Exploring ESG Controversies: The Role of Corporate Governance mechanism, Economic Performance, and Legal Systems.

This study examines the association between corporate governance mechanisms (with particular reference to the structure of the BoD) and ESG controversies in publicly traded companies from the United States, Italy, Spain, the United Kingdom, France, and Canada. Specifically, the mediating role of economic performance and the moderating effect of the legal context are analyzed to understand their influence on these controversies. This topic is particularly relevant for investors and policymakers given the increasing importance of ESG issues in decision-making processes. The dataset includes 300 companies, with 50 firms from each country, representing both Common Law and Civil Law systems. The analysis covers the period from 2021 to 2023, using panel data and fixed effects models to minimize bias. The results demonstrate that the presence of ESG committees on boards is strongly associated with a reduction in ESG controversies. However, other board-level factors, including board gender diversity, CEO duality, and independent directors, were not found to have statistically significant effects. These findings provide valuable insights into how corporate governance structures can mitigate ESG controversies and open up avenues for future research, as well as offering practical recommendations for enhancing sustainable and responsible management practices.