Hostname: page-component-5f56664f6-287w5 Total loading time: 0 Render date: 2025-05-07T07:07:26.864Z Has data issue: false hasContentIssue false
  • English
  • Français

Are boards on board? A model of corporate board influence on sustainability performance

Published online by Cambridge University Press:  02 February 2015

Jeremy Galbreath
Jeremy Galbreath*
Affiliation:
Curtin Graduate School of Business, Curtin University, Perth, WA, Australia
Get access Rights & Permissions [Opens in a new window]

Abstract

Existing research on a board-of-director–sustainability performance relationship have largely examined inside directors, outside directors, and gender diversity – yet empirical results have yet to offer any definitive answers. I posit that this previous research lacks a thorough examination of the role of boards and the means and mechanisms by which they influence performance. Drawing on the board capital perspective and the role of boards, this paper develops a model that highlights the influence of board capital on the future sustainability performance of firms. The model takes into account specific types of human and social capital of outside directors which have previously been unexamined. Beyond the board capital perspective, an argument is put forth that values are largely neglected in the examination of boards of directors, but are necessary in the study of sustainability because of its normative implications. I therefore account for the value attunement concept as a moderating variable in the model. The paper draws on corporate governance and business ethics' literature to generate propositions and offer original insight into the drivers of sustainability performance in organizations.

Keywords

boards of directorscorporate governancehuman capitalsocial capitalvaluessustainability
Type
Conceptual Article
Information
Journal of Management & Organization , Volume 18 , Issue 4 , July 2012 , pp. 445 - 460
Copyright
Copyright © Cambridge University Press and Australian and New Zealand Academy of Management 2012

