The effects of board characteristics and sustainable compensation policy on carbon performance of UK firms

Faizul Haque

The British Accounting Review, 2017, vol. 49, issue 3, 347-364

Abstract: This study examines the effects of board characteristics and sustainable compensation policy on carbon reduction initiatives and greenhouse gas (GHG) emissions of a firm. We use firm fixed effect model to analyse data from 256 non-financial UK firms covering a period of 13 years (2002–2014). Our estimation results suggest that board independence and board gender diversity have positive associations with carbon reduction initiatives. In addition, environment-social-governance based compensation policy is found to be positively associated with carbon reduction initiatives. However, we do not find any relationship between corporate governance variables and GHG emissions of a firm. Overall, our evidence suggests that corporate boards and executive management tend to focus on a firm's process-oriented carbon performance, without improving actual carbon performance in the form of reduced GHG emissions. The findings have important implications for practitioners and policymakers with respect to the effectiveness of internal corporate governance mechanisms in addressing climate change risks, and possible linkage between corporate governance reform and carbon related policies.

Keywords: Carbon reduction initiatives; GHG emissions; Board independence; Gender diversity; ESG-based compensation (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (144)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:bracre:v:49:y:2017:i:3:p:347-364

DOI: 10.1016/j.bar.2017.01.001

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