Corporate Response to Sustainability Challenges: Research Review and Future Directions – Toru Yoshikawa & Yi Cheong Eugene Tung

Corporate Response to Sustainability Challenges: Research Review and Future Directions – Toru Yoshikawa & Yi Cheong Eugene Tung

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This chapter presents the major findings of prior studies on the effects of corporate governance, top executives, and top corporate decision-makers on firm sustainability performance. While there is a view that firms’ primary responsibility is to serve shareholder interests, there is a growing awareness that firms should also make contributions in tackling societal problems, including environmental sustainability and carbon neutral society. This is especially true given that some firm activities negatively affect the environment and that firms have the resources to make contributions to address such challenges. Based on our review of previous studies, specific corporate governance practices and top executive attributes are associated with sustainability performance. Research also shows that specific ownership structures such as institutional ownership relate to firm sustainability performance. However, prior studies reveal that such effects are rather complex; some factors, such as executive compensation and board CSR committees, work together. This suggests the importance of examining the effects of corporate governance practices as a “bundle” and thus, firms must design their corporate governance system by choosing multiple practices that reinforce each other when they aim to improve their sustainability performance and contributions to achieve a carbon neutral society.

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