Busy Outside Directors and Carbon Disclosure: When Do Talented Directors Turn Out to Be Incompetent?

Abstract

This study explores whether busy outside directors (BODs) with a wealth of experience influence carbon disclosure. The data analysis is based on Japanese listed firms—a sample of 2169 firm‐year observations from 2017 to 2023. In line with the reputation hypothesis, where director busyness is considered reflective of greater talent, the findings reveal a positive association between BODs and carbon disclosure practices. The benefits of board interlocks became prominent especially when a higher proportion of BODs viewed the board directorship as more prestigious. However, having BODs aged 75 years or older working in relatively less prestigious directorships was less beneficial. The results suggest that director reputation is a powerful incentive for outside directors and highlight the predicted, empirically elusive, potential risks associated with older directors. They provide important policy implications concerning the contentious topic of board busyness and aging, especially for firms selecting outside directors.