Essays on Corporate Governance and Sustainability

This thesis consists of a brief synopsis and five essays that together represent the core of my doctoral research in corporate governance and accounting at Copenhagen Business School. Each chapter is designed to stand alone and can be read independently.
The first essay examines foundation ownership as a model for promoting corporate sustainability. In this structure, a non-profit foundation owns and controls a for-profit business, prioritizing environmental and social goals over profit maximization. Using data from 2003–2020 on listed foundation-owned firms matched with comparable firms by size and industry, the analysis reveals that foundation-owned companies outperform their peers in environmental and social (E&S) dimensions of ESG performance. These firms sustained ESG activities during the financial crisis and committed to more ambitious emission reductions following the Paris Agreement. Overall, the findings emphasize the potential of purposeful ownership structures in advancing corporate sustainability policies and practices.
The second essay examines the financial performance of foundation-owned firms in a global sample of listed companies. These firms differ fundamentally from conventional governance structures by pursuing broader social objectives, forgoing high-powered incentives, and limiting exposure to the market for corporate control. Using both accounting-based and market-based performance metrics, the analysis compares foundation-owned firms with matched non-foundation-owned peers. Contrary to the view that firms lacking residual claimants cannot thrive financially, the results show that foundation-owned firms perform at least as well as their family- and investor-owned counterparts. They also invest more and demonstrate a stronger, more credible commitment to employees. Our findings are robust across a range of methodological and measurement stress tests, indicating that an organizational structure based on purposeful, non-profit ownership can be economically viable
The third essay explores how employee slack— the prevalence in organizations of employees with personal resources in excess of private consumption needs—influences organizational adaptation and innovation. Using comprehensive administrative register data from all Norwegian firms and residents between 2010 and 2017 and leveraging the repeal of the inheritance tax in 2014 as a quasi-natural experiment, the study shows that employee slack reduces the exploration of new knowledge and activities while increasing the abandonment of existing ones. It also affects employee effort, such as working hours, job continuity, and job mobility. Furthermore, employee slack plays a key role in moderating the effect of organizational slack on adaptation. Our findings indicate that slack resources are not confined to the company itself; employees can also hold such resources, which, in turn, influence the firm's capacity to innovate. By introducing the concept of employee slack, our study deepens the understanding of how individual resource availability influences firm adaptation and innovation. It also opens up new avenues for exploring the important, yet often overlooked, role of wealth dynamics within firms.
The fourth essay investigates the role of political ideology in the making of Environmental
and Social (E&S) disclosure regulation. It examines three key actions in the making of E&S disclosure rules: (i) voting, (ii) co-sponsoring legislation, and (iii) submitting comment letters to the U.S. Securities and Exchange Commission (SEC). The study finds that political ideology proves to be a stronger predictor of support for these regulations compared to other factors influencing politicians' voting decisions, such as campaign contributions, public opinion on corporate accountability, and social protests. This highlights the significant role political ideology plays in shaping sustainability disclosure legislation. Our results also indicate that the influence of ideology in these legislative proposals is stronger compared to other types of regulation, such as financial disclosure rules or E&S non-disclosure regulations.
The fifth essay explores the relationship between corporate social responsibility (CSR) and payout policy in European firms. This essay shows that heightened CSR engagement is associated with lower payout rates, particularly in smaller firms and those with weaker governance structures, showing the trade-offs between financial and social objectives.