Environmental Performance: Does Corporate Governance Matter?

ABSTRACT Corporate environmental management and performance have become increasingly significant for companies in recent years, as they should operate in line with societal values and norms. Top management of companies, which include their board members, have an important role to play to address environmental issues, which include compliance with environmental laws and regulations. However, despite the growing number of environmental problems, stakeholder pressures and media attentions, there are relatively few studies that consider the role of corporate governance mechanisms in influencing the corporate environmental performance. This study investigates this phenomenon built upon the stakeholder theory. The study employs a matched pairs’ design method to select sample of this study; compliant and non-compliant groups of companies listed on Bursa Malaysia for the year of 2013. Data for environmental performance (EP) information were obtained from the Malaysia Department of the Environment (DOE). Data for corporate governance were collected from annual reports of sample companies to form corporate governance index. Results show that corporate governance mechanism is positively associated with the environmental performance of companies in Malaysia. Results suggest that the existence of good corporate governance would lead to higher companies’ compliance with environmental regulations that positively affects environmental performance. Additional analysis, which uses an alternative measurement for corporate governance and environmental performance measures, also confirm this finding. The results of this study highlight the importance of corporate governance mechanism in the formulation of strategic direction and operational implementation especially in the area of environmental management to meet regulatory standards and stakeholders’ expectation. Keywords: Corporate governance; environmental performance; stakeholders’ theory; corporate governance index; environmental management ABSTRAK Pengurusan dan prestasi alam sekitar korporat telah menjadi perkara yang semakin penting untuk syarikat kebelakangan ini kerana mereka perlu beroperasi bersesuaian dengan norma dan nilai-nilai dalam masyarakat. Pengurusan tertinggi syarikat, termasuk ahli lembaga pengarah, mempunyai peranan penting untuk mengutarakan isu alam sekitar termasuklah pematuhan terhadap peraturan dan undang-undang alam sekitar. Walaupun masalah alam sekitar, tekanan dari pemegang taruhan dan pemerhatian dari pihak media semakin meningkat, kajian yang mempertimbangkan peranan mekanisma tadbir urus korporat dalam mempengaruhi prestasi alam sekitar korporat amatlah sedikit. Kajian ini meneliti fenomena ini berasaskan teori pemegang tuntutan. Kajian menggunakan kaedah reka bentuk padanan pasangan untuk memilih sampel kajian: kumpulan syarikat patuh dan tidak patut yang tersenarai di Bursa Malaysia untuk tahun 2013. Data maklumat prestasi alam sekitar (EP) telah diperoleh dari Jabatan Alam Sekitar Malaysia (DOE). Data tadbir urus korporat diperoleh dari laporan tahunan sampel syarikat untuk membentuk Indeks Tadbir Urus Korporat. Hasil kajian mendapati mekanisma tadbir urus korporat berhubungan secara positif dengan prestasi alam sekitar syarikat di Malaysia. Hasil kajian mencadangkan bahawa kewujudan tadbir urus korporat yang baik akan mengarah syarikat untuk lebih patuh kepada peraturan alam sekitar dan seterusnya mempengaruhi prestasi alam sekitar secara positif. Analisis tambahan yang menggunakan kaedah pengukuran yang berbeza untuk tadbir urus korporat dan prestasi alam sekitar juga mengesahkan dapatan kajian ini. Hasil kajian ini menyorot kepentingan mekanisma tadbir urus korporat dalam memformulasikan hala tuju strategik dan pelaksanaan operasi terutama dalam bidang pengurusan alam sekitar bagi memenuhi piawaian undang-undang dan jangkaan pemegang taruhan. Kata kunci: Tadbir urus korporat; prestasi alam sekitar; teori pemegang taruhan; indeks tadbir urus korporat; pengurusan alam sekitar