Appointing Charity Directors in Response to ESG Incidents

Marina Gertsberg, Hae Won (Henny) Jung, and Yuyang Zhang

♦ This paper examines how companies respond to negative ESG incidents by appointing directors with charitable organization experience. Firms are more likely to make these appointments following high-profile ESG incidents, especially those involving social issues. The market reacts positively, particularly when directors’ biographies emphasize their charity experience. Using the local supply of charity directors as an instrumental variable, we show that incidents, particularly workforce-related incidents, decline after these appointments, with effects driven by nonoverboarded directors. Overall, our study documents a value-enhancing human capital channel through which firms address ESG concerns.

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