Better-connected boards and their influence on corporate social responsibility: Evidence from U.S. restaurant industry

Abstract

Many studies on the impact of boards of directors on corporate social responsibility have focused on the human capital of board members (i.e., structures and characteristics). However, the relational capital of board members (i.e., board interlock centrality) has yet to be fully explored. This study examines the extent to which board members are connected in their networks (i.e., board interlock centrality) on corporate social responsibility (CSR) performance in the restaurant industry. It also recognizes the moderating role of board effectiveness on the relationship between board centrality and CSR performance. On the basis of organization legitimacy theory and resource dependence theory, this study found that high-centrality boards increase positive CSR performance. The effect is more substantial when a firm has more standing board committees. The theories view firms as components of the larger social environment, and their performance depends on their ability to procure crucial resources from other firms through mutual exchange. No significant link was found between negative CSR performance and the moderating effect of board committees.

Keywords

board interlocks network centrality corporate governance corporate social responsibility

Introduction

Corporate social responsibility (CSR) has been defined as “the ongoing commitment by business to behave ethically and contribute to economic growth while improving the quality of life, the local community, and the society at large” (World Business Council for Sustainable Development, 1999). CSR has become an increasingly important strategy for restaurant companies (Rhou et al., 2016). Specifically, positive CSR performance can generate moral capital, which provides a favorable image in the equity markets, thus motivating investors (Godfrey et al., 2009). In contrast, negative CSR performance can be detrimental, reducing stakeholders’ willingness to involve themselves in long-term relationships with the firm (Werbel and Wortman, 2000). Therefore, firms must adopt CSR strategies effectively.

In CSR decision-making, the board of directors’ role is significant, yet that role has not been fully examined in the literature. Boards are involved in evaluating and forming company policies and strategies by providing expertise and experience related to strategic decisions (Ruigrok et al., 2006), ensuring legitimacy (Hillman and Dalziel, 2003), and linking firms with their stakeholders (Burt, 1980). Researchers can examine boards of directors from two points of view—that of human capital (e.g., structures, characteristics, CEOs; Horner, 2015) and that of relational capital (e.g., network centrality; Hillman and Dalziel, 2003). Prior research has mainly adopted the former, the human capital aspects. Nonetheless, relational capital has been recognized as important in acquiring resources and information (Hillman and Dalziel, 2003).

The link between boards of directors’ relational capital and CSR performance can be interpreted from different theoretical perspectives. Resource dependence theory posits that firms are not self-efficient because their performance depends on their ability to procure crucial resources from other firms through mutual exchanges (Pfeffer and Salancik, 1978). Boards of directors’ high network centrality represent their well-connectedness. A well-connected board member is at the center of the network, enabling firms to gain access to such resources. Organizational legitimacy theory asserts that firms are components of the larger social environment. Firms respond to legitimacy pressure, which directly affects a firm’s pursuit of CSR strategies (Filatotchev and Nakajima, 2014). Therefore, as decision-makers and guardians of a firm’s reputation, a board of directors actively supports a firm’s socially responsible activities and alleviates social concerns so that the firm’s legitimacy is enhanced. While researchers have recognized the importance of a board’s social network and the effects of boards of directors on CSR performance, few studies have investigated the relationship between board network centrality and CSR performance. The present study aims to fill this gap.

This study focuses on the restaurant industry for several reasons. Keiser (2002) identified that the restaurant industry has traditionally favored well-connected boards of directors. For instance, Starbucks Corporation currently has 13 directors, of which 12 also serve as directors in other firms in the retail, investment, and technology industries. Such service enables these individuals to share their strategic insights with the Starbucks organization. A well-connected board of directors creates strategic links that are a commonplace in the restaurant industry (Song et al., 2021). However, prior research has rather neglected to examine the interlocked network (network centrality) aspect of the board of director’s effects on CSR performance. Although Keiser (2002) explored board of directors’ interlocking network in the hospitality and tourism setting, he documented only descriptive results regarding the number of board members and counts on their interlocked links. The literature needs more research on the relational influence of a board of directors’ interlocking network on various strategic outcomes.

Further, Guillet and Mattila (2010) argued that governance systems, including the board of directors, should be established regarding industry-specific characteristics. Food-related health and safety crises could lead to significant financial loss and the disrepute of restaurant companies (Ortega et al., 2011). Consumers’ knowledge of sustainable restaurant practices and environmental concerns has been found significantly affect consumer retention (Hu et al., 2010). Given these characteristics, flexible and innovative decision-making is much needed. CSR can be an important strategy for restaurant companies to mitigate potential risks and increase revenue, a potentiality that should pressure boards of directors to enhance CSR performance. Boards of directors with high network centrality and the resourceful knowledge they bring to the firm are necessary for the restaurant industry to handle consumer needs while mitigating managerial risks.

The current study also tests whether the relationship between board network centrality and CSR performance depends on the number of board committees. Spira and Bender (2004) suggested that board committees improve corporate governance by allocating tasks from the main board to a smaller group of board members that address the firm’s specific needs (Klein, 1998). Thus, the committees are formed with expert board members who deal with specific issues (Puni, 2015). The committee structure, with its focused roles and tasks, enhances the boards’ productivity (Klein, 1998), which increases the effectiveness of the board’s monitoring responsibility. Consequently, whether the information and resources gathered by an interlocking board member influences corporate strategy making is dependent upon that board member’s proximity to the related decision outcome.

The remaining sections are constructed as follows. First, our literature review synthesizes past research on board of directors, the linkage between board network centrality and CSR performance, and board effectiveness. The methodology section explains data collection, modeling, and analysis. The results and discussion sections report and interpret the results while laying out the study’s practical and theoretical contributions. This paper ends with limitations and suggestions for future studies.

Literature review

Board of directors studies in tourism and hospitality research

In the tourism and hospitality literature, most corporate governance research has investigated executives’ compensation, which is associated with various factors, such as stock performance (Madanoglu et al., 2018), companies’ assets (Kim and Gu, 2005), and executives’ tenure (Guillet et al., 2012). Some previous studies have examined the implications of corporate governance on CSR performance: CEOs’ equity-based compensation (Park et al., 2019) and CEO’s networks (Chen et al., 2021).

While CEOs have significant influence over socially responsible decisions, the board of directors shares the leadership role with CEOs to safeguard a firm’s economic, legal, ethical, and socially responsible reputations (Buckholtz et al., 2008). As the authorized group in collective decision-making within the corporation, the board is one of the main elements in making strategic CSR decisions and is thus worthy of investigation. The hospitality industry is highly competitive and has a higher leverage and capital intensity, which are unique characteristics that impact managerial decision-making and affect how corporate governance mechanisms (e.g., board of directors) are implemented (Li and Singal, 2021). Thus, this study intends to fill the void in the literature by examining the association between boards of directors and CSR performance in the hospitality context.

Link between board network centrality and CSR performance

Corporate actions and executive decisions are influenced and constrained by relationships to their environment, including the board of directors interlocking (i.e., the network centrality of the board of directors; Gnyawali and Madhavan, 2001). A board’s network forms when an individual is on the boards of two or more firms, thereby providing an interlocking tie between firms. Most firms are not self-sufficient; they rely on their boards of directors to obtain critical resources, depending on other firms to access resources beyond one firm’s reach (Heide, 1994). Resource dependence theory posits that firms obtain proficiencies through resource exchange (Pfeffer and Salancik, 1978). Boards of directors manage external dependencies; therefore, a board member’s network centrality acts as a mechanism of cooptation. Boards of directors also ensure that the firm has reliable external dependencies and resources (Hillman and Keim, 2001) that benefit the firm’s public image and aid its strategic decisions (Judge and Zeithaml, 1992). That is, resource dependency theory accentuates the knowledge and network well-connectedness of the board in achieving a strategic outcome.

Boards bring resources through networks and establish a company’s legitimacy. Organizational legitimacy theory argues “a generalized perception or assumption that the actions of any entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs and definitions” (Suchman, 1995: p. 574). It suggests that organizations seek to create the social value of their business activities in a way that is congruent with the standards of suitable societal behaviors, and CSR as a corporate strategy supports companies in tackling social concerns and thus enhances their organizational legitimacy (Husted and Allen, 2006). Therefore, boards perform a social participation role so that the legitimacy of their organizations can be enhanced by establishing external relations with stakeholders and society. The board’s relational network and resources provide a shared context for social interaction and create communication links within the organizational setting (Hung, 2011), which contributes to improved CSR performance as an outcome of the organization’s social strategy (Zahra and Pearce, 1989).

