Linking ESG Management to Corporate Success: The Influence of Board Composition

The main objective of this paper is to examine the impact of ESG management on corporate performance by focusing on board characteristics. To this end, this study uses financial data and empirical panel data of Fortune 300 firms from 2008 to 2021 and firm-specific ESG scores derived from the European Sustainability Reporting Standard (ESRS) to conduct an empirical analysis. Specifically, a panel model analysis was conducted to examine the relationship between ESG management and firm performance using alternative variables on board characteristics. In the basic model analysis, we adopted alternative variables for ESG management and board characteristics and conducted a panel model analysis to examine the relationship between these factors and corporate performance. In the basic model analysis that included board characteristics, only board size (+) and nationality diversity (-) had a statistically significant effect on corporate performance, while gender diversity had no statistically significant effect on corporate performance. However, in the full model analysis, where board characteristics and ESG management were combined, factors E (-) and S (+) had statistically significant effects on firm performance, confirming that the presence of a board of directors leads to better performance. We found that the effects of E and S on firm performance were reversed, indicating that there is a difference in the cost of ESG management by factor. Finally, G did not have a statistically significant relationship with firm performance, which was likely due to the fact that the characteristics of the board were already reflected in ESG, confirming the role of the board. As a result, the board of directors seems to help with the smooth implementation of ESG management by focusing on internal stabilization and communication, suggesting that future research should consider the impact of the board of directors rather than analyzing ESG management in isolation. The results also show that the board of directors in the G sector has a significant impact on ESG management, but it is not treated as an important factor in ESG evaluation criteria, suggesting that it is necessary to reflect factors on stakeholder communication. Finally, the practical implication is that a united board is necessary to implement ESG management in corporate operations.