Board of directors network centrality and environmental, social and governance (ESG) performance
ISSN: 1472-0701
Article publication date: 7 July 2020
Issue publication date: 21 August 2020
Abstract
Purpose
Drawing from social capital, social network theory of stakeholder influence and stakeholder management, the purpose of this paper is to examine the relationship between board network centrality and firms’ environmental, social and governance (ESG) performance.
Design/methodology/approach
Using social network analysis, the authors construct five board network centrality, namely, degree centrality (the number of connections), closeness centrality (distance among firms), eigenvector centrality (the quality of connections), betweenness centrality (how often a firm sits between two other firms) and the information centrality (the speed and reliability of information), as measures of board access for social capital and timely information.
Findings
Using a sample of non-financial firms listed in the UK FTSE 350 index from 2007 to 2018, the authors find that board networks, measured by degree, closeness, eigenvector, betweenness and information centrality, has positive influence on firms’ ESG performance. Furthermore, the findings show that there is a non-linear relationship between board networks and ESG performance, and this relationship is stronger in the sectors where firms that have high product market concentration and high percentage of women board members.
Originality/value
This study unveils that strong board network centrality brings higher social (reputational) capital and information advantages to the firm to effectively, timely and accurately deal with the pressures from stakeholders (stakeholder management), which leads to better ESG performance.
Keywords
Acknowledgements
The authors acknowledged the contributions from two anonymous reviewers for their constructive comments and recommendations. The authors thank the Editor, Gabriel Eweje, for his consideration. Harjoto acknowledges the Denney Academic Chair 2019–2021 research endowment for the financial support and release time for this research project.
Citation
Harjoto, M.A. and Wang, Y. (2020), "Board of directors network centrality and environmental, social and governance (ESG) performance", Corporate Governance, Vol. 20 No. 6, pp. 965-985. https://doi.org/10.1108/CG-10-2019-0306
Publisher
:Emerald Publishing Limited
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