I would like to explore the following question:
Do board interlocking networks influence high performance in
corporate sustainability?
Board interlocking networks are complex social networks among
company boards created by directors sitting on multiple boards.[i]
Many prior studies have examined the origins and effects of board interlocking
networks in different contexts and across various time periods, showing that
firms’ actions are often related to their interlocks. For example, in a recent
study, Wong, Gygax and Wang (2015) present evidence that board interlocks are
positively linked with similarities in the design of executive compensation
packages in interlocked firms as well as in a number of board characteristics.[ii]
In the context of corporate strategy, Davis (1991) demonstrated that there
is an interlock network diffusion process with regard to the
use of poison pills as a defense strategy.[iii] Haunschild
(1993) showed that corporate acquisition activities are spread over the
interlocking network by imitation processes.[iv] Palmer
et al. (1993) demonstrated that interlocks are associated with the
adoption of a multidivisional form within corporations,[v]
and Galaskiewicz and Wasserman (1989) showed that interlocks are
linked with how corporations decide on their charitable recipients.[vi]
By sitting on multiple company boards, directors can facilitate
the sharing of information, experience, and other techniques and managerial
practices. I would like to investigate whether there is evidence that robust sustainability
management practices are diffused through board interlock networks. My hypothesis
is that the existence of a board interlock between two boards is correlated
with the similarity in corporate sustainability strategy, governance and
performance in the two companies. In other words, I expect to observe similar corporate
sustainability approaches and outcomes in connected firms.
In order to test this hypothesis, I propose to conduct a social
network analysis of the board interlock network of a selection of companies included
on the Corporate Knights Global 100 (CKG100)[vii]
list of the most sustainable companies in the world (published annually from
2005 to 2019) at three points in time – 2009, 2014, and 2019. Each year’s
network would include the selection of CKG100 companies as well as the firms with
which they are interlocked by one or more board members (this data may be
extracted from a database such as BoardEx, GMI Ratings Corporate Governance
Database, or ORBIS database).
For each of these networks, I would then examine the homophilia
(E-I index) of companies related to the following attributes: CKG100 inclusion/exclusion
status, existence of a board level sustainability committee, and existence of
an executive level sustainability position within the firm (this data should be
available in companies’ corporate sustainability reports). I would also conduct
various sub-group analyses (clique and newman-girvan) to determine if any sub-groups
tend to form on the basis of the same attributes. Finally, I would analyze the evolution
the networks over time to see if there was an increase in homophilia and/or
sub-group formation on the basis of these attributes over time, indicating an
influence of board interlock networks on corporate sustainability strategy, governance
and performance over time.
[i] Mizruchi,
M.S., 1996. What do interlocks do? An analysis, critique, and assessment of
research on interlocking directorates. Annu. Rev. Sociol. 22, 271–298.
[ii] Wong,
L., Gygax, A., Wang, P., 2015. Board interlocking network and the design of executive
compensation packages. Social Networks 41, 85-100.
[iii] Davis,
G.F., 1991. Agents without principles? The spread of the poison pill through the
intercorporate network. Adm. Sci. Q. 36, 583–613.
[iv] Haunschild,
P.R., 1993. Interorganizational imitation: the impact of interlocks on corporate
acquisition activity. Adm. Sci. Q. 38, 564–592.
[v] Palmer,
D.A., Jennings, P.D., Zhou, X., 1993. Late adoption of the multidivisional form
by large U.S. corporations: institutional, political and economic accounts.
Adm.Sci. Q. 38, 100–131.
[vi] Galaskiewicz,
J., Wasserman, S., 1989. Mimetic processes within an interorganization field:
an empirical test. Adm. Sci. Q. 34, 454–479.
[vii] The
Corporate Knights Global 100 is one of the most widely publicized and
well-respected corporate sustainability rankings, based on companies’ public
disclosure of 21 key performance indicators (KPIs) covering resource
management, employee management, financial management, clean revenue and
supplier performance.