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

References

Banerjee, S. B. (2011). Embedding sustainability across the organization: A critical perspective. Academy of Management Learning & Education, 10(4), 719–731.Google Scholar
Bansal, P. (2002). The corporate challenges of sustainable development. Academy of Management Perspectives, 16(2), 122–131.Google Scholar
Bansal, P. (2003). From issues to actions: The importance of individual concerns and organizational values in responding to natural environmental issues. Organization Science, 14(5), 510–527.Google Scholar
Bansal, P. (2005). Evolving sustainability: A longitudinal study of corporate sustainable development. Strategic Management Journal, 26(3), 197–218.Google Scholar
Bansal, P., & Gao, J. (2006). Building the future by looking to the past: Examining research published on organizations and the environment. Organization & Environment, 19(4), 458–478.Google Scholar
Business Council of Australia. (2011). Business creatively meeting the sustainability challenge. Retrieved from http://www.bca.com.au/Content/101868.aspxGoogle Scholar
Bear, S., Rahman, N., & Post, C. (2010). The impact of board diversity and gender composition on corporate social responsibility and firm reputation. Journal of Business Ethics, 97(2), 207–221.Google Scholar
Becker, G. S. (1993). Human capital. Chicago, IL: University of Chicago Press.Google Scholar
Berns, M., Townsend, A., Khayat, Z., Balagopal, B., Reeves, M., Hopkins, M. S., & Kruschwitz, N. (2009). Survey: The business of sustainability now. MIT Sloan Management Review, 51(1), 19–26.Google Scholar
Berridge, R., & Cook, J. (2010). Mutual funds and climate change: Growing support for shareholder resolutions. Boston, MA: Coalition for Environmentally Responsible Economies.Google Scholar
Boerner, H. (2010). Sustainable and responsible investment: The revolution is on. Corporate Finance Review, 14(6), 39–41.Google Scholar
Bosse, D. A., Phillips, R. A., & Harrison, J. S. (2009). Stakeholders, reciprocity, and firm performance. Strategic Management Journal, 30(4), 447–456.Google Scholar
Brennan, M. J. (1990). Latent assets. Journal of Finance, 45(3), 709–730.Google Scholar
Brickley, J. A., Coles, J. L., & Jarrell, G. (1997). Leadership structure: Separating the CEO and chairman of the board. Journal of Corporate Finance, 3(3), 189–220.Google Scholar
Coffey, B. S., & Wang, J. (1998). Board diversity and managerial control as predictors of corporate social performance. Journal of Business Ethics, 17(14), 1595–1603.Google Scholar
Cyert, R., & March, J. (1963). A behavioral theory of the firm. Englewood Cliffs, NJ: Prentice-Hall.Google Scholar
Desai, A., Kroll, M., & Wright, P. (2003). CEO duality, board monitoring, and acquisition performance: A test of competing theories. Journal of Business Strategy, 20(2), 137–156.Google Scholar
Dhanda, K. K., & Murphy, P. J. (2011). The new wild west is green: Carbon off set markets, transactions, and providers. Academy of Management Perspectives, 25(4), 37–49.Google Scholar
DiMaggio, P. J., & Powell, W. W. (1983). The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48(2), 147–160.Google Scholar
Doh, J. P., & Teegen, H. (2003). Globalization and NGOs: Transforming business, governments, and society. Westport, CT: Praeger.Google Scholar
Dutton, J. E., Ashford, S. J., O'Neil, R. M., & Lawrence, K. A. (2001). Moves that matter: Issue selling and organizational change. Academy of Management Journal, 44(4), 716–736.Google Scholar
Dyllick, T., & Hockerts, K. (2002). Beyond the business case for corporate sustainability. Business Strategy and the Environment, 11(2), 130–141.Google Scholar
Edelman, R. (2012). 2012 Edelman trust barometer. New York, NY: Edelman.Google Scholar
Eesley, C., & Lenox, M. J. (2006). Firm responses to secondary stakeholder actions. Strategic Management Journal, 27(8), 765–781.Google Scholar
Elkington, J. (2006). Governance for sustainability. Corporate Governance: An International Review, 14(6), 522–529.Google Scholar
Environmental Protection Agency. (2009, 12 7). Greenhouse gases threaten public health and the environment. Press release. Retrieved from http://yosemite.epa.gov/opa/admpress.nsf/7ebdf4d0b217978b852573590040443a/08d11a451131bca585257685005bf252!OpenDocumentGoogle Scholar
Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control. Journal of Law and Economics, 26(2), 327–349.Google Scholar
Finkelstein, S., Hambrick, D. C., & Cannella, A. A. (2009). Strategic leadership: Theory and research on executives, top management teams, and boards. New York, NY: Oxford University Press.Google Scholar
Freeman, R. E. (1984). Strategic management: A stakeholder approach. Boston, MA: Pitman.Google Scholar
Freeman, R. E., & Gilbert, D. R. Jr. (1992). Business, ethics and society: A critical agenda. Business & Society, 31(1), 9–18.Google Scholar