In sum, the advisory role of boards of directors suggests that the board is responsible for narrowing the differences between the board and management and accessing resources. Baysinger and Hoskisson (1990) suggested that boards serve as advisors to various decision-making processes, such as strategic development and management operations. Companies will seek counsel from the board of directors to establish their CSR strategies and can benefit from access to pertinent knowledge about CSR’s impacts and good CSR practices. Furthermore, boards of directors are often made up of executives from other companies or those with substantial business, legal, or political backgrounds. Directors then form networks by serving on different firms’ boards, becoming channels of information accumulation across organizations. Therefore, the interconnectedness of directors, particularly directors with CSR expertise, is likely to be another avenue to providing CSR strategy resources relevant to the organization and creating a collaborative network that eventually improves CSR performance (Liu et al., 2020). Thus, we propose the following hypothesis:

H1: As a board of directors’ network connectedness increases (high network centrality), the positive CSR performance of the focal firm increases.

Boards of directors’ networks also provide legitimacy to focal firms (Hillman and Dalziel, 2003). Legitimacy does not emerge from merely making a profit or abiding by legal requirements (Suchman, 1995); rather, it arises from referring to society’s fundamental norms and values. In response to the increasing social pressure to secure legitimacy and better long-term performance, CSR became an effective channel for firms’ viability (Arya and Zhang, 2009). As the key governing body in an organization, boards of directors actively seek ways to survive under social pressure.

With regard to adopting CSR strategies, boards of directors are learning from their own experiences and those of their peers from a similar institutional context (Zou et al., 2019). The board’s network seeks to gain legitimacy for a firm’s stakeholders (Suchman, 1995) and enhance stakeholder acceptance by alleviating negative CSR performance (Zhang et al., 2013). Negative CSR performance—also referred to as corporate social irresponsibility—is defined as a set of activities or behaviors that can—intentionally or not—be damaging to a firm’s stakeholders and society in general (Riera and Iborra, 2017). A board’s network has been shown to provide credible communication between firms, and the information transmitted through the board network is influential (Haunschild, 1993).

As reputation guardians for firms and protectors/representatives of stakeholders, a board of directors persuades companies to avoid socially irresponsible activities. A board’s network serves as a crucial conduit of information between firms, which may facilitate a firm’s propensity to imitate the CSR strategies of other firms (Zou et al., 2019). In particular, high-centrality boards are better connected with other boards and have stronger ties with the community. Therefore, they are likely to be more motivated to discourage socially irresponsible activities. Thus, Hypothesis 2 is as follows:

H2: As a board of directors’ network connectedness increases (high network centrality), the negative CSR performance of the focal firm decreases.

The moderating role of board effectiveness

A board of directors contributes to a firm’s strategic knowledge and influences its managerial discretion and behaviors. High-centrality-board individuals can further promote firms by shaping social ties, reducing competition, influencing decision-making, acquiring information, scanning the environment, and diffusing administrative innovation (Haunschild and Beckman, 1998; Nguyen, 2012). Meanwhile, a board’s effectiveness is determined by its structure and the inner workings of its members (John and Senbet, 1998). Board members actively participate in different board committees, making the board effective. Formed by smaller groups of board members, board committees exercise their authority over a specific task (Klein, 1998). The Securities and Exchange Commission (SEC) mandates that firms establish audit, compensation, and governance committees. Apart from these requisite committees, many companies’ boards establish non-required committees to focus on other issues. For example, McDonald’s has a Sustainability and Corporate Responsibility Committee to fulfill its oversight responsibility concerning the brand’s commitment to perpetuating a sustainable organization.

Harrison (1987) viewed board committees as strategic tools that accomplish a board’s obligations of sustaining corporate legitimacy and formulating strategic decisions. Examples include the boards’ responsibilities to engage in CSR activities, protect stakeholders, and govern the firm’s citizenship performance. Board committees or specialized committees improve firms’ corporate governance by assigning particular tasks to a specific group of boards and specifying the best utilization of the boards’ specialization (Spira and Bender, 2004; Van Den Berghe and Levrau, 2004). Board committees also encourage boards to interact more frequently so that they are vigilant about reducing information asymmetries. As Eisenhardt (1989, p. 65) observed, “Operationally, the richness of board information can be measured in terms of characteristics such as frequency of board meetings [and] number of subcommittees.” The more that board committees are established within a firm, the more efficiently they are organized around specific issues, such as public policies or environmental concerns. Increased efficiencies would be applied regardless of a firm’s direction (i.e., encouraging positive corporate actions and discouraging negative corporate actions). Thus, Hypothesis 3 is given below:

H3: A higher number of committees help connected directors to maximize CSR strengths more profoundly.

Board decisions reflect information and suggestions provided by board subcommittee meetings, which consist of interlocked directors with the greatest expertise in a specific subject area (Bilimoria and Piderit, 1994; Kesner, 1988; Peterson and Philpot, 2007). Whether the expertise held by an interlocked director can be transmitted to the focal firm depends on those interlocked directors’ access and proximity to the relevant dialogue and decisions. Thus, the establishments of more subcommittees would then increase the board of directors’ efficiency in tackling socially irresponsible activities. In the case of CSR concerns, socially irresponsible activities are costly to the organizations, which would increase the stakeholders’ expectations to pronounce performance standards (Jain and Zaman, 2020; Velte and Stawinoga, 2020). The pressure from the stakeholders could lead the board of directors to formulate additional subcommittees besides mandatory committees (audit, compensation, governance) that specialize in CSR-related issues such as an ethics committee, a sustainable committee, or an environmental committee (Baraibar‐Diez et al., 2019). A specific subcommittee could improve awareness and ensure consistency in sustainability strategies (Klettner et al., 2014). Firms often use CSR-related committees to show their concern for social irresponsibility issues and tend to be more transparent in CSR disclosure (Adam, 2002). Thus, Hypothesis 4 is presented below.

H4: A higher number of committees help connected directors to more profoundly reduce CSR concerns.

Methodology

Data

This study collected a sample of US publicly traded restaurant firms, recognized by the Standard Industrial Classification code 5812. Based on data availability, the original sample ranged from 1991 to 2015. This study utilized three databases. First, to obtain corporate social performance (CSP) data, we drew on Morgan Stanley Capital International’s Environmental, Social, and Governance (MSCI ESG) database (formerly known as the KLD database for CSR performance data). The ESG database is objective and desirable because it measures CSR along many dimensions previously validated for the quantitative analysis of CSP (Hillman and Keim, 2001; Waddock and Graves, 1997). Our sample ends in 2015 because many rating variables have been modified since that year (MSCI, 2015). Second, the research team used the BoardEx database to obtain data on boards of directors. BoardEx contains records on the shared ties and biographical data of board members. Finally, the research team used the COMPUSTAT database to acquire financial data.

The original sample period starts in 1991, when the gathering of ESG data was initiated. The financial data mostly started in 1993 when the SEC mandated that all public companies submit filings electronically through the EDGAR (Electronic Data Gathering, Analysis, and Retrieval) system. Financial data from three companies (McDonald’s Corp, Luby’s Inc., and Wendy’s Co.) were hand-collected because their 10Ks are accessible for the years 1991 and 1992. After eliminating missing values and observations with outliers (an absolute value of a studentized residual of four as a cut-off line) and considering lagging effects, this study used a final total of 242 firm-year observations ranging from 1999 to 2015.

Dependent variable

This study’s dependent variable is corporate social performance (CSP). CSP is measured using the ratings developed by the MSCI ESG database. CSP ratings are multidimensional and generalizable across industries and therefore represent a comprehensive evaluation of firms’ CSP (Harrison and Freeman, 1999).

The MSCI ESG database provides data on seven major CSR dimensions: community (COM), diversity (DIV), employee relations (EMP), environment (ENV), product (PRO), human rights (HUM), and corporate governance. This study excludes the corporate governance dimension from CSR performance measurement. The exclusion is because of corporate governance’s direct relevance to the independent variables and this dimension measuring activities that benefit specific shareholders, which runs counter to the definition of CSR being a practice that benefits all stakeholders (Kim et al., 2012).

