy of financial report projections of future environmental capital expenditures: A research note. Accounting, Organizations and Society, 30(5), 457–468.

    Article  Google Scholar 

  98. Patton, M. Q. (2002). Qualitative research and evaluation methods. Newbury Park: Sage Publications.

    Google Scholar 

  99. Renneboog, L. D. R., ter Horst, J., & Zhang, C. (2008). Socially responsible investments: Institutional aspects, performance and investor behavior. Journal of Banking & Finance, 32(9), 1723–1742.

    Article  Google Scholar 

  100. RMG. (2001). CEPD data dictionary. Rockville: Risk Metrics Group.

    Google Scholar 

  101. Rossouw, G. J. (2005). Business ethics and corporate governance: A global survey. Business and Society, 44(1), 32–39.

    Article  Google Scholar 

  102. Sacconi, L. (2006). A social contract account for CSR as an extended model of corporate governance (I): Rational bargaining and justification. Journal of Business Ethics, 68(3), 259–281.

    Article  Google Scholar 

  103. Schwartz, M. S., Dunfee, T. W., & Kline, M. J. (2005). Tone at the top: An ethics code for directors? Journal of Business Ethics, 58(1–3), 79–100.

    Article  Google Scholar 

  104. SEC. (2008). Electronic code of federal regulation. http://www.gpoaccess.gov/ecfr.

  105. Sharma, S. (2000). Managerial interpretations and organizational context as predictors of corporate choice of environmental strategy. Academy of Management Journal, 47(4), 681–697.

    Article  Google Scholar 

  106. Sharma, S., & Vredenberg, H. (1998). Proactive corporate environmental strategy and the development of competitively valuable organizational capabilities. Strategic Management Journal, 19, 719–853.

    Google Scholar 

  107. Social Investment Forum. (2010). 2010 Report on Socially Responsible Investing Trends in the United States. http://www.ussif.org/resources/pubs.

  108. Solomon, J. F. (2007). Corporate governance and accountability. New York: Wiley.

    Google Scholar 

  109. Suchman, M. C. (1995). Managing legitimacy: Strategic and institutional approaches. Academy of Management Review, 20(3), 571–610.

    Google Scholar 

  110. SustainAbility. (2008). Stakeholder engagement and the board: Integrating best practices. http://www.sustainability.com.

  111. Tedeschi, J. T., & Melburg, V. (1984). Impression management and influence in organization. In S. B. Bacharach & E. J. Lawler (Eds.), Research in the sociology of organizations (pp. 31–58). Greenwich: JAI Press.

    Google Scholar 

  112. Thomas, S., Repetto, R., & Dias, D. (2007). Integrated environmental and financial performance metrics for investment analysis and portfolio management. Corporate Governance: An International Review, 15(3), 421–426.

    Article  Google Scholar 

  113. Tihanyi, L., Johnson, R. A., Hoskisson, R. E., & Hitt, M. A. (2003). Institutional ownership differences and international diversification: The effects of boards of directors and technological opportunity. Academy of Management Journal, 46(2), 195–211.

    Article  Google Scholar 

  114. Tilt, C. A. (2007). External stakeholders’ perspectives on sustainability reporting. In J. Unerman, J. Bebbington, & B. O’Dwyer (Eds.), Sustainability accounting and accountability (pp. 104–126). New York: Routledge.

    Google Scholar 

  115. Tribo, J. A., Berrone, P., & Surroca, J. (2007). Do the type and number of blockholders influence R&D investments? New evidence from Spain. Corporate Governance: An International Review, 15(5), 828–842.

    Article  Google Scholar 

  116. Vafeas, N. (2005). Audit committees, boards, and the quality of reported earnings. Contemporary Accounting Research, 22(4), 1093–1122.

    Article  Google Scholar 

  117. Wang, J., & Dewhirst, H. D. (1992). Boards of directors and stakeholder orientation. Journal of Business Ethics, 11(2), 115–123.

    Article  Google Scholar 

  118. Westphal, J. D., & Graebner, M. E. (2010). A matter of appearances: How corporate leaders manage the impressions of financial analysts about the conduct of their boards. Academy of Management Journal, 53(1), 15–43.

    Article  Google Scholar 

  119. Westphal, J. D., & Zajac, E. J. (1994). Substance and symbolism in CEOs’ long-term incentive plans. Administrative Science Quarterly, 39(3), 367–390.

