Board diversity and corporate social responsibility versus sustainability development: Evidence from US and Australia

Abstract

Corporate governance plays a critical role in addressing the interests of domestic and global stakeholders. The board of directors is under pressure to represent the interests of every stakeholder. The purpose of this study is to analyze and compare the impact of board diversity on corporate social responsibility and sustainability in the U.S. and Australian non-financial sectors. In this vein, very first time current study, develop an index score for board diversity and sustainable development for both economies. In addition, the study also examines the influence of gender diversity, cultural diversity and diversity of experience on CSR and sustainable development in the two countries. Sample of non-financial sectors embedded from the S&P 1500 Index and the Australian Stock Exchange (ASX) for the periods 2010 to 2020. Results are estimated based on Panel regression models and dynamic GMM. The results of the study show that, on average, corporate social responsibility and sustainable development in the United States are superior to those in Australia. The ASX Diversity Index score has a significant and positive impact on CSR funds and the Sustainability Index. However, in the USA, the Board Diversity Index only impacts CSR funds. Moreover, directors with diverse cultural background in Australian firms are highly promoting sustainable development than US ones. However, cultural diversity on US boards strongly favors CSR practices compared to their Australian counterparts. While the presence of women on the board of directors contributes positively to local CSR activities and has a negative impact on global development in both countries. In addition, the experience of the US Board of Directors has suggested more funding for community development rather than sustainable development. The results of the study make significant contributions to academics and policymakers for U.S. and Australian stock exchanges. To develop CSR practices at the national level and sustainable development at the global level, the American and Australian Security Exchange Commission needs to take initiatives through the deployment of diversified boards of directors. Based on the findings, current study supports the stakeholder theory, Upper Echelon theory and cultural trait theory.