The ESG Performance in Relation to the Board of Directors’ Characteristics and Sustainability Incentives: A Cross-National Study

Abstract

This paper seeks to find the impact of board of directors characteristics', compensation policy, and the CSR committee on the ESG performance by examining the examining the influence of board characteristics', sustainability incentive compensation, and a CSR committee on ESG performance. By referring to one of the largest datasets to date, we use an unbalanced data set of 36,764 constant-year observations from 6000 listed companies, covering a 16-year period (2002-2017) from 60 countries around the world. Anyway, we show that the share of board independence is positively related to the ESG scores. There is an important effect of gender diversity in the board of directors on the firm performance' in the area of environmental, social and institutional governance. The results reveal that offsetting sustainability incentives has a positive effect in some geographic areas. There is a positive correlation between the ESG performance and the CSR Committee. Hypothesis 1. Board size positively affects ESG performance. Hypothesis 2. Board independence positively affects ESG performance. Hypothesis 3. A high level of gender diversity positively affects ESG performance. Hypothesis 4: ceteris paribus, large firms adopt sustainable ESG compensation incentives, which are greater for process-oriented ESG performance. Hypothesis 5. The establishment of a CSR sustainability committee has a positive impact on the performance of the ESG.