The impact of board structure on CSR practices on the international scale

Abstract

This research aims to examine the relationship between several aspects of the board of directors (board size, independence and diversity) and the level of corporate social responsibility (CSR) practices. We used a sample of 1043 international non-financial companies for the period 2003-2009. We find evidence for an inverted U-shaped relation between the board size and CSR practices, specifically in the case of outside directors. A higher number of outside directors is related to more CSR practices; however, when the number of directors is excessively high, CSR practices are reduced. In addition, more diversity on the board is positively associated with economic, social and environmental practices. Theoretically, the study extends the current theory by demonstrating that board diversity has a positive relationship with the strength ratings for CSR. Based on our results, there is a critical number of outside and inside directors that ensures interests beyond those of the shareholders are considered.