The Effect of Board Roles on Firm Environmental Governance

In recent years much attention has been paid to firms’ environmental profile. Implementing and improving firm’s environmental profile are twofold. First, launching the environmental governance is a foundation for firm’s environmental profile. Second, the characteristics of board of directors directly affect the decisions made by board on all firm’s performance. Drawing on the resource-dependence theory and agency theory, board characteristics represent board resource-provision role and board monitoring role. This paper aims to understand how the board monitoring and board resource- provision roles influence firm’s environmental governance for 267 US firms from 2010 to 2012. The findings confirm that effective boards increase their monitoring of management when there are more independent directors on the board, higher CEO–chairman duality, higher share ownership for insiders and the CEO and finally lower share ownership for outsider–directors. Boards with strong social network connections, larger board size and lower board tenure are classified as resource-rich boards. The results also confirm that resource-rich boards with effective monitoring roles tend to have a board, or a committee appointed by the board that is responsible for environmental initiatives, paying incentives for the management of climate change issues, publishing information in annual reports, voluntary communications and other regulatory filings.