Corporate Governance and Sustainability : The Role of the Board of Directors

This book discusses the implementation of sustainability in corporate governance mechanisms since 2013 and assesses how much the role of the Board of Directors has changed as a result. The study explores the impact of legislation upon corporate governance in two European contexts, the UK and Italy, which have been affected differently by changes in national regulations since 2013. This investigation relies first on the analysis of interviews administered to the boards of directors of Italian firms, to highlight how far sustainability objectives were considered a real priority for their firms and how their role evolved in terms of specific duties and practices. Second, thanks to a rich dataset from 2013 to 2017, the investigation considers the corporate governance reports of top Italian and British listed firms, to identify how the integration of sustainability within corporate governance has been evolving since 2013, and how it has been disclosed. This insider perspective provides the reader with a set of tools useful for analysing firms’ engagement towards sustainability, and for assessing whether listed firms practice what they preach. Acknowledgments 6 Contents 7 About the Author 13 List of Figures 14 List of Tables 15 1: Introduction 17 1.1 Governing Sustainability 17 1.2 A New Legal and Regulatory Framework 18 1.3 The Research Project 20 1.4 Book Structure 21 References 23 2: The Governance of Sustainability: A Theoretical Background 26 2.1 Introduction 26 2.2 The Role of the Board of Directors in Corporate Governance 28 2.2.1 The Board of Directors 28 2.3 Common Law and Civil Law 30 2.3.1 Investor Protection under Civil and Common Law 32 2.3.2 Corporate Governance under Common Law and Civil Law 34 2.4 The Governance of Sustainability under Civil and Common Law: Comparing Italy and the UK 36 2.4.1 An Overview of Corporate Governance and Sustainability Regulation in the UK 37 2.4.2 An Overview of Corporate Governance and Sustainability Regulation in Italy 40 2.5 The Governance of Sustainability: A Literature Review 44 2.5.1 The Role of the Board of Directors towards Sustainability 44 2.5.2 The Integration of Sustainability in Corporate Governance through Board Committees 46 2.5.3 The Impact of External Factors on Board Committees 48 References 50 Legislative References 60 3: The Early Stage of the Governance of Sustainability in Italy and the UK: The Scenario in 2013 61 3.1 Introduction 61 3.2 The Perspective of Italian Boards of Directors in 2013 62 3.2.1 Methodology 62 3.2.1.1 The Research Phases 62 3.2.1.2 The Sample 64 3.2.1.3 The Structure of the Questionnaire 65 3.2.2 The Role of the Board of the Directors 67 3.2.2.1 The Integration of Sustainability within the Vision and Strategic Plan 67 3.2.2.2 The Implementation of Sustainability-Related Practices 69 3.2.2.3 The Operational Model of the Board of Directors 70 3.2.2.4 Control/Risk Management and Stakeholder Engagement Related to Sustainability 71 3.2.2.5 Competences and Rewards Related to Sustainability 73 3.2.3 The Integration of Sustainability at the Organizational Level 74 3.2.3.1 Organizational Units and the Sustainability Manager 74 3.2.3.2 Reporting Activities 75 3.2.3.3 Room for Sustainability during the Shareholders’ General Meeting 76 3.2.4 Emerging Approaches 78 3.2.4.1 The Results of Cluster Analysis 79 3.2.4.2 Clusters by Industry 85 3.2.5 The Role of the Sustainability Manager 85 3.2.6 The Point of View of Non-executive Independent Directors 89 3.2.6.1 Definition of the Vision and Socio-environmental Strategy 90 3.2.6.2 The Perceived Benefits of Sustainability 91 3.2.6.3 Competences, Compensation, and Accountability 92 3.2.6.4 The Topics Discussed by the Board of Directors 93 3.3 The Governance of