Some firms establish greater board independence than legally required. Although research has extensively examined the positive role of board independence, less research has focused on the implications of those firms with enhanced board independence. This study aims to investigate the influence of greater-than-legal board independence on corporate social responsibility, which might improve the understanding of why some firms go over and beyond the legal requirements of board structure.
Using a large sample of 2,328 public firms in the USA and conducting regression analyses, this study empirically validates the symbolic and functional value of establishing a greater proportion of independent directors than the legal requirement. Additional analyses using the bootstrapping technique confirm the validity of the study findings.
This study found that firms with board independence greater than the legal requirement achieve significantly better corporate social performance than firms with board independence no greater than the legal requirement. Moreover, this study revealed that greater board independence than the legal requirement is essential for independent directors to exercise their capabilities and improve corporate social performance.
This study proposes a motivation for firms to comply with stakeholders’ expectations beyond legal requirements by demonstrating the symbolic and functional role of board independence greater than the legal requirement in improving corporate social performance.
