Director Expertise and Compliance to Corporate Social Responsibility Regulations
Swarnodeep Homroy, Wentao Li, Nassima SelmaneABSTRACT
Research Question/Issue
This paper investigates whether assigning CSR‐specific expertise to the board committee legally responsible for CSR improves compliance with mandatory CSR law and shapes how firms organize that compliance.
Research Findings/Insights
Using Indian listed companies subject to mandatory CSR regulation, we find that CSR expertise on CSR committees is associated with higher compliance and more concentrated CSR activities across categories and locations. These associations are stronger among firms facing greater competitive or financial pressures and those without prior CSR engagement. High compliance combined with CSR expertise is also associated with higher firm value, improved creditworthiness, and greater institutional ownership.
Theoretical/Academic Implications
Our findings highlight how directors with CSR expertise help companies improve legal compliance with mandatory CSR regulations and pursue more focused CSR strategies. This research identifies committee‐level CSR expertise as an important governance mechanism shaping both regulatory compliance and the organization of CSR activities. It demonstrates the benefits of embedding CSR expertise within board structures.
Practitioner/Policy Implications
We provide evidence that directors with CSR expertise and stronger compliance positively affect firm outcomes. Governments and policymakers could use these findings to promote CSR expertise on corporate boards, incentivize compliance, and promote the convergence of financial and social goals. Our study provides empirical support for recent public policies, including the 2020 EU recommendation to appoint sustainability experts on corporate boards.