The ESG database provides a dichotomy value for each CSR performance dimension: either a strength indicator (positive rating) or a concern indicator (negative rating). Following previous research (Hillman and Keim, 2001), this study sums all strength indicators for each of the six dimensions that represents a positive CSR (CSPstr) and calculates the same for all concern indicators denoting negative CSR (CSPcon). Strength and concern indicators equally weigh the value of strengths and concerns across difference dimensions. High scores on strength indicators suggest a strong CSR performance, whereas high scores on concern indicators indicate poor CSR performance. By separately investigating CSR strengths and concerns, this study distinctively apprehends a firm’s positive and negative social actions. Furthermore, this study uses 1-year lead CSPstr and CSPcon to alleviate possible endogeneity issues (Greene, 2010).

Many CSR studies in the tourism and hospitality context have evaluated CSR performance using an aggregated measure (e.g., Theodoulidis et al., 2017). However, firms simultaneously engage in CSR strengthening and concerning activities, with some firms participating in more responsible activities to counterbalance their engagement in socially irresponsible activities (Kim and Kim, 2014). For example, The Walt Disney Company has been criticized for labor and human rights violations in its supply chain. Yet, it was also recognized as the world’s best employer in 2018. In this vein, socially responsible activities (CSR strengths) and socially irresponsible activities (CSR concerns) are examined separately in this study.

Main variable

The main independent variable is board network centrality (INTER). A board interlock is formed between two companies when a board member of one company also serves on another board. Such a tie provides the basis for the social network analysis—specifically, a two-mode network with board members (first mode) and corporations (second mode). Figure 1 shows a sample network analysis of restaurant companies. It demonstrates the relationship between companies created by interlocked boards of directors. This study calculates board network centrality using affiliation procedures to derive the adjacency matrix of ties between board members. The adjacency matrix was computed and converted to a matrix of geodesic distances between board members to highlight the centrality of board members to the main network (Nicholson et al., 2004). Board network centrality helps researchers identify the most well-connected board members within a network. Other network measures, such as a sum of interlocked ties between firms, do not reflect a board member’s importance within the network (Bonacich, 1987). This study calculates the eigenvector centrality of board members.

Figure 1.

Network analysis of sample restaurant companies. Note. This figure demonstrates a network analysis of sample restaurant companies. Board of directors create links (black lines) between focal companies (orange squares) and interlocked companies (blue dots).

Eigenvector centrality for the two-mode networks is calculated using UCINET, an SNA program developed by Steve Borgatti, Martin Everett, and Lin Freeman (2002). Eigenvector centrality evaluates a node’s importance in terms of the centrality of its neighbors. A board member is well-connected when its immediate interlocks are also well-connected

λ \cdot {CENTRALITY}_{i} = \sum_{j} g_{ij} \cdot {CENTRALITY}_{j}

(1)

where λ is the proportionality factor, i and j are elements of the adjacency matrix g_ij, and g_ij = 1 if boards i and j are linked. Transform (1) into vector form so that each board’s centrality can be obtained by the EIGENVECTOR of the matrix g. That is

λ * EIGENVECTOR = g * EIGENVECTOR

(2)

The eigenvalue centrality score χ_i is then expressed as

χ_{i} = \frac{1}{p} \sum_{j = 1}^{n} g_{i j} χ_{i}

(3)

where p is a constant, defined as the maximum possible eigenvector for the given network in year t. The eigenvector centrality score is calculated recursively and ranges from 0 to 1 (Borgatti and Halgin, 2011). An eigenvector centrality score of 0 represents a central board being interlocked with other boards; those other boards are not linked. The central board is marginal in the network. As the eigenvector centrality score gets higher, the central board is better connected when its direct interlocks are also better connected. That is, the central board becomes more influential in the network. Given that the well-connectedness of each board member depends on the connectedness of its immediate links, eigenvector centrality captures notions of power and prestige and indicates the popularity of board members. In this study, we calculate the average eigenvector centrality of all board members for each firm-year observation.

Moderator

This study examines the moderating effects of board effectiveness (NUMCOM). Consistent with previous research, we measure NUMCOM using the number of board committees for each firm year (Van Den Berghe and Levrau, 2004). The board committees include those that are mandatory and voluntary, such as audit, compensation, and management planning and development committees.

Control variables

This study considers two firm-specific control variables: firm size (FSIZE) and firm performance (TOBINQ). It considers three board-specific control variables: board size (BSIZE), board tenure (TENURE), and board gender diversity (GENDER).

Firm size, measured by the natural log of a firm’s market capitalization, is expected to positively affect CSR performance. Large firms have a greater ability to adapt to changes (e.g., economic and social) in a business environment than smaller firms (Huang, 2010). Firm performance, measured by Tobin’s Q, is expected to affect CSR performance positively. Following Ullmann (1985), financial performance is deemed to influence a firm’s financial capacity to undertake activities related to social demands.

Board size, estimated by the number of board members on the board, is expected to have a negative relationship with CSR performance. An excessive number of board members on a board can cause a lack of communication and coordination that results in slow decision-making (De Andres and Vallelado, 2008; Zheng and Tsai, 2019). Board tenure, measured by the years that board members have served on the board, is expected to affect CSR performance positively. Tenure is related to the boards’ experience and knowledge of a firm (Kosnik, 1990). Thus, the longer the tenure, the better the CSR performance. Board gender diversity, estimated by the ratio of female-to-male representation on the board, represents the percentage of female board members on the board. Previous studies have identified that board gender diversity affects CSR performance because women on boards are more philanthropically driven than men (Lockstone-Binney et al., 2021; Williams, 2003).

Estimation models

This study develops four models to test our hypotheses. Model 1 tested H1, which states that board network centrality (INTER) positively affects CSR performance (CSPstr). Model 1 is as follows:

CSPstr_it = α_{0it +} α₁INTER_{it-1 +} α₂FSIZE_{it-1 +} α₃TOBINQ_it-1 + α₄BSIZE_it-1 + α₅TENURE_it-1 + α₆GENDER_it-1 + µ_it-1

Model 2 tested H3, which states that the positive relationship between board network centrality (INTER) and higher number of board committees (NUMCOM) helps connected directors maximize CSR strength (CSPstr) more profoundly. Model 2 is as follows:

CSPstr_it+1 = α_{0it +} α₁INTER_{it +} α₂NUMCOM_{it +} α₃INTER×NUMCOM_it + α₄FSIZE_it + α₅TOBINQ_it + α₆BSIZE_it + α₇TENURE_it + α₈GENDER_it + µ_it

Model 3 tested H2, which states that board network centrality (INTER) has a negative impact (main effect) on negative CSR performance (CSPcon). Model 3 is as follows:

CSPcon_it+1 = α_{0it +} α₁INTER_{it +} α₂FSIZE_{it +} α₃TOBINQ_it + α₄BSIZE_it + α₅TENURE_it + α₆GENDER_it + µ_it

Model 4 tested H4, which states that the negative relationship between board network centrality (INTER) and higher number of board committees (NUMCOM) helps connected directors reduce CSR concerns (CSPcon) more profoundly. Model 4 is as follows:

CSPcon_it+1 = α_{0it +} α₁INTER_{it +} α₂NUMCOM_{it +} α₃INTER×NUMCOM_it + α₄FSIZE_it+ α₅TOBINQ_it + α₆BSIZE_it + α₇TENURE_it + α₈GENDER_it + µ_it

Data analysis

Our dependent variables, CSR strength and CSR concerns, are non-negative integer count variables. Thus, the characteristics of the data must be considered in the regression models. Two common approaches to a count data model are the Poisson regression and the negative binomial model. The negative binomial model allows for handling data with over-dispersion, which indicates that the variance is larger than the mean. In this study, CSR strength had a mean of 1.598 and a variance of 8.012. CSR concern had a mean of 1.469 and a variance of 2.820. Furthermore, we apply the zero-inflated negative binomial model because the dependent variables exhibited a high number of zeros (52.8% in CSR strength and 37.6% in CSR concern). We also use the Vuong test to examine whether the zero-inflated specification was preferred over the general negative binomial model.

Stata 14.2 is used for data analysis. The Vuong test results showed that the zero-inflated model was preferred over the general negative binomial model (Model 1: z = 17.72, p > z = 0.000; Model 2: z = 17.88, p > z = 0.000; Model 3: z = 25.16, p > z = 0.000; Model 4: z = 25.08, p > z = 0.000). Based on the Hausman test (χ² = 23.06, p < 0.05; χ² = 19.72, p < 0.05), to account for potential issues from unobserved aspects in the panel data analysis, the research team used the two-way fixed effects model by firm and year effects. The clustered standard errors were robust to heteroscedasticity and autocorrelation (Greene, 2010).