Sustainability According to 2013 Corporate Documents: Comparing Italy and the UK 96 3.3.1 Methodology 96 3.3.1.1 The Research Phases 96 3.3.1.2 Desk Analysis 97 3.3.1.3 The Sample 99 3.3.2 The Italian Context in 2013 99 3.3.3 The UK Context in 2013 101 3.3.4 A Comparison between Italy and the UK in 2013 102 3.4 Conclusions 103 References 108 4: The Evolution of Corporate Governance towards Sustainability in Italy and the UK: The Influence of Regulation (2017) 111 4.1 Introduction 111 4.2 The Perspective of Italian Boards of Directors in 2016 113 4.2.1 Methodology 113 4.2.1.1 The Research Phases 113 4.2.1.2 The Sample 115 4.2.1.3 The Structure of the Questionnaire 116 4.2.2 The Role of the Board of the Directors 117 4.2.2.1 The Operational Model of the Board of Directors in Accordance with the New Code of Corporate Governance 117 4.2.2.2 The Activities of the Board of Directors 119 4.2.2.3 Competences and Training towards the Integration of Sustainability 124 4.2.2.4 Social and Environmental Performance and Monetary Incentives 129 4.2.2.5 The Integration of Sustainability-Related Goals within Firms’ Strategic Plans 131 4.2.3 The Integration of Sustainability at the Organizational Level 133 4.2.3.1 The Organizational Units and the Sustainability Manager 133 4.2.3.2 Communication and Reporting Activities 136 4.2.3.3 Sustainability Debate during the Shareholders’ General Meeting 139 4.3 The Evolution of the Governance of Sustainability According to Corporate Documents: Italy and the UK between 2013 and 2016 142 4.3.1 Methodology 142 4.3.1.1 Research Design 142 4.3.1.2 The Desk Analysis 143 4.3.2 The Italian Context in 2016 144 4.3.3 The UK Context in 2016 146 4.3.4 The Evolution of the Governance of Sustainability between 2013 and 2016 146 4.3.5 The Dynamics of Change in the Governance of Sustainability 149 4.4 Conclusions 151 References 156 5: Appraising the Evolution of the Governance of Sustainability in 2018: An Overview of Italy and the UK 159 5.1 Introduction 159 5.2 The Integration of Sustainability in Corporate Governance According to Corporate Documents: Patterns of Evolutions in Italy and the UK 160 5.2.1 Methodology 160 5.2.1.1 Research Design 160 5.2.1.2 Desk Analysis 161 5.2.2 The Background: Non-financial Disclosure Requirements in Italy and the UK 162 5.2.3 The Italian Context in 2017 164 5.2.4 The UK Context in 2017 165 5.2.5 Following Up on the Changes in Corporate Governance Mechanisms 166 5.2.6 The Origin of Sustainability Board Committees: A Longitudinal Overview 168 5.2.7 Patterns of Evolution of the Corporate Governance of Sustainability 172 5.3 The Influence of Sustainability Board Committees: A Focus on Italian Firms 176 5.3.1 Sustainability Board Committee and Executive Remuneration 176 5.3.1.1 Methodology 177 5.3.1.2 Sustainability-Related Compensation 177 5.3.1.3 Sustainability-Related Compensation and Governance Model 178 5.4 Conclusions 180 References 184 6: Conclusions 186 6.1 The Demand for Governance of Sustainability 186 6.2 Filling the Research Gap 187 6.3 Towards Sustainability-Oriented Governance 190 6.4 Limitations and Opportunities for Further Research 192 References 194 Index 195 Front Matter ....Pages i-xx Introduction (Marco Minciullo)....Pages 1-9 The Governance of Sustainability: A Theoretical Background (Marco Minciullo)....Pages 11-45 The Early Stage of the Governance of Sustainability in Italy and the UK: The Scenario in 2013 (Marco Minciullo)....Pages 47-96 The Evolution of Corporate Governance towards Sustainability in Italy and the UK: The Influence of Regulation (2017) (Marco Minciullo)....Pages 97-144 Appraising the Evolution of the Governance of Sustainability in 2018: An Overview of Italy and the UK (Marco Minciullo)....Pages 145-171 Conclusions (Marco Minciullo)....Pages 173-181 Back Matter ....Pages 183-185