resided in Switzerland for extended periods of time and also travelled to the UK, the Netherlands and Germany for interviews and observations.
My original contribution to knowledge is in the area of strategic cognition, and I present it in the next section.
sustainable value creation. It shows that directors regard purpose neither as a philosophical topic related to the social aims or responsibility of corporations, nor to moral obligations, but rather as the core raison d’être of commercial entities that exist to create value sustainably.
What is distinctive in purpose in the twenty-first century in how value is created. Purpose emerges as core directorial business, intrinsically linked to directorial governance roles, directors’ fiduciary duty to protect the interest of the company, and their legal responsibility for the overall management of the company and its strategic direction. The sustainability attribute of purpose, or how value is to be created, emerges as multidimensional, entailing financial, social and environmental aspects which have different degrees of relevance in the short and long term.
Secondly, director engagement with purpose emerges as a directorial SC process of knowing and understanding purpose. Engagement emerges as an affective, cognitive and behavioural mechanism, predicated along a continuum which ranges between conformity and compliance to corporate development. A continuum is necessary because the cognitive process of
engagement is neither a linear progression nor a dichotomy of engaged/disengaged directors, as directors can find themselves at both ends of the continuum and can move along the continuum, given the shifting nature of engagement. This temporary nature indicates that engagement, and the directorial role performance it represents, can vary significantly in terms of resource commitment, and depending on a set of contingencies, by which I mean factors or conditions influencing engagement (Owens & Hekman 2012). Contingencies determine where directors are situated along the continuum and how they might move on it, and
comprise directorial, governance and organisational factors. Directorial contingencies include personality, role identity, competence, motivation, generational shift and time. Among
governance contingencies are the chair, board structure and process, integrated reporting and public ownership, while the organisational contingency affecting engagement is culture.
Thirdly, the study suggests that institutional investors, by enacting their stewardship duties through a form of activism known as engagement, exercised around ESG topics which relate to purpose, are able to demand director attention through behavioural integrity, knowledge of the investee company, strategic relationships with directors (chairs and vice-chairs in
particular), and an investment time horizon aligned with corporate purpose. Neither investor nor investment size (assets under management and percentage of voting rights respectively), appear to play a role, as small investors are equally able to demand director attention if the above described conditions are met. Proxy advisors support director engagement in terms of conformity and compliance and are not conducive to the movement towards engagement as corporate development.
Fourthly, director engagement towards the far end of the continuum is viewed as possible both in public and private ownership, as long as the chair leads on qualitatively different relationships with investors to ensure alignment of purpose, and the trade-offs it entails, and investors display behavioural integrity and knowledge of the company, engage strategically with directors (chairs in particular), and have an investment time horizon aligned with purpose.
The fifth contribution concerns ESG and integrated reporting. Despite cross-industry
initiatives,6 a multitude of single-issue niche groups, and 230 sustainability standards for over 80 sectors in 180 countries (Solvang 2018), directors and investors face several competing sets of standards by which to measure and report ESG factors, often entailing intangible concepts and sources of capital beyond the financial (for instance human, social and natural).
Furthermore, a common preference to categorise ESG factors as ‘non-financial’ shapes the current policy debate on the integrated reporting of financial and non-financial factors as a
‘1+1’ discussion, promoting the illusion that ESG opportunities and risk are anything other than financial. Consequently, the developments in integrated reporting, including the EU Non-financial Reporting Directive II (EU 2014) and Non-binding Guidelines (EU 2017), indicate that ESG factors should be reported separately, or in separate sections of financial statements, rather than being accounted for in numbers and fully integrated within financial reports, a format which urgently needs to be adapted to the twenty-first century. The lack of global standards, coupled with a myopic view of ESG, impair the movement of director engagement with purpose towards corporate development, as directors can continue to relegate ESG issues to ‘non-financial matters’ with little to no impact on the bottom-line, treating them as non-core factors in strategic decision making, divorced from reality.
Sixthly, this research extends discussion in the corporate governance field, offering insights into directors’ attitudes, values, beliefs and behaviours, and into their interactions with investors, answering calls for a better understanding of these actors and the dynamics between them (Aguilera, Florackis & Kim 2016; Aguilera et al. 2015; Goranova & Ryan
6 Among others, the Global Reporting Initiative, the Financial Stability Board Task Force on Climate Related Financial Disclosures, and the Sustainability Accounting Standards Board.
2014; Judge, Gaur & Muller-Khale 2010; Kumar & Zattoni 2019; McNulty & Nordberg 2016). This thesis contributes to the emerging tradition of qualitative studies in corporate governance. I hope that the fact that this study was completed by a doctoral student of limited financial means (as opposed to an experienced researcher or team of researchers tapping into funding support) will inspire future colleagues in corporate governance to overcome fears that getting close to those in governance is impossible, and encourage them to enter this field of research.
Concerning the implications for policy and practice, policy implications relate to directors’
duties of strategy, integrated reporting and governance disclosure. As for implications for practice, they include the role of the chair, the talent pipeline and education for directors, and board structure. Having elaborated on my original contribution to knowledge, I now present the structure of the thesis.