Results

Descriptive statistics

Table 1 summarizes the descriptive statistics of the variables examined in the study. Positive CSR performance (CSPstr) varied from 0 to 14. The mean value of 1.598 suggests that the restaurant companies received a positive CSR score of 1.6 on average. Negative CSR performance (CSPcon) varied from 0 to 8, with an average value of 1.469. Board network centrality (INTER) varied from 0.363 to 0.921, with a mean value of 0.735 in our sample. The eigenvector centrality ranges from 0 to 1 and measures the structural importance of each board member, informing us only that the higher value, the better. Board committees (NUMCOM) with an average of 3.856 indicates that the sampled restaurant companies had four board committees on average. Firm size (FSIZE) had an average of 3.210. The mean value of a firm’s value (TOBINQ) 2.286 indicated that the present market values of the sampled US restaurants were twice their replacement cost on average. Board size (BSIZE), with a mean of 9.292, suggests that the board of directors for the restaurant companies had nine members on average. Board tenure (TENURE), with a mean value of 6.829, implies that the members of the board of directors in our sample served for an average of 7 years. Board gender diversity (GENDER), with an average of 0.148, suggests that 14.8% of the board members are female.

Table 1.

Descriptive results.

Variables	Obs	Mean	Std. Dev.	Min	Max	CSPstr	CSPcon	INTER	NUMCOM	FSIZE	TOBINQ	BSIZE	TENURE
CSPstr	242	1.598	2.830	0	14	—
CSPcon	242	1.469	1.679	0	8	0.449***	—
INTER	242	0.735	0.142	0.363	0.921	0.333***	0.229***	—
NUMCOM	242	3.856	1.179	2	7	0.244***	0.277***	0.376***	—
FSIZE	242	3.210	0.568	1.941	4.449	0.553***	0.438***	0.542***	0.518***	—
TOBINQ	242	2.286	1.562	0.137	10.217	0.138*	−0.005	0.020	−0.220***	0.248***	—
BSIZE	242	9.292	2.440	4	17	0.451***	0.321***	0.530***	0.599***	0.665***	−0.003	—
TENURE	242	6.829	3.008	0.2	15.962	0.273***	0.122	0.327***	0.185**	0.415***	0.128*	0.359***	—
GENDER	242	0.148	0.096	0	0.429	0.178**	0.068	0.225***	0.184**	0.201***	−0.011	0.200***	0.022

Note: *p < 0.05, **p < 0.01, ***p < 0.001.

We then tested the bivariate relationship between two variables by conducting a Pearson’s r correlation analysis. We mean-centered the independent variable and moderators to alleviate the multicollinearity issue. Table 1 also shows the results of the Pearson’s r correlation analysis. The highest correlation occurred concerning board size (BSIZE): 0.665 with firm size (FSIZE), 0.599 with the number of board committees (NUMCOM), and 0.530 with board network centrality (INTER). Other notable correlations are between firm size (FSIZE) and CSR strengths (r = 0.553) and CSR concerns (r = 0.438), indicating that larger companies tend to get more attention for their corporate strategies.

Main analyses

Table 2 shows the results of the zero-inflated negative binomial regression. First, for H1, Model 1 found that board network centrality was positively associated with positive CSR performance (β = 1.373, p < 0.05). A one-unit increase in board network centrality resulted in an increase in positive CSR score by exp(1.373) = 3.95. Thus, H1 is supported. Among the control variables, firm size (FSIZE) had a positive association with positive CSR performance (β = 0.828, p < 0.001). In Model 3, an interaction term of board network centrality (INTER) and the board committee (NUMCOM) was added to test H3. The interaction term INTER×NUMCOM showed a significant and positive association with positive CSR performance (β = 1.237, p < 0.05), suggesting that the number of board committees positively moderated the relationship between board network centrality and positive CSR performance. Thus, H3 is supported.

Table 2.

Zero-inflated negative binomial regression results.

	Positive CSR performance				Negative CSR performance
	Model 1		Model 3		Model 2		Model 4
	b	Exp(b)	b	Exp(b)	B	Exp(b)	b	Exp(b)
Control variables
Firm size (FSIZE)	0.828***	2.29	0.861***	2.37	0.872***	2.39	0.872**	2.39
Firm size (FSIZE)	(3.84)		(3.88)		(4.52)		(4.51)
Firm performance (TOBINQ)	0.104	1.11	0.070	1.07	−0.062	−1.06	−0.063	−1.07
Firm performance (TOBINQ)	(1.84)		(1.19)		(−1.11)		(−1.10)
Board size (BSIZE)	0.000	1.00	0.008	1.01	−0.018	−1.02	−0.018	−1.09
Board size (BSIZE)	(0.00)		(0.15)		(−0.48)		(−0.47)
Board tenure (TENURE)	0.039	1.04	0.043	1.04	−0.002	−1.00	−0.002	−1.00
Board tenure (TENURE)	(1.25)		(1.38)		(−0.09)		(−0.07)
Board gender diversity (GENDER)	1.278	3.59	1.663*	5.28	0.283	1.33	0.307	1.36
Board gender diversity (GENDER)	(1.55)		(1.97)		(0.39)		(0.41)
Positive CSR (CSPstr)					−0.012	−1.01	−0.012	−1.01
Positive CSR (CSPstr)					(−0.55)		(−0.56)
Negative CSR (CSPcon)	0.007	1.01	−0.007	1.01
Negative CSR (CSPcon)	(0.20)		(–0.19)
Main variables
Board network centrality (INTER)	1.373*	3.95	1.642*	5.17	0.078	1.08	0.094	1.01
Board network centrality (INTER)	(1.96)		(2.29)		(0.14)		(0.16)
Board committees (NUMCOM)	−0.064	−1.07	−0.217*	−1.24	−0.009	−1.01	−0.015	−1.02
Board committees (NUMCOM)	(−0.99)		(−2.10)		(−0.15)		(–0.18)
INTER * NUMCOM			1.237*	3.45			0.053	1.05
INTER * NUMCOM			(1.96)				(0.10)
Constant	−3.186***	−24.19	−3.024	−20.57	−1.938***	−6.94	−1.933	−6.91
Constant	(−5.65)		(−5.44)		(−4.39)		(−4.36)
LR χ²	82.65***		86.47***		57.22***		57.23***
Vuong test of ZINB vs NB	17.52***		17.87***		5.08***		4.83***
VIF	1.74		1.78		1.74		1.78

Note: 1. N = 242

2. *p < 0.05. **p < 0.01. ***p < 0.001

Regarding the results of the zero-inflated negative binomial regression for negative CSR performance, Model 2 was used to investigate H2. Board network centrality had no significant effect on negative CSR performance. Thus, H2 was not supported. Among the control variables, firm size (FSIZE) had a positive association with negative CSR performance (β = 0.872, p < 0.001). In Model 4, an interaction term of board network centrality (INTER) and board committee (NUMCOM) was added to test H4. The interaction term INTER×NUMCOM had no significant effect on negative CSR performance. Thus, H4 was not supported.

The log-likelihood ratio (LR) chi-square test evaluated the model fit. According to the chi-square values, all four models were statistically significant at 0.001. Models 1 through 4 presented VIF values within the threshold value of 10, implying that this study’s sample was not suffering from multicollinearity issues (Hair et al., 2010).

Robustness tests

We performed two additional analyses to ensure the robustness of the results. First, we tested our model using aggregated CSR performance measured by subtracting total CSR concerns from total CSR strength (Choi and Lee, 2018). Table 3 shows that the main effect of board network centrality and the moderating effect of board effectiveness are insignificant on aggregated CSR performance. These results, along with the positive correlation between CSPstr and CSPcon, confirmed that our approach on separating aggregated CSR performance into two distinct constructs was appropriate. Firms with high ratings on their CSR strengths tend to score high on their CSR concerns (Mattingly and Berman, 2006). Second, our models also examined 2-year lead dependent variables for sensitivity analysis. The results in Table 4 are qualitatively consistent with the results shown in the main analysis, indicating the robustness of our analyses.

Table 3.

Robustness analysis—aggregated CSR performance dependent variable.

