This paper examines the relationships between corporate governance and corporate sustainability by focusing on two main components of companies’ governance structure: boards of directors (BoDs) and investor relations officers (IROs). We propose an original empirical strategy based on the 120 biggest French capitalizations for the year 2013, allowing us to measure boards of directors’ independence and expertise, as well as investor relations officers’ convictions and communication on corporate sustainability. Our results show that corporate governance has an ambiguous impact on corporate sustainability because of opposing forces: internal, external and intermediate forces. On the one hand, the higher the proportion of inside directors, the higher the company’s environmental and governance performance, while the higher the proportion of general experts in the board room, the lower the company’s governance performance. On the other hand, investor relations officers’ beliefs that corporate sustainability is primarily driven by investors’ ethical values appear negatively related to companies’ governance performance. In sum, corporate sustainability appears positively related to internal forces (inside directors) and negatively related to external forces (general expert directors and investor activist engagement). The results of this study demonstrate the need to carry out efforts to train BoDs (specifically inside directors) and IROs to respond to corporate sustainability and to take more of a leadership role in this area.
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IR is an abbreviation of investor relations. IRO is an abbreviation of investor relations officer. In this study, both the abbreviations and the long versions of these two expressions are used interchangeably.
Corporate sustainability or corporate social responsibility (CSR) can be defined considering three main dimensions: environmental, social and governance (the so-called ESG factors). The ESG acronym describes corporate social responsibility and governance actions of a firm. In this paper, ESG and CSR data and ESG and CSR performance could be treated as synonyms considering that ESG performance is used by the stock market as a proxy of company’s integration of CSR in their strategy.
Socially responsible investment is “an investment discipline that considers ESG criteria to generate long-term competitive financial returns and positive societal impact” (US-SIF 2015).
The French sustainability rating agency ARESE was transformed and became Vigeo in 2002. We assume that former ARESE data and Vigeo data are similar as the same methodology applies.
In the Vigeo database, two other criteria are present: human rights and community involvement. However, those criteria are not activated for all sectors, and therefore, not all companies in the sample are systematically rated on those two dimensions. Hence, following the literature and given the possible issue of missing data, we choose not to take those two dimensions into account.
AFEP (Association Française des Entreprises Privées) and MEDEF (Mouvement des Entreprises De France) are two associations representative of business at the national level.
Firms are allowed to adopt a “comply or explain” approach. Most firms apply all criteria of independence. We take here firm disclosure in order to evaluate the impact of independence as defined by practitioners. We do not consider stricter definitions of independence (see Crespí-Cladera and Pascual-Fuster 2014 for discussion).
IROs convictions are not a measure of corporate sustainability performance.
We do not report here the bivariate outcome model coefficients for all the estimations, only for the bivariate Probit models that are significant, but they are available upon request.
Only significant coefficients are reported here. Full tables of marginal effects are available upon request.
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We thank Vigeo and Ethics & Boards for granting us access to their data and the French Investor Relations Professional Association (CLIFF) for helping us in gathering the data on Investors Relations practices in the top French listed companies. Patricia Crifo acknowledges the support of the chair for Sustainable Finance and Responsible Investment (chair FDIR—Toulouse IDEI & Ecole Polytechnique) and Research program Investissements d’Avenir (ANR-11-IDEX-0003/Labex Ecodec/ANR-11-LABX-0047). Elena Escrig Olmedo acknowledges the support of Group SoGReS-MF (Sustainability of Organizations and Social Responsibility Management–Financial Markets) and the financial support provided by Grant E-2013-10 funded by Universitat Jaume I. Nicolas Mottis acknowledges the support of the chair for Energy and prosperity, finance and evaluation of energy transition.
Conflict of interest
The authors declare that they have no conflict of interest.
This study does not contain any studies with human participants or animals performed by any of the authors.
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Crifo, P., Escrig-Olmedo, E. & Mottis, N. Corporate Governance as a Key Driver of Corporate Sustainability in France: The Role of Board Members and Investor Relations. J Bus Ethics 159, 1127–1146 (2019). https://doi.org/10.1007/s10551-018-3866-6
- Investor relations officers (IROs)
- Board of directors (BoDs)
- Environmental Social and governance (ESG) criteria
- Socially responsible investment (SRI)
- Corporate sustainability and corporate social responsibility (CSR)