Board Diversity and Corporate Sustainability Practices: Evidence on Environmental, Social and Governance (ESG) Reporting

Abstract

The emerging awareness on sustainability issues among Malaysian listed companies has increased the voluntary disclosure on environmental, social and governance (ESG) in the annual report. This study examines the relationship of board diversity on firm’s sustainability practices. Board diversity characteristics in terms of gender, age, board composition, board capabilities and board reputation are examined as to their influence towards firm’s sustainability practice. The data includes the ESG Scores of 38 listed companies in Malaysia for the period in 2010–2016 which was obtained from the Thomson Reuters Eikon™ Datastream. The result showed that board diversity traits such as age, board capabilities and board reputation are positively associated with firm’s sustainability practices. In contrast, women director and independent directors are negatively related with firm sustainability practice. Result of this study helps to provide another viewpoint on the roles played by board members, particularly their diversity representations as the determinant for corporate sustainability practice.