	Main effect	w/interaction
	B	b
Control variables
Firm size (FSIZE)	1.096	1.057
Firm size (FSIZE)	(1.10)	(1.07)
Firm performance (TOBINQ)	0.042	0.033
Firm performance (TOBINQ)	(0.40)	(0.32)
Board size (BSIZE)	0.083	0.082
Board size (BSIZE)	(1.06)	(1.02)
Board tenure (TENURE)	−0.016	−0.008
Board tenure (TENURE)	(−0.21)	(−0.10)
Board gender (GENDER)	3.512	3.658
Board gender (GENDER)	(1.64)	(1.71)
Main variables
Board network centrality (INTER)	−0.335	0.082
Board network centrality (INTER)	(−0.26)	(0.07)
Board committees (NUMCOM)	−0.404	−0.483
Board committees (NUMCOM)	(−1.24)	(−1.61)
INTER * NUMCOM		1.399
INTER * NUMCOM		(1.54)
Constant	−2.976**	−2.967
Constant	(−1.17)	(−1.19)
Wald χ²	6.76	31.84**

Note: 1. N = 242

2. *p < 0.05. **p < 0.01. ***p < 0.001

Table 4.

Sensitivity analysis—2-year lead dependent variables.

	Positive CSR performance				Negative CSR performance
	Model 1		Model 3		Model 2		Model 4
	b	Exp(b)	b	Exp(b)	b	Exp(b)	b	Exp(b)
Control variables
Firm size (FSIZE)	0.835***	2.30	0.807**	2.24	0.858***	2.36	0.863***	2.37
Firm size (FSIZE)	(3.68)		(3.41)		(3.94)		(4.10)
Firm performance (TOBINQ)	0.148*	1.16	0.110	1.12	0.001	1.00	0.008	1.00
Firm performance (TOBINQ)	(2.08)		(1.36)		(0.02)		(0.19)
Board size (BSIZE)	0.007	1.01	0.019	1.02	−0.004	−1.00	−0.005	−1.00
Board size (BSIZE)	(0.13)		(0.32)		(−0.10)		(0.15)
Board tenure (TENURE)	0.043	1.04	0.049	1.05	−0.006	−1.00	−0.007	−1.00
Board tenure (TENURE)	(1.55)		(1.78)		(−0.28)		(−0.33)
Board gender diversity (GENDER)	1.333	3.79	1.633*	5.12	0.744	2.10	0.594	1.81
Board gender diversity (GENDER)	(1.78)		(2.31)		(1.19)		(0.82)
Positive CSR (CSPstr)					−0.023	−1.02	−0.021	−1.02
Positive CSR (CSPstr)					(−1.11)		(−1.04)
Negative CSR (CSPcon)	−0.019	−1.02	−0.035	−1.04
Negative CSR (CSPcon)	(−0.53)		(−1.00)
Main variables
Board network centrality (INTER)	1.428	4.17	1.743*	5.71	0.323	1.38	0.219	1.24
Board network centrality (INTER)	(1.86)		(2.48)		(0.69)		(0.44)
Board committees (NUMCOM)	−0.041	−1.04	−0.198	−1.22	−0.023	−1.02	−0.009	−1.01
Board committees (NUMCOM)	(−0.60)		(−1.90)		(−0.42)		(−0.12)
INTER * NUMCOM			1.272	3.57			−0.274	−1.32
INTER * NUMCOM			(1.64)				(−0.62)
Constant	−3.505***	−33.28	−3.202***	−24.58	−2.267	−9.65	−2.293	−9.90
Constant	(−4.69)		(−4.36)		(−5.04)		(−5.16)
LR χ²	135.64***		129.89***		83.64***		83.45***

Note: 1. N = 213

2. *p < 0.05. **p < 0.01. ***p < 0.001

Sub-categories tests

To delve further into the impact of board network centrality and CSP, we analyze the relationship by the sub-dimensions of CSR: community, diversity, employee relations, environment, product, and human rights. Given that the purpose of the sub-categories test was to see the general relationship by sub-category, each sub-dimension was measured by aggregated number (positive score minus negative score). We ran two analyses for each sub-dimension. Panel A is without a moderator, whereas Panel B has a moderation effect.

The Breusch and Pagan LM test revealed that pooled OLS is recommended for each model. Table 5 summarizes the results. The results show that only two dimensions were found significant. Board network centrality negatively affected employee relations, and the significance disappeared in the interaction model. With human rights, board network centrality revealed a positive and significant impact, but no significant moderating effect was found.

Table 5.

Pooled OLS results using aggregated sub-categories.

	ENV		COM		EMP		DIV		PRO		HUM
	Panel A	Panel B	Panel A	Panel B	Panel A	Panel B	Panel A	Panel B	Panel A	Panel B	Panel A	Panel B
Control variables
Firm size (FSIZE)	0.107	0.085	0.194	0.211	0.005	−0.031	0.157	0.114	−0.138	−0.136	−0.242***	−0.245***
Firm size (FSIZE)	(1.00)	(0.79)	(1.68)	(1.83)	(−0.03)	(−0.17)	(0.50)	(0.36)	(−1.38)	(−1.36)	(−4.61)	(−4.63)
Firm performance (TOBINQ)	0.039	0.037	0.057	0.060	−0.013	−0.020	0.001	−0.006	−0.013	−0.012	−0.012	−0.012
Firm performance (TOBINQ)	(1.36)	(1.27)	(1.81)	(1.90)	(−0.27)	(−0.42)	(0.01)	(−0.07)	(−0.47)	(−0.46)	(−0.80)	(−0.84)
Board size (BSIZE)	−0.011	−0.008	0.019	0.140	0.039	0.044	0.121	0.114	−0.048*	−0.048*	−0.038**	−0.038**
Board size (BSIZE)	(−0.50)	(−0.36)	(0.78)	(0.59)	(1.08)	(1.22)	(1.91)	(0.36)	(−2.38)	(−2.38)	(−3.49)	(−3.44)
Board tenure (TENURE)	−0.008	−0.004	−0.005	−0.010	0.015	0.023	0.043	0.050	−0.014	−0.014	0.008	0.009
Board tenure (TENURE)	(−0.51)	(−0.28)	(−0.26)	(−0.57)	(0.53)	(0.82)	(0.90)	(1.06)	(−0.92)	(−0.93)	(1.04)	(1.10)
Board gender diversity (GENDER)	−0.364	−0.260	−0.399	−0.541	1.101	1.314*	0.994	1.178	−0.293	−0.300	0.126	0.144
Board gender diversity (GENDER)	(−0.96)	(−0.68)	(−0.96)	(−1.29)	(1.72)	(2.03)	(0.91)	(1.06)	(−0.83)	(−0.84)	(0.66)	(0.74)
Environment (ENV)			0.088	0.103	0.323**	0.282*	0.187	0.137	0.138*	0.140*	−0.002	−0.005
Environment (ENV)			(1.26)	(1.47)	(2.76)	(2.38)	(0.93)	(0.67)	(2.13)	(2.12)	(−0.05)	(−0.14)
Community (COM)	0.558***	0.571***			0.400**	0.443**	0.708**	0.746**	0.185*	0.184*	0.174***	0.178***
Community (COM)	(7.62)	(7.78)			(2.95)	(3.24)	(3.02)	(3.15)	(2.50)	(2.43)	(4.34)	(4.35)
Employees (EMP)	−0.111**	−0.115**	0.034	0.036			−0.084	−0.086	0.026	0.027	0.041*	0.041*
Employees (EMP)	(−2.94)	(−3.07)	(0.81)	(0.87)			(−0.77)	(−0.78)	(0.74)	(0.75)	(2.25)	(2.23)
Diversity (DIV)	0.084**	0.075**	0.090**	0.098***	−0.128**	−0.143**			−0.055*	−0.055*	0.016	0.015
Diversity (DIV)	(3.40)	(2.97)	(3.27)	(3.55)	(−3.07)	(−3.38)			(−2.37)	(−2.30)	(1.30)	(1.18)
Product (PRO)	−0.063	−0.062	0.067	0.058	−0.022	−0.016	−0.522*	−0.509*			0.035	0.036
Product (PRO)	(−0.91)	(−0.90)	(0.89)	(0.77)	(−0.19)	(−0.13)	(−2.57)	(−2.50)			(1.00)	(1.02)
Human right (HUM)	0.122	0.143	0.067	0.036	1.030***	1.056***	−0.368	−0.343	0.547***	0.546***
Human right (HUM)	(0.96)	(1.11)	(0.48)	(0.26)	(5.04)	(5.19)	(−0.98)	(−0.92)	(4.63)	(4.58)
Main variables
Board network centrality (INTER)	−0.571	−0.441	0.489	0.323	−1.171*	−0.930	0.206	0.450	−0.123	−0.131	0.303*	0.324*
Board network centrality (INTER)	(−1.90)	(−1.42)	(1.47)	(0.95)	(−2.29)	(−1.77)	(0.23)	(0.49)	(−0.44)	(−0.45)	(2.03)	(2.08)
Board committees (NUMCOM)	0.048	0.026	−0.137**	−0.403*	−0.073	−0.117	0.151	0.104	0.088*	0.090*	0.047*	0.043
Board committees (NUMCOM)	(1.15)	(0.58)	(−3.12)	(−2.20)	(−1.03)	(−1.58)	(1.23)	(0.80)	(2.26)	(2.18)	(2.20)	(1.95)
INTER * NUMCOM		0.417		−0.550		0.847		0.871		−0.030		0.068
INTER * NUMCOM		(1.57)		(−1.89)		(1.86)		(1.12)		(−0.12)		(0.50)
Constant	−0.005	−0.021	−0.512	−0.467	0.149	0.119	−2.591***	−2.573***	0.651**	0.652**	0.617***	0.615***
Constant	(−0.02)	(−0.08)	(−1.85)	(−1.69)	(0.34)	(0.27)	(−3.62)	(−3.59)	(2.81)	(2.80)	(4.85)	(4.83)
R²	45.1%	45.7%	27.4%	28.7%	33.8%	35.0%	35.0%	35.4%	36.0%	36.0%	33.9%	34.0%

