Board diversity and sustainability performance

Abstract

The purpose to this study was to describe and explore the difference in the board composition and characteristics of sustainability performing companies compared with other companies in terms of gender, ethnicity, affiliation and, uniquely, the inclusion of directors from a non-business background.

This exploratory study used a cross-sectional design in the form of a quantitative comparative analysis, and a longitudinal design in the form of a trend analysis to compare the differences in board composition between a sample of sustainability performing companies and a sample of other companies listed on the FTSE/JSE All Share Index between 2004 and 2010. Inclusion on the Social Responsibility Investment (SRI) Index was used as a proxy for sustainability performance.

The study provided support that director background as a board attribute may be linked to overall sustainability performance. It further provided insight into who board members should be, namely non-executive directors with non-business backgrounds.

The findings of this study suggest that the nomination committees of companies wanting to improve sustainability performance should consider the recruitment and appointment of non-executive directors from non-business backgrounds on to their boards. The study provides grounds for further empirical studies on the causal relationship between board compositions and sustainability performance.

Keywords: sustainability, sustainability performance, boards of directors, board diversity, corporate governance, SRI index, director background, King Report, integrative model of board performance, corporate social responsibility