Corporate Social Responsibility and Sustainability Committee Inside the Board

Abstract

Type: Empirical.Research Question/Issue: This study examines whether the existence of a sustainability committee with independent directors facilitates the requirements of the Dow Jones Sustainability Index to include the company with the leading sustainability companies in the world.Research Findings/Insights: We use firm-level data for 469 European firms from EUROSTOXX500 for 2010. We find that the existence of a sustainability committee increases the likelihood that a large European firm could be included in the Dow Jones Sustainability Index (DJSI), which serves as a way to measure the quality of a firm’s CSR strategy and to identify leading CSR companies. Theoretical/Academic Implications: This study develops and tests notions related to how the CSR policies are driven adequately by the board. This study provides empirical support for the necessary role of the sustainability committee formed by independent directors with CSR knowledge to orientate the corporate governance to the interest of all stakeholders. Practitioner/Policy Implications: This study offers a tool for the boards of firms to adopt CSR policies. Furthermore, our study helps stakeholders to direct their efforts to increase the independence of board to pursue the objective of the firm according to CSR perception. It also provides a perspective for executives and investment managers of multinational firms to follow the recommendations of good practices in corporate governance with the goal of becoming a member of the select club of DJSI, which includes the leading sustainability companies in the world.