Note: 1. N = 242

2. *p < 0.05. **p < 0.01. ***p < 0.001.

Discussion

Given the growing recognition of the role of the board of directors’ on a firm’s strategic CSR decision-making process, this study revealed the dynamic impact of board network centrality by targeting one of the most imperative strategic outcomes to the restaurant industry: CSR performance. This study supported two key hypotheses concerning board network centrality and CSR performance of publicly traded US restaurants. First, we hypothesize that board network centrality positively affected CSR performance. Aligning with a previous finding that a board’s network improves CSR performance (Al-Dah, 2019; Vo et al., 2020), our findings suggest that well-connected boards strengthen positive CSR performances in the restaurant industry by playing a vital role in information transfer within the social network. Well-connected boards are more likely to (1) foresee industry trends and market conditions (Mizruchi, 1996); (2) reduce information asymmetries between the firm and external markets (Schoorman et al., 1981); (3) provide firms with the capability to stay connected with stakeholders, such as customers, suppliers, and communities (Mol, 2001); and (4) facilitate information transmission between firms on innovation and value-enhancing practices (Haunschild and Beckman, 1998).

Our findings further suggest that the positive effects of well-connected boards on CSR performance are conditional upon how effective the boards are. A growing portion of board decisions is made through board committees (Finkelstein et al., 2009), which involve the boards of directors’ capabilities in a specific professional field. The boards’ capacity for transferring information and resources from network centrality firms is contingent upon the boards’ involvement in the committees (Shropshire, 2010).

Conversely, board network centrality does not significantly reduce negative CSR consequences, and the board’s effectiveness has no significant moderating effect on that relationship. Firms simultaneously engage in CSR strengthening and concerning activities, with some firms participating in more responsible activities to counterbalance their engagement in socially irresponsible activities (Kim and Kim, 2014). In other words, CSR strength and concern are independent of each other. A firm with a high positive CSR performance cannot be viewed because it is not involved in negative CSR practices. Although boards of directors can gain more insight into and knowledge of CSR practices through their external ties, the nature of the restaurant industry includes pre-existing conditions that are socially damaging. Although the restaurant industry is not considered controversial (such as the gambling industry, which entails moral arguments), it is involved with environmental issues, such as excessive waste.

Restaurant companies have strived to reduce their environmental impacts. For instance, Starbucks has endeavored to build environmentally friendly stores, reduce water and energy consumption, improve food packaging, and reduce waste (Starbucks, 2018). Pizza Hut’s efforts include reducing paper fiber in pizza boxes (Alliance, 2011). However, restaurant companies face constant pressure to act eco-friendly (Kim, 2017). The reason is that the restaurant industry impacts the environment greatly, such as water and soil pollution and food waste (Kim, 2017). Given that these characteristics are inherently embedded in the restaurant industry, even firms that are recognized for their positive CSR performance continue to be criticized. Logically, boards of directors of restaurant companies prioritized their CSR strategies to address criticism but only to a certain extent. Boards of directors are encouraged to put their efforts into alleviating CSR concerns despite it being challenging. Indeed, boards’ concerted and interconnected efforts may be the key to resolving the industry’s challenge.

A similar notion exists with respect to employee relations. While companies are evaluated for their CSR performance based on union relations, health/safety, workforce reduction, and retirement benefits, restaurants typically rely on part-time workers. Even McDonald’s Corp., one of the largest restaurant companies in the world, hires numerous part-time workers whose wages are lower than their full-time counterparts and who do not receive benefits. These features can easily be evaluated as negative CSR activities. The negative and significant association between board network centrality and employee relations from the sub-category analysis reveals that boards of directors used their network resources to deal with “employee-related issues” rather than approaching them from employee development perspectives. These concerns cannot be solved in the board room alone. States and municipalities must address them using their discretion.

Theoretical implications

The current study has investigated the effects of board network centrality on CSR performance. Previous CSR research in the US restaurant industry mainly focused on CSR as a factor that influenced firm performance. This study examined CSR performance as a strategic outcome and board network centrality as a factor in CSR performance. This study provides merit in that it attempts to improve current understandings of the complex mechanism of board committees that drive CSR practices, a previously under-explored topic.

Second, our findings document that the mechanisms of a board’s network on CSR performance are through two constructs: socially responsible activities (CSR strengths) and socially irresponsible activities (CSR concerns). Many CSR studies in the restaurant context have evaluated overall CSR performance by subtracting CSR concerns from CSR strengths. Firms involved in more socially irresponsible activities are more likely to take on more socially responsible activities to buffer the negative effect. Restaurant companies are motivated to undertake more socially responsible activities, considering that the restaurant industry entails inevitable consequences that are socially damaging. Thus, by separately investigating CSR strengths and CSR concerns, the findings revealed that board network centrality has a positive effect on increasing socially responsible activities but not on decreasing socially irresponsible activities.

Third, CSR research has mainly explained the role of boards of directors based on stakeholder theory, which argues that boards make strategic decisions, including CSR strategies, in the interest of all firm stakeholders. The findings of this study align with this notion but further advance the literature by incorporating resource dependence and organization legitimacy theories to capture the dynamic relationship between board network centrality and CSR strengths/concerns. Our combining of resource dependence theory and organization legitimacy theory showed that the impact of board network centrality on CSR performance could be positive or negative depending on a board of directors’ motivation. This combination further suggested that board network centrality may impact firm’s CSR performance depending on the nature of an industry. The restaurant industry is inherently exposed to environmental issues. Even restaurant companies that are recognized for their positive CSR performance are being criticized for their illegitimacy. Often, companies that are structurally illegitimate have a harder time attaining legitimacy (Campbell et al., 2003). Therefore, the results of this study validate what resource dependency theory and organization legitimacy theory posit in the tourism and hospitality field.

Practical implications

The positive relationship between board network centrality and positive CSR performance shown in this study indicates that board network centrality serves as a bridge to market information and resources that are valuable for establishing CSR strategies. The restaurant industry presents unique characteristics: it contains high risk with low profits margins and is sensitive to consumer discretion, and the industry is ever in need of flexible and innovative CSR strategies. Thus, a restaurant company must assemble a board of directors with high network centrality. The market insights and resources obtained from a board with high network centrality improve information communication, positively affecting their CSR strategy outcomes. Firms with better-connected boards also have better relationships with other firms and tend to have higher levels of CSR performance. Restaurant firms that desire greater CSR performance can form alliances with firms with higher board centrality in the network to benefit their strengths in CSR (Macaulay et al., 2018).

Second, stakeholders in the restaurant firms with a more central position in the board’s network can take advantage of this competitive position. A firm’s higher centrality could be appealing to better-connected and reputable board members. Furthermore, board members of restaurant firms with higher centrality may be asked to serve on other firms’ boards more often (Song et al., 2021). Both situations mentioned above could lead the focal firms to be more central in the board’s network, which may lead to greater CSR performance in the long run.

Third, as regulatory and social pressures on CSR-related issues continue to increase, firms must pay increased attention to their CSR strategies and practices. Corporate policies are usually generated at a subcommittee level, where board members in smaller groups focus on a specific topic or agenda. The cost associated with the increase in socially irresponsible activities can be significant. Thus, restaurant companies should expect to face higher expectations and pressure from stakeholders to articulate CSR performance guidelines. Establishing a specific CSR subcommittee may be an effective strategy to respond to CSR concerns and stakeholders. With multiple committees and subcommittees, boards have more channels to exercise their expertise in specific areas, including CSR.