    Article  Google Scholar 

  120. Westphal, J. D., & Zajac, E. J. (1998). The symbolic management of stockholders: Corporate governance reforms and shareholder reactions. Administrative Science Quarterly, 43(1), 127–153.

    Article  Google Scholar 

  121. White, R., & Hanson, D. (2002). Corporate self, corporate reputation and corporate annual reports: Re-enrolling Goffman. Scandinavian Journal of Management, 18(3), 285–301.

    Article  Google Scholar 

  122. Worldwatch (2009). State of the World 2009 at a Glance. http://www.worldwatch.org/node/5988.

  123. Yuthas, K., Rogers, R., & Dillard, J. F. (2002). Communicative action and corporate annual reports. Journal of Business Ethics, 41(1–2), 141–157.

    Article  Google Scholar 

  124. Zahra, S. A., & Pearce, J. A, I. I. (1989). Boards of directors and corporate financial performance: A review and integrative model. Journal of Management, 15(2), 291–334.

    Article  Google Scholar 

  125. Zajac, E. J., & Westphal, J. D. (1995). Accounting for the explanations of CEO compensation: Substance and symbolism. Administrative Science Quarterly, 40(2), 283–308.

    Article  Google Scholar 

Download references

Acknowledgments

We would like to thank Emilio Boulianne, Nola Buhr, Denis Cormier, Giovanna Michelon, Den Patten, and participants in parallel sessions of the 2012 Annual Meeting of the American Accounting Association, the 34th Congrès de l’Association Francophone de Comptabilité, the 33rd European Accounting Association Annual Congress in Istanbul, the 21st International Congress on Social and Environmental Accounting Research in Saint Andrews, the 2010 and 2011 North American Congress on Social and Environmental Accounting Research (CSEAR Summer Schools in North America) in Orlando and Montreal for their comments and suggestions on previous versions of the paper. Financial support from the Social Sciences and Humanities Research Council of Canada, the Ordre des Comptables Agréés du Québec, the Lawrence Bloomberg Chair in Accountancy (Concordia University), the RBC Professorship in Responsible Organizations (Concordia University), and the École de comptabilité and the Faculté des Sciences de l’Administration of Université Laval is gratefully acknowledged. Also special thanks to our informants who generously donated their time for this study.

Author information

Affiliations

Authors

Corresponding author

Correspondence to Charles H. Cho.

Appendices

Appendices

Appendix 1: KLD Environmental Rating Criteria

Strengths

  • Beneficial Products & Services

  • Pollution Prevention

  • Recycling

  • Alternative Fuels

  • Communications

  • Environment Management Systems

  • Other Strengths

Concerns

  • Hazardous Waste

  • Regulatory Problems

  • Ozone Depleting Chemicals

  • Substantial Emissions

  • Agricultural Chemicals

  • Climate Change

  • Other Concerns

Appendix 2: Regulation Acts Covered by the Corporate Environmental Performance Database (CEPD)

  • Atomic Energy Act

  • Clean Air Act

  • Clean Water Act

  • Endangered Species Act

  • Insecticide, Fungicide and Rodenticide Act

  • Mining Safety and Health Act

  • Safe Drinking Water Act

  • Toxic Substances Control Act

The CEPD also provides information on the Resource Conservation and Recovery Act (RCRA). This information was left out of the variables environmental violations and environmental fines following the recommendations of the database builders. Indeed, the RiskMetrics Group mentions that:

[The RCRA] programs requires a company to assess, and if necessary clean up, contamination at active industrial sites as a condition of retaining its RCRA permit to treat, store or dispose of hazardous waste […]. Because it largely represents an obligation to clean up sites that were contaminated at some past date when waste disposal standards were less restrictive, however, waste cleanup responsibility should not be interpreted as evidence that a company violated any environmental law or that current management is not addressing environmental issues in a responsible manner. (RMG 2001, p. 12)

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Rodrigue, M., Magnan, M. & Cho, C.H. Is Environmental Governance Substantive or Symbolic? An Empirical Investigation. J Bus Ethics 114, 107–129 (2013). https://doi.org/10.1007/s10551-012-1331-5

Download citation

Keywords

  • Environmental performance
  • Environmental regulation
  • Governance
  • Substantive management
  • Symbolic management