Abstract This article examines how salient sustainability risks from near‐miss natural disasters influence board composition. Using a difference‐in‐differences design, I find that firms located in counties neighboring disaster‐affected areas significantly increase the presence of directors with sustainability expertise following the disaster. The effect is stronger for firms with greater institutional ownership and responsible investor ownership, suggesting that these governance changes are driven by investor expectations and preferences. Further analysis shows that these board changes are not short‐lived, do not crowd out directors with other qualifications, and contribute to improvements in sustainability performance and firm value. Collectively, these findings highlight risk salience as a catalyst for strategic board restructuring.
Bo Wang (Mon,) studied this question.