Galbreath, J. (2009). Addressing sustainability: A strategy development framework. International Journal of Sustainable Strategic Management, 1(3), 303–319.Google Scholar
Galbreath, J. (2010). Drivers of corporate social responsibility: The role of strategic planning and firm culture. British Journal of Management, 21(2), 511–525.Google Scholar
Galbreath, J. (2011a). Are there gender-related influences on corporate sustainability? A study of women on boards of directors. Journal of Management and Organization, 17(1), 17–38.Google Scholar
Galbreath, J. (2011b). Strategy in a world of sustain-ability: A developmental framework. In Quaddus, M. A. & Siddique, M. A. B. (Eds.), Handbook of corporate sustainability: Frameworks, strategies and tools (pp. 37–56). Cheltenham, England: Edward Elgar.Google Scholar
Garcia-Castro, R., Ariño, M. A., & Canela, M. A. (2011). Over the long-run? Short-run impact and long-run consequences of stakeholder management. Business & Society, 50(3), 428–455.Google Scholar
Ghoshal, S. (2005). Bad management theories are destroying good management practices. Academy of Management Learning & Education, 4(1), 75–91.Google Scholar
Gladwin, T. N.Kennelly, J. J., & Krause, T. S. (1995). Shifting paradigms for sustainable development: Implications for management theory and research. Academy of Management Review, 20(4), 874–907.Google Scholar
Gladwin, T. N.Kennelly, J. J., & Krause, T. S. (1996). Toward eco-moral development of the academy of management. Academy of Management Review, 21(4), 912–914.Google Scholar
Godos-Díez, J. -L., Fernández-Gago, R., & Martínez-Campillo, A. (2011). How important are CEOs to CSR practice? An analysis of the mediating effect of the perceived role of ethics and social responsibility. Journal of Business Ethics, 98(4), 531–548.Google Scholar
Goodall, A. H. (2008). Why have the leading journals in management (and other social sciences) failed to respond to climate change? Journal of Management Inquiry, 17(4), 408–420.Google Scholar
Gordenker, L., & Weiss, T. G. (1996). Pluralizing global governance: Analytical approaches and dimensions. In Weiss, T. B. & Gordenker, L. (Eds.), NGOs, the UN & global governance (pp. 17–47). London, England: Rienner.Google Scholar
Haanaes, K., Balagopal, B., Kong, M. T., Velken, I., Arthur, D., Hopkins, M. S., & Kruschwitz, N. (2011). New sustainability study: The ‘embracers’ sieze advantage. MIT Sloan Management Review, 52(3), 23–35.Google Scholar
Hahn, T., Figge, F., Pinske, J., & Preuss, L. (2010). Trade-offs in corporate sustainability: You can't have your cake and eat it. Business Strategy and the Environment, 19(4), 217–229.Google Scholar
Haigh, N., & Griffiths, A. (2009). The natural environment as a primary stakeholder: The case of climate change. Business Strategy and the Environment, 18(6), 347–359.Google Scholar
Hall, J., & Vredenburg, H. (2003). The challenges of innovating for sustainable development. MIT Sloan Management Review, 45(1), 61–68.Google Scholar
Hambrick, D. C., Geletkanycz, M. A., & Fredrickson, J. W. (1993). Top executive commitment to the status quo: Tests of its determinants. Strategic Management Journal, 14(6), 401–418.Google Scholar
Hart, S. L. (1995). A natural-resource-based view of the firm. Academy of Management Review, 20(4), 986–1014.Google Scholar
Hart, S. L. (1997). Beyond greening: Strategies for a sustainable world. Harvard Business Review, 75(1), 67–76.Google Scholar
Hayes, R. H., & Abernathy, W. J. (1980). Managing our way to economic decline. Harvard Business Review, 58(07–August), 67–77.Google Scholar
Haynes, K. T., & Hillman, A. (2010). The effect of board capital and CEO power on strategic change. Strategic Management Journal, 31(11), 1145–1163.Google Scholar
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
Hillman, A. J., Cannella, A. A. Jr., & Paetzold, R. L. (2000). The resource dependence role of corporate directors: Strategic adaptation of board composition in response to environmental change. Journal of Management Studies, 37(2), 235–255.Google Scholar
Ibrahim, N. A., & Angelidis, J. P. (1995). The corporate social responsiveness orientation of board members: Are there differences between inside and outside directors? Journal of Business Ethics, 14(5), 405–410.Google Scholar
International Institute for Sustainable Development, Deloitte & Touche, & World Business Council for Sustainable Development (WBCSD). (1992). Business strategy for the 90s. Manitoba, Canada: IISD.Google Scholar
Ittner, C. D., Larcker, D. F., & Randall, T. (2003). Performance implications of strategic performance measurement in financial service firms. Accounting, Organizations and Society, 28(7–8), 715–741.Google Scholar
Jacobs, M. T. (1991). Short-term America. Boston, MA: Harvard Business School Press.Google Scholar
Jenkins, B. (1993). Economic rationality and sustainable development: Conflicts and implementation. Economic Papers, 12(2), 69–84.Google Scholar
