Board responsibility and corporate performance

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Abstract

The purpose of this study is to examine the relationship between board responsibility and the performance of the company. It is the ultimate responsibility of the board to properly discharge their duty as stipulated by the laws and prohibit any unnecessary actions and decisions that are detrimental to the company (Salin, Ismail, et al., 2019). Board responsibility in this study is proxied by having a clear board function, formation of sustainability policy, directors’ access to information and existence of a board charter. This study uses archival analysis of the annual report of the top 500 publicly listed companies in Malaysia by market capitalisation. This study finds that only sustainability policies had a significant positive relationship with corporate performance which is consistent with many prior empirical findings (Orlitzky et al., 2003). No significant relationship was found between clear board function, directors’ access to information and the existence of a board charter with corporate performance. It can be concluded that board responsibility in terms of sustainability does influence the corporate performance of the company. This paper is relevant as it shows that by adopting a good sustainability policy and strategy, the company can improve overall managing efficiency and create long-term values which enhance the worth of the company.

Keywords: Board Responsibility, Board Function, Sustainability, Board Charter, Accountability, Board Information

Authors’ individual contributions: Conceptualization — A.S.A.P.S. and Z.I.; Methodology — A.S.A.P.S., Z.I., and M.S.; Formal Analysis — A.S.A.P.S., Z.I., and M.S.; Investigation — A.S.A.P.S.; Data Curation — A.S.A.P.S.; Writing — Original Draft — A.S.A.P.S.; Writing — Review & Editing — Z.I. and M.S.; Visualization — A.S.A.P.S. and Z.I.; Supervision — Z.I. and M.S.; Project Administration — A.S.A.P.S.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G3, M12, M14, M40, M48

Received: 19.10.2023
Accepted: 12.04.2024
Published online: 17.04.2024

How to cite this paper: Salin, A. S. A. P., Ismail, Z., & Smith, M. (2024). Board responsibility and corporate performance. Corporate Board: Role, Duties and Composition, 20(1), 23–32. https://doi.org/10.22495/cbv20i1art2