Corporate governance and ESG controversies: a quantile regression approach

Purpose This study aims to examine how corporate governance mechanisms affect environmental, social and governance (ESG) controversies in the US publicly traded nonfinancial firms. Design/methodology/approach Using a quantile regression approach, this study uses data from US nonfinancial firms and examines how governance mechanisms, such as board size, outside directors, gender diversity, CEO compensation and CSR committees, influence ESG controversies at different levels across firms. Findings The findings suggest that firms with larger boards face more ESG controversies, potentially due to challenges in reaching cohesive decisions. Likewise, higher CEO compensation is associated with increased ESG controversies, possibly because of a focus on short-term gains. Conversely, having more women and independent directors on corporate boards and CSR committees is associated with fewer ESG controversies. These governance practices help reduce ESG risks and encourage more sustainable practices. Practical implications The results can guide boards and executives in improving governance mechanisms that address ESG risks. Corporate strategies, such as promoting gender diversity, ensuring board independence, and creating dedicated CSR committees, may support a long-term focus and help reduce ESG controversies. Social implications The results align with growing ethical and responsible governance expectations. Improving board diversity, independence, and accountability through CSR committees could help firms better align with societal values and drive positive impacts on environmental and social fronts. Originality/value This study provides empirical evidence on how specific governance mechanisms, such as board composition, CEO compensation, and CSR oversight, can influence ESG controversies. By showing governance mechanisms that may support responsible practices, it adds depth to our understanding of effective ESG risk management.