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Finance, 3(4), 305–350.Google Scholar
Kassinis, G., & Vafeas, N. (2002). Corporate boards and outside stakeholders as determinants of environmental litigation. Strategic Management Journal, 23(5), 399–415.Google Scholar
Kluckholn, C. (1951). Values and value-orientations in the theory of action. In Parsons, T. & Shils, E. A. (Eds.), Toward a general theory of action (pp. 388–433). New York, NY: Harper & Row.Google Scholar
Konrad, A., Steurer, R., Langer, M. E., & Martinuzzi, A. (2006). Empirical findings on business-society relations in Europe. Journal of Business Ethics, 63(1), 89–105.Google Scholar
Kor, Y. Y., & Sundaramurthy, C. (2009). Experience-based human capital and social capital of outside directors. Journal of Management, 35(4), 981–1006.Google Scholar
Lamertz, K., Martens, M., & Heugens, P. P. M. A. R. (2003). Issue evolution: A symbolic interactionist perspective. Corporate Reputation Review, 6(1), 82–93.Google Scholar
Lo, S. -F., & Sheu, H.-J. (2007). Is corporate sustainability a value-increasing strategy for business? Corporate Governance: An International Review, 15(2), 345–358.Google Scholar
Lubin, D. A., & Esty, D. C. (2010). The sustainability imperative. Harvard Business Review, 88(5), 42–50.Google Scholar
Mahon, J. F., & Waddock, S. A. (1992). Strategic issues management: An integration of issue life cycle perspectives. Business & Society, 31(1), 19–33.Google Scholar
Maier, S. (2005). How global is good governance? London, England: Ethical Investment Research Services.Google Scholar
Marcus, A. A., & Fremeth, A. R. (2009). Green management matters regardless. Academy of Management Perspectives, 23(3), 17–26.Google Scholar
McDonough, W., & Braungart, M. (2002). Design for the triple top line: New tools for sustainable commerce. Corporate Environmental Strategy, 9(3), 251–258.Google Scholar
Merchant, K. A., & Van der Stede, W. A. (2007). Management control systems: Performance measurement, evaluation and incentives. Harlow, England: Pearson Education.Google Scholar
Michael, B., & Gross, R. (2004). Running business like a government in the new economy: Lessons for organizational design and corporate governance. Corporate Governance, 4(3), 32–46.Google Scholar
Mizruchi, M. S. (1996). What do interlocks do? An analysis, critique, and assessment of research on interlocking directorates. Annual Review of Sociology, 22, 271–298.Google Scholar
Narayanan, M. P. (1985). Managerial incentives for short-term results. Journal of Finance, 40(5), 1469–1484.Google Scholar
Nidumolu, R., Prahalad, C. K., & Rangaswami, M. R. (2009). Why sustainability is now the key driver of innovation. Harvard Business Review, 87(9), 56–64.Google Scholar
Oh, H., Labianca, G., & Chung, M. -H. (2006). A multilevel model of group social capital. Academy of Management Review, 31(3), 569–582.Google Scholar
O'Shannassy, T. (2010). Board and CEO practice in modern strategy-making: How is strategy developed, who is the boss and in what circumstances? Journal of Management and Organization, 16(2), 280–298.Google Scholar
Pettigrew, A. (1992). On studying managerial elites. Strategic Management Journal, 13(Winter), 163–182.Google Scholar
Pfeffer, J., & Salancik, G. R. (1978). The external control of organizations: A resource dependence perspective. New York, NY: Harper & Row.Google Scholar
Post, C., Rahman, N., & Rubow, E. (2011). Green governance: Boards' of directors composition and environmental corporate social responsibility. Business & Society, 50(1), 189–223.Google Scholar
Ricart, J. E., Rodríguez, M. Á., & Sánchez, P. (2005). Sustainability in the boardroom. Corporate Governance, 5(3), 24–41.Google Scholar
Rokeach, M. (1973). The nature of human values. New York, NY: The Free Press.Google Scholar
Rose, J. M. (2007). Corporate directors and social responsibility: Ethics versus shareholder value. Journal of Business Ethics, 73(3), 319–331.Google Scholar
Russo, M. V., & Fouts, P. A. (1997). A resource-based perspective on corporate environmental performance and profitability. Academy of Management Journal, 40(3), 534–559.Google Scholar
Schein, E. H. (1984). Coming to a new awareness of organizational culture. Sloan Management Review, 25(2), 3–16.Google Scholar
Schneider, A., & Meins, E. (2012). Two dimensions of corporate sustainability assessment: Towards a comprehensive framework. Business Strategy and the Environment, 21(4), 211–222.Google Scholar
Schwartz, S. H., & Bilsky, W. (1987). Toward a universal psychological structure of human values. Journal of Personality and Social Psychology, 53(3), 550–562.Google Scholar
Scott, W. R. (1990). Innovation in medical care organizations: A synthetic review. Medical Care Review, 47(2), 165–193.Google Scholar
Senge, P. M., & Carstedt, G. (2001). Innovating our way to the next industrial revolution. MIT Sloan Management Review, 42(2), 24–38.Google Scholar
