Charity Experience of Directors and Corporate Social Responsibility: Global Evidence

Abstract

Listen

Translate article

ABSTRACTThis paper studies the role of directors with prior experience of working in the charity sector (here labelled ‘charity directors’) in determining the corporate social responsibility (CSR) activity of firms on whose boards they sit. We predict that these charity directors shape the ethical climate of their boards and influence their CSR policies. The findings on firms across 50 countries show that the presence of such directors on a board is positively associated with the firm's environmental and social (E&S) performance. Such charity directors exert more influence following disasters that exogenously increase societal demand for CSR, suggesting a causal interpretation of their role. We further show that charity directors play a more active role in those countries where societal norms stress the importance of E&S issues. This does not seem to be a manifestation of organizational slack, as the link between charity directors and CSR is stronger in the presence of good corporate governance. Furthermore, the death of a charity director leads to a negative market reaction, suggesting that their efforts are in line with shareholder interests.