Corporate governance pillars and business sustainability: does stakeholder engagement matter?

This study extends the existing work on corporate governance and business sustainability by exploring corporate governance pillars comprising board functions, structure, strategy, compensation and shareholder rights utilizing data from listed S&P 500 firms. Using panel fixed effects and two-step GMM, we discovered that environmental, social and financial sustainability dimensions of the business sustainability are impacted positively by board functions and board structure. Our findings further reveal that low stakeholder engagement adversely impacts companies' bottom-line performance. The results are robust to outliers, model specifications, statistical estimations and alternative measures of performance. Most importantly, the inferences from the moderating result suggest stakeholder engagement as a strategic approach to improve performance. The study is relevant for business sustainability practitioners and policy makers in advancing principles of corporate governance to promote enhanced performance.