Sharma, S., & Henriques, I. (2005). Stakeholder influences on sustainability practices in the Canadian forest products industry. Strategic Management Journal, 26(2), 159–180.Google Scholar
Smith, J. (1997). Characteristics of the modern transnational social movement sector. In Smith, J., Chatfield, C., & Pagnucco, P. (Eds.), Transnational social movements and global politics: Solidarity beyond the state (pp. 42–58). Syracuse, NY: Syracuse University Press.Google Scholar
Spar, D., & La Mure, L. (2003). The power of activism: Assessing the impact of NGOs on global business. California Management Review, 45(3), 78–101.Google Scholar
Steen Knudsen, J. (2011). Company delistings from the UN global compact: Limited business demand or domestic governance failure? Journal of Business Ethics, 103(3), 331–349.Google Scholar
Steurer, R., Langer, M. E., Konrad, A., & Martinuzzi, A. (2005). Corporations, stakeholders and sustainable development I: A theoretical exploration of business-society relations. Journal of Business Ethics, 61(3), 263–281.Google Scholar
Stiles, P. (2001). The impact of board on strategy: An empirical examination. Journal of Management Studies, 38(5), 627–650.Google Scholar
Stubbs, W., & Cocklin, C. (2008). Conceptualizing a ‘sustainability business model’. Organization & Environment, 21(2), 103–127.Google Scholar
SustainAbility. (2012). Financial short-termism a major obstacle to sustainable change in business: Expert poll. Retrieved from http://www.sustainability.comGoogle Scholar
Swanson, D. L. (1999). Toward an integrated strategy of business and society: A research strategy for corporate social performance. Academy of Management Review, 24(3), 506–521.Google Scholar
Thakor, A. V. (1990). Investment myopia and the internal organization of capital allocation decisions. Journal of Law, Economics, and Organizations, 6(1), 129–154.Google Scholar
Thorton, J., & Beckwith, S. (1997). Environmental law. London, England: Sweet & Maxwell.Google Scholar
Tian, J., Haleblian, J., & Rajagopalan, N. (2011). The effects of board human and social capital on investor reactions to new CEO selection. Strategic Management Journal, 32(7), 731–747.Google Scholar
Treviño, L., & Weaver, G. (1994). Business ethics: One field or two? Business Ethics Quarterly, 4(2), 111–125.Google Scholar
Tuggle, C. S., Schnatterly, K., & Johnson, R. A. (2010). Attention patterns in the boardroom: How board composition and processes affect discussion of entrepreneurial issues. Academy of Management Journal, 53(3), 550–571.Google Scholar
Turnbull, S. (2005). Why Anglo corporations should not be trusted: And how they could be trusted. Corporate Board: Role, Duties & Composition, 1(1), 10–17.Google Scholar
UN PRI. (2006). Principles of responsible investment. Retrieved from http://www.unpri.org/files/pri.pdfGoogle Scholar
UN PRI. (2009). Annual report ofthe PRI initiative 2009. Retrieved from http://www.unpri.org/files/PRI%Annual%20Report%2009.pdfGoogle Scholar
US President's Council on Sustainable Development. (1994). A vision for a sustainable US and principles of sustainable development. Washington, DC: Author.Google Scholar
Walsh, J. P., & Seward, J. K. (1990). On the efficiency of internal and external corporate control mechanisms. Academy of Management Review, 15(3), 421–458.Google Scholar
Wang, J., & Coffey, B. S. (1992). Board composition and corporate philanthropy. Journal of Business Ethics, 11(10), 771–778.Google Scholar
WCED. (1987). Our common future. Oxford, England: World Commission on Environment and Development and Oxford University Press.Google Scholar
Webb, E. (2004). An examination of socially responsible firms' board structure. Journal of Management and Governance, 8(3), 255–277.Google Scholar
Weisbach, M. S. (1988). Outside directors and CEO turnover. Journal of Financial Economics, 20(01— March), 431–460.Google Scholar
Westphal, J. D., & Milton, L. P. (2000). How experience and network ties affect the influence of demographic minorities on corporate boards. Administrative Science Quarterly, 45(2), 366–398.Google Scholar
Williams, R. J., & Barrett, J. D. (2000). Corporate philanthropy, criminal activity, and firm reputation: Is there a link? Journal of Business Ethics, 26(4), 341–350.Google Scholar
Wood, D. J. (1991). Corporate social performance revisited. Academy of Management Review, 16(4), 691–718.Google Scholar
Wright, P. M., Kroll, M., & Elenkov, D. (2002). Acquisition returns, increase in firm size, and chief executive officer compensation: The moderating role of monitoring. Academy of Management Journal, 45(3), 599–608.Google Scholar
Young, W., & Tilley, F. (2006). Can businesses move beyond efficiency? The shift toward effectiveness and equity in the corporate sustainability debate. Business Strategy and the Environment, 15(6), 402–415.Google Scholar