Staggered board, social capital and sustainability

Abstract

Maintaining good relationships with internal and external stakeholders can help companies gain competitive advantages and mitigate risks associated with social factors. However, building social capital is not an easy task, as it requires management to prioritize long-term goals over short-term gains. The board of directors is expected to ensure that management maximizes shareholders' value, commits to strengthening its relationship with stakeholders, and engages in socially responsible activities. These expectations depend heavily on the quality and effectiveness of the board. Certain board characteristics may impede its ability to drive long-term vision or create good stakeholder relationships, leading to a decline in the company's social capital. In this paper, we analyze board characteristics of publicly listed US firms, focusing on staggered boards, and find evidence supporting the agency theory that staggered boards adversely affect firms' social capital. To ensure the robustness of our analysis, we conduct additional analyses including propensity score matching, entropy balancing, and instrumental-variable analysis.