Corporate Governance and LGBT-Supportive Policies from CSR, Resource-based, and Agency Perspectives

Abstract

We investigate the relationship between corporate governance structure and the implementation of LGBT-supportive policies using the theoretical lenses of corporate social responsibility, the resource-based view of human resource management, and agency theory. Specifically, we estimate whether firms’ investment in LGBT-friendly policies changed as a result of changes to the firms’ boards of directors. We assembled a dataset of 10,233 firm-year observations from 1996-2011 and analyzed 1,594 unique firms and their governing boards, and we exploit the passage of the Sarbanes-Oxley Act in 2002 as an exogenous shock that increased board independence. Our results indicate that LGBT-supportive policies are positively associated with firm performance above the contribution of other CSR policies and independent of HRM strengths and concerns. Our difference-in-difference estimation shows that firms forced to raise board independence were less likely to invest in LGBT-supportive policies than those not required to change board composition. Overall, our findings underscore the notion that the choices made by management and the will of boards of directors can be guided by CSR and HR resource-based views in pursuit of wealth maximization, but that agency conflict is also real concern for external majority boards put in place by requirements unrelated to these views.