Firm Performance and Corporate Social Responsibility: The Moderating Role of Board Skills

Purpose: This study examines the association between firm profitability and corporate social responsibility (CSR), with a particular focus on the moderating role of board skills, specifically those with financial and industry expertise. Design/methodology/approach: Based on a sample of 42,623 observations from 2002 to 2021, we use panel regression analysis with robust standard errors are clustered at the firm level. Findings: The results show that firm profitability is positively associated with CSR performance. However, the positive effect is less likely in the presence of board with financial and industry expertise. Indeed, boards dominated by financially and industry experienced directors tend to prioritize short-term financial returns over long-term CSR initiatives. Originality/value: This study offers a novel contribution to stakeholder and legitimacy theory perspectives by show that the association between financial performance and CSR depends significantly on the expertise embedded within the boardroom. While financial and industry expertise can bring valuable oversight, it may not adequately support CSR initiatives. In this regard, firms may need directors with additional skills and perspectives—such as sustainability or stakeholder management expertise—to better address CSR issues and balance financial objectives with long-term societal and legitimacy concerns. Practical implications: Policy and decision makers should carefully consider the composition of the board when seeking to align profitability with corporate social responsibility (CSR) outcomes. While financial and industry expertise are valuable for oversight, an overrepresentation of such skills on the board may inadvertently undermine long-term CSR commitments.