An Examination of Socially Responsible Firms' Board Structure

Abstract

This study investigates the structure of the board of directors at socially responsible (SR) firms. Using a sample of 394 SR firms and comparing these to a matched sample of firms, I find that SR firms have characteristics associated with effective board structures. For instance, SR firms have more outsiders and women directors, and less instance of CEO/Chairman duality than non-SR firms. Results are similar when using a continuous measure of social responsibility. Also, I document that SR firms have higher Governance Index scores than the matched sample. Overall, this suggests that a reason for shareholders' appeal in socially responsible firms and mutual funds may be because these firms have stronger governance mechanisms in place than do non-SR firms. In addition, it appears that effective governance structures are more likely to exist in firms that focus on a broad range of stakeholders, rather than in firms that have a strict focus on shareholder wealth maximization.

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Webb, E. An Examination of Socially Responsible Firms' Board Structure. Journal of Management & Governance 8, 255–277 (2004). https://doi.org/10.1007/s10997-004-1107-0

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  • agency theory
  • boards of directors
  • corporate governance
  • social responsibility
  • socially responsible investing