Limitations and future research

This study’s limitations present several future research opportunities. First, although the MSCI ESG database has been widely used in CSR research, it assigns a binary value to each CSR activity and weight equally across different dimensions of CSR. Future research could use a different CSR rating database to construct CSR performance measures. Second, this study investigates publicly traded US restaurant companies only; generalization to the entire restaurant industry in or outside the US and other industries may be limited. If similar data are accessible, future studies could replicate this investigation in different country’s contexts. Third, the study investigates the impact of board network centrality on positive/negative CSR performance, with board effectiveness being a moderator. Future research could incorporate other possible contingent factors, such as institutional pressure, CEO power, market dynamics, or investigating a specific board’s network.

Footnotes

Declaration of conflicting interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

ORCID iD

Yoon Koh

Author biographies

Yue Vaughan, PhD, is an assistant professor of the Department of Hospitality Management at Kansas State University. Her research focuses on financial and strategic management in the hospitality industry regarding corporate governance and corporate social responsibility issues.

Yoon Koh, PhD, is an associate professor in Conrad N. Hilton College of Global Hospitality Leadership at University of Houston. Her research explores financial implications of corporate strategies in the hospitality industry. Her current research projects investigate the topic in the context of crowdfunding, sharing economy, and corporate social responsibility.

References

Adams

(2002) Internal organisational factors influencing corporate social and ethical reporting. Accounting, Auditing & Accountability Journal 15(2): 223–250.

Al-Dah

(2019) Director interlocks and the strategic pacing of CSR activities. Management Decision 57(10): 2782–2798.

Arya

Zhang

(2009) Institutional reforms and investor reactions to CSR announcements: evidence from an emerging economy. Journal of Management Studies 46(7): 1089–1112.

Baraibar‐Diez

Odriozola

Fernandez Sanchez

(2019) Sustainable compensation policies and its effect on environmental, social, and governance scores. Corporate Social Responsibility and Environmental Management 26(6): 1457–1472.

Baysinger

Hoskisson

(1990) The composition of boards of directors and strategic control: effects on corporate strategy. Academy of Management Review 15(1): 72–87.

Bilimoria

Piderit

(1994) Board committee membership: effects of sex-based bias. Academy of Management Journal 37(6): 1453–1477.

Bonacich

(1987) Power and centrality: a family of measures. American Journal of Sociology 92(5): 1170–1182.

Borgatti

Halgin

(2011) Political dimensions of corporate connections. In: Carrington

Scott

(eds), The Sage Handbook of Social Network Analysis. Thousand Oaks, CA: Sage Publications, 417–433. DOI: 10.4135/9781446294413.n14

Buckholtz

Brown

Shabana

(2008) Corporate governance and corporate social responsibility. In: Crane

McWilliams

Matten

, et al. (eds), The Oxford Handbook of CSR. Oxford University Press, 327–345. New York, NY: Oxford University Press.

10.

Burt

(1980) Models of network structure. Annual Review of Sociology 6(1): 79–141.

(2003) Voluntary social reporting in three FTSE sectors: a comment on perception and legitimacy. Accounting, Auditing & Accountability Journal 16(4): 558–581.

12.

Chen

, et al. (2021) Are better-connected CEOs more socially responsible? Evidence from the U.S. restaurant industry. Tourism Management 85: 104304.

13.

Choi

Lee

(2018) Revisiting the financial performance - corporate social performance link. International Journal of Contemporary Hospitality Management 30(7): 2586–2602.

14.

Andres

Vallelado

(2008) Corporate governance in banking: the role of the board of directors. Journal of Banking & Finance 32(12): 2570–2580.

15.

Eisenhardt

(1989) Agency theory: an assessment and review. Academy of management review 14(1): 57–74.

16.

Filatotchev

Nakajima

(2014) Corporate governance, responsible managerial behavior, and corporate social responsibility: organizational efficiency versus organizational legitimacy? Academy of Management Perspectives 28(3): 289–306.

(2009) Strategic leadership: Theory and Research on Executives, Top Management Teams, and Boards. New York, NY: Oxford University Press.

18.

Gnyawali

Madhavan

(2001) Cooperative networks and competitive dynamics: a structural embeddedness perspective. Academy of Management Review 26(3): 431–445.

(2009) The relationship between corporate social responsibility and shareholder value: an empirical test of the risk management hypothesis. Strategic Management Journal 30(4): 425–445.

20.

Greene

(2010) Econometric Analysis. 7th edition. Upper Saddle River, NJ: Prentice Hall International Inc.

(2012) An examination of executive compensation in the restaurant industry. International Journal of Hospitality Management 31(1): 86–95.

22.

Guillet

Mattila

(2010) A descriptive examination of corporate governance in the hospitality industry. International Journal of Hospitality Management 29(4): 677–684.

, et al. (2010) Multivariate Data Analysis: A Global Perspective. London, UK: Pearson.

24.

Harrison

(1987) The strategic use of corporate board committees. California Management Review 30(1): 109–125.

25.

Harrison

Freeman

(1999) Stakeholders, social responsibility, and performance: empirical evidence and theoretical perspectives. Academy of Management Journal 42(5): 479–485.

26.

Haunschild

(1993) Interorganizational imitation: the impact of interlocks on corporate acquisition activity. Administrative Science Quarterly 38: 564–592.

27.

Haunschild

Beckman

(1998) When do interlocks matter?: alternate sources of information and interlock influence. Administrative Science Quarterly 43(4): 815–844.

28.

Heide

(1994) Interorganizational governance in marketing channels. Journal of Marketing 58(1): 71–85.

29.

Hillman

Dalziel

(2003) Boards of directors and firm performance: integrating agency and resource dependence perspectives. Academy of Management Review 28(3): 383–396.

30.

Hillman

Keim

(2001) Shareholder value, stakeholder management, and social issues: what’s the bottom line? Strategic Management Journal 22(2): 125–139.

31.

Horner

(2015) CEOs as corporate directors: a human capital perspective. Academy of Strategic Management Journal 14(1): 30–42.

32.

Parsa

Self

(2010) The dynamics of green restaurant patronage. Cornell Hospitality Quarterly 51(3): 344–362.

33.

Huang

(2010) Corporate governance, corporate social responsibility and corporate performance. Journal of Management & Organization 16(5): 641–655.

34.

Hung

(2011) Directors’ roles in corporate social responsibility: a stakeholder perspective. Journal of Business Ethics 103(3): 385–402.

35.

Husted

Allen

(2006) Corporate social responsibility in the multinational enterprise: strategic and institutional approaches. Journal of International Business Studies 37(6): 838–849.

36.

John

Senbet

(1998) Corporate governance and board effectiveness. Journal of Banking & Finance 22(4): 371–403.

37.

Jain

Zaman

(2020) When boards matter: the case of corporate social irresponsibility. British Journal of Management 31(2): 365–386.

38.

Judge

Zeithaml

(1992) Institutional and strategic choice perspectives on board involvement in the strategic decision process. Academy of Management Journal 35(4): 766–794.

39.

Keiser

(2002) Boards of directors of the hospitality and tourism industries: an exploratory analysis of composition and interlocks. Journal of Hospitality & Tourism Research 26(2): 155–174.

40.

Kesner

(1988) Directors’ characteristics and committee membership: an investigation of type, occupation, tenure, and gender. Academy of Management Journal 31(1): 66–84.

41.

Klein

(1998) Firm performance and board committee structure. The Journal of Law and Economics 41(1): 275–304.

(2014) The governance of corporate sustainability: empirical insights into the development, leadership and implementation of responsible business strategy. Journal of Business Ethics 122(1): 145–165.

43.

Kim

(2005) A Preliminary examination of determinants of ceo cash compensation in the U.S. restaurant industry from an agency theory perspective. Journal of Hospitality & Tourism Research 29(3): 341–355.

44.

Kim

(2014) Corporate social responsibility and shareholder value of restaurant firms. International Journal of Hospitality Management 40: 120–129.

(2012) Is earnings quality associated with corporate social responsibility? The Accounting Review 87(3): 761–796.

46.

Kim

(2017) Consumer responses to the food industry’s proactive and passive environmental CSR, factoring in price as CSR tradeoff. Journal of Business Ethics 140(2): 307–321.

47.

Kosnik

(1990) Effects of board demography and directors' incentives on corporate greenmail decisions. Academy of Management Journal 33(1): 129–150.

