Untangling the antecedents of code of ethics quality: does corporate governance matter?

Abstract

Purpose

This study aims to investigate the antecedents of code of ethics’ quality with specific regard to the peculiarities of corporate governance, which include the role of the primary shareholders within the firm, the role and influence of independent directors on the board, the effect of board size on the strategic decision-making process and the influence of the chief executive officer’s (CEO) age and gender diversity.

Design/methodology/approach

A sample of 248 Italian public companies publishing a code of ethics as of 2011 is used to test the hypotheses through Tobit regression models.

Findings

A positive or negative impact is derived from the implementation of a high-quality code of ethics. Codes of ethics are strongly influenced by the ownership structure of the company given the critical role played by primary shareholders with larger stakes in influencing the quality of a code. Moreover, the lower the number of independent directors, the higher the firm’s propensity to invest in code of ethics’ quality. Similar results were found in relation to board size and CEO age, where smaller boards and younger CEOs are more inclined to implement higher-quality codes of ethics.

Originality/value

Results support the argument that when linked to a sustainability strategic orientation focused on a high-quality code of ethics, corporate governance characteristics reveal influences that differ from those found in prior literature.

Citation

Garegnani, G.M., Merlotti, E.P. and Russo, A. (2015), "Untangling the antecedents of code of ethics quality: does corporate governance matter?", Corporate Governance, Vol. 15 No. 5, pp. 607-622. https://doi.org/10.1108/CG-02-2015-0020