Corporate Social Responsibility and NGO Directors on Boards
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ORIGINAL PAPER
Corporate Social Responsibility and NGO Directors on Boards Shili Chen1 · Niels Hermes2 · Reggy Hooghiemstra2 Received: 9 November 2019 / Accepted: 8 October 2020 © Springer Nature B.V. 2020
Abstract In the years 2009 to 2016, approximately 35% of Standard & Poor’s (S&P) 500 firms had at least one director with a professional background in private, not-for-profit organizations (NGO director). Yet research provides little guidance on what kind of firms are more likely to have NGO directors on their boards, neither do we know these directors’ effects on firm strategic outcomes. Our study examines the above two questions in the context of corporate social responsibility (CSR), taking the lens of resource dependence theory. Results from an analysis of all firms included in the S&P 500 index between 2010 and 2016 show that the number of NGO directors serving on a firm’s board in a certain year is positively related to the extent to which the firm displays poor CSR performance in the prior year. We also find that NGO directors on boards are not associated with immediate improvements in CSR performance; rather, their positive influence on CSR performance takes hold after 3 years. Our findings suggest that whereas NGO directors may potentially be appointed to a firm’s board for legitimization reasons, these directors are associated with enhanced CSR performance in the long term. Keywords NGO directors · Corporate social responsibility · Resource dependence theory · Legitimacy
Introduction Resource dependence theory suggests that the board of directors serves functions beyond monitoring management on behalf of shareholders (Pfeffer and Salancik 1978). By providing advice and counsel to management and linking the firm to external contingencies, directors play a critical role in strategic decision making (Adams et al. 2010; Baysinger and Butler 1985; Daily et al. 2003; Hillman and Dalziel 2003). Moreover, the prestige of directors within the business and/ or social world helps to enhance firm legitimacy by signifying the firm’s stature or quality (Certo 2003; Hambrick et al. 2015; Hillman et al. 2000; Zahra and Pearce 1989). * Shili Chen [email protected] Niels Hermes [email protected] Reggy Hooghiemstra [email protected] 1
International Business School Suzhou, Xi’an JiaotongLiverpool University, Suzhou 215123, China
Faculty of Economics and Business, University of Groningen, PO BOX 800, 9700 AV Groningen, The Netherlands
2
In line with the resource dependence logic, prior research has examined not only the predictors of what types of directors sit on the firm’s board, but also how board composition in general and how specific types of directors are associated with firm strategic outcomes. This research has focused on the resources provided by CEOs of other firms (Dalton et al. 1999; Kroll et al. 2007), bankers (Dittmann et al. 2009; Stearns and Mizruchi 1993), lawyers (Agrawal and Knoeber 2001; de Villiers et al. 2011), politicians (Hillman 2005; Lester et al. 2008), and profes
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