48.

Singal

(2021) Corporate governance in the hospitality and tourism industry: theoretical foundations and future research. Journal of Hospitality & Tourism Research 46: 1347–1383. DOI: 10.1177/10963480211011718

49.

Liu

Jia

, et al. (2020) CSR orientation incongruence and supply chain relationship performance—a network perspective. Journal of Operations Management 67: 1–24.

(2021) Examining the interlocking of tourism editorial boards. Tourism Management Perspectives 38: 100829.

, et al. (2018) Alliance network centrality, board composition, and corporate social performance. Journal of Business Ethics 151(4): 997–1008.

(2018) Which bundles of corporate governance provisions lead to high firm performance among restaurant firms? International Journal of Hospitality Management 72: 98–108.

53.

Mattingly

Berman

(2006) Measurement of corporate social action. Business & Society 45(1): 20–46.

54.

Mizruchi

(1996) What do interlocks do? An analysis, critique, and assessment of research on interlocking directorates. Annual Review of Sociology 22(1): 271–298.

55.

Mol

(2001) Creating wealth through working with others: interorganizational relationships. Academy of Management Perspectives 15(1): 150–152.

56.

MSCI (2015) ESG rating methodology. https://www.msci.com/www/research-paper/esg-ratings-methodology/0175943017

57.

Nguyen

(2012) Does the Rolodex matter? Corporate elite’s small world and the effectiveness of boards of directors. Management Science 58(2): 236–252.

58.

Nicholson

Alexander

Kiel

(2004) Defining the social capital of the board of directors: an exploratory study. Journal of Management & Organization 10(1): 54–72.

59.

Ortega

Wang

, et al. (2011) Modeling heterogeneity in consumer preferences for select food safety attributes in China. Food Policy 36(2): 318–324.

60.

Park

Song

Lee

(2019) The influence of CEOs’ equity-based compensation on restaurant firms' CSR initiatives. International Journal of Contemporary Hospitality Management 31(9): 3664–3682.

61.

Peterson

Philpot

(2007) Women’s roles on U.S. fortune 500 boards: director expertise and committee memberships. Journal of Business Ethics 72(2): 177–196.

62.

Pfeffer

Salancik

(1978) The External Control of Organizations: A Resource Dependence Perspective. New York, NY: Harper and Row.

63.

Puni

(2015) Do board committees affect corporate financial performance? Evidence from listed companies in Ghana. International Journal of Business and Management Review 3(5): 14–25.

64.

Rhou

Singal

Koh

(2016) CSR and financial performance: the role of CSR awareness in the restaurant industry. International Journal of Hospitality Management 57: 30–39.

65.

Riera

Iborra

(2017) Corporate social irresponsibility: review and conceptual boundaries. European Journal of Management and Business Economics 26(2): 146–162.

66.

Ruigrok

Peck

Keller

(2006) Board characteristics and involvement in strategic decision making: evidence from Swiss companies*. Journal of Management Studies 43(5): 1201–1226.

67.

Schoorman

Bazerman

Atkin

(1981) Interlocking directorates: a strategy for reducing environmental uncertainty. Academy of Management Review 6(2): 243–251.

68.

Shropshire

(2010) The role of the interlocking director and board receptivity in the diffusion of practices. Academy of Management Review 35(2): 246–264.

69.

Song

Lee

Kang

(2021) The influence of board interlocks on firm performance: in the context of geographic diversification in the restaurant industry. Tourism Management 83: 104238.

70.

Spira

Bender

(2004) Compare and contrast: perspectives on board committees. Corporate Governance 12(4): 489–499.

71.

Starbucks (2018) Global Social Impact Report. https://stories.starbucks.com/uploads/2019/08/2018-Global-Social-Impact-Report.pdf

72.

Suchman

(1995) Managing legitimacy: strategic and institutional approaches. Academy of Management Review 20(3): 571–610.

73.

Theodoulidis

Diaz

Crotto

, et al. (2017) Exploring corporate social responsibility and financial performance through stakeholder theory in the tourism industries. Tourism Management 62: 173–188.

74.

Ullmann

(1985) Data in search of a theory: a critical examination of the relationships among social performance, social disclosure, and economic performance of U.S. firms. Academy of Management Review 10(3): 540–557.

75.

Van den Berghe

Levrau

(2004) Evaluating boards of directors: what constitutes a good corporate board? Corporate Governance 12(4): 461–478.

76.

Velte

Stawinoga

(2020) Do chief sustainability officers and CSR committees influence CSR-related outcomes? A structured literature review based on empirical-quantitative research findings. Journal of Management Control 31(4): 333–377.

77.

HTT

Kim

(2020, March 4). Board network centrality and corporate social responsibility.

78.

Waddock

Graves

(1997) The corporate social performance-financial performance link. Strategic Management Journal 18(4): 303–319.

79.

Werbel

Wortman

(2000) Strategic philanthropy: responding to negative portrayals of corporate social responsibility. Corporate Reputation Review 3(2): 124–136.

80.

Williams

(2003) Women on corporate boards of directors and their influence on corporate philanthropy. Journal of Business Ethics 42(1): 1–10.

81.

World Business Council on Sustainable Development (1999) Corporate Social Responsibility: Meeting Changing Expectations. Geneva: World Business Council on Sustainable Development.

82.

Zahra

Pearce

(1989) Boards of directors and corporate financial performance: a review and integrative model. Journal of Management 15(2): 291–334.

83.

Zhang

Zhu

Ding

(2013) Board composition and corporate social responsibility: an empirical investigation in the post Sarbanes-Oxley era. Journal of Business Ethics 114(3): 381–392.

84.

Zheng

Tsai

(2019) The moderating effect of board size on the relationship between diversification and tourism firm performance. Tourism Economics 25(7): 1084–1104.

85.

Zou

Xie

Meng

, et al. (2019) The diffusion of corporate social responsibility through social network ties: from the perspective of strategic imitation. Corporate Social Responsibility and Environmental Management 26(1): 186–198.

Better-connected boards and their influence on corporate social responsibility: Evidence from U.S. restaurant industry

Abstract

Keywords

Introduction

Literature review

Board of directors studies in tourism and hospitality research

Link between board network centrality and CSR performance

The moderating role of board effectiveness

Methodology

Data

Dependent variable

Main variable

Moderator

Control variables

Estimation models

CSPstrit = α0it + α1INTERit-1 + α2FSIZEit-1 + α3TOBINQit-1 + α4BSIZEit-1 + α5TENUREit-1 + α6GENDERit-1 + µit-1

CSPstrit+1 = α0it + α1INTERit + α2NUMCOMit + α3INTER×NUMCOMit + α4FSIZEit + α5TOBINQit + α6BSIZEit + α7TENUREit + α8GENDERit + µit

CSPconit+1 = α0it + α1INTERit + α2FSIZEit + α3TOBINQit + α4BSIZEit + α5TENUREit + α6GENDERit + µit

CSPconit+1 = α0it + α1INTERit + α2NUMCOMit + α3INTER×NUMCOMit + α4FSIZEit + α5TOBINQit + α6BSIZEit + α7TENUREit + α8GENDERit + µit

Data analysis

Results

Descriptive statistics

Main analyses

Robustness tests

Sub-categories tests

Discussion

Theoretical implications

Practical implications

Limitations and future research

Footnotes

Declaration of conflicting interests

Funding

ORCID iD

Author biographies

References

CSPstr_it = α_{0it +} α₁INTER_{it-1 +} α₂FSIZE_{it-1 +} α₃TOBINQ_it-1 + α₄BSIZE_it-1 + α₅TENURE_it-1 + α₆GENDER_it-1 + µ_it-1

CSPstr_it+1 = α_{0it +} α₁INTER_{it +} α₂NUMCOM_{it +} α₃INTER×NUMCOM_it + α₄FSIZE_it + α₅TOBINQ_it + α₆BSIZE_it + α₇TENURE_it + α₈GENDER_it + µ_it

CSPcon_it+1 = α_{0it +} α₁INTER_{it +} α₂FSIZE_{it +} α₃TOBINQ_it + α₄BSIZE_it + α₅TENURE_it + α₆GENDER_it + µ_it

CSPcon_it+1 = α_{0it +} α₁INTER_{it +} α₂NUMCOM_{it +} α₃INTER×NUMCOM_it + α₄FSIZE_it+ α₅TOBINQ_it + α₆BSIZE_it + α₇TENURE_it + α₈GENDER_it + µ_it