BOARD DIVERSITY AND SUSTAINABILITY DISCLOSURE QUALITY: A CONCEPTUAL FRAMEWORK INTEGRATING RESOURCE DEPENDENCE THEORY AND STAKEHOLDER THEORY

Abstract

Sustainability disclosure is now an important feature of company reporting as the focus on environmental, social, and governance (ESG) issues grows. However, the evidence regarding board diversity remains mixed. Some studies link a diverse board to improved sustainability reporting, while others find little to no effect. This research contends that the distinction may lay in what happens after diverse directors are selected. Specifically, the board must create an internal framework that allows for the exploitation of varied information and perspectives in ESG supervision. Drawing on Stakeholder Theory and Resource Dependence Theory (RDT), this paper develops a framework in which ESG committee effectiveness strengthens the relationship between board diversity and sustainability disclosure quality. ESG committee effectiveness is considered in terms of independence, relevant expertise, and diligence. The framework distinguishes between the resources that diverse directors contribute and the committee structure that is used to apply those resources. Three propositions are developed for future empirical testing. The paper contributes to the governance literature by showing that board composition and committee effectiveness should be considered together, especially in emerging markets where formal diversity requirements may not always result in meaningful participation.