The Effectiveness of CSR Committees’ Characteristics and CSR Contracting

Develay, Etienne ORCID: https://orcid.org/0000-0003-4396-841X, Wang, Yan and Giamporcaro, Stephanie (2023) The Effectiveness of CSR Committees’ Characteristics and CSR Contracting. In: AOM 2023: Putting the Worker Front and Center, 4 August 2023 - 8 August 2023, Boston, Massachusetts, USA.

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Abstract

We rely on the stakeholder-agency theory to examine whether the effectiveness of CSR committees influences the initiative of CSR contracting, which consists of tying ESG performance measures to executive compensation contracts. Using a sample of 1,641 observations from 575 U.S. companies over 2015 to 2019, we measure the effectiveness of CSR committees in function of their structural characteristics. We find that an effective independence of CSR committees, proxied by a larger proportion of independent directors and an independent chairperson enhances the likelihood of CSR contracting. Furthermore, we report that an effective structure for CSR committees, captured through a composite score including size, directors’ independence, chairperson’s independence, and meeting frequency, is positively associated with CSR contracting. Overall, our results show that an effective CSR committee improves the controllability of CSR contracting through better monitoring and consideration of all stakeholders’ interests. This study has important implications for practitioners to build more effective CSR committees based on their structural characteristics and for regulators to provide better guidance on their structures and practices.