Adding foreign directors to a corporate board actually increases the frequency of the company's environmental, social, and governance (ESG) scandals.
Common corporate wisdom suggests that internationalizing a board helps a firm navigate global risks and ethical standards. However, data from U.S. companies reveals that foreign directors often lack the local cultural context or monitoring capabilities to prevent controversies, actually exacerbating the risks of international expansion rather than mitigating them.
Internationalisation and ESG Controversies: Do Foreign Directors on Corporate Boards Matter?
SSRN · 6470302
This study examines the relationship between internationalisation and environmental, social, and governance (ESG) controversies, focusing on whether foreign directors on corporate boards influence this relationship. Drawing on resource dependence theory, we argue that internationalisation increases ESG controversies due to the complexity of managing diverse regulatory environments and stakeholder expectations. While foreign directors may contribute valuable global expertise and networks, they ca