A governance approach to stakeholder engagement in sustainable enterprises-Evidence from B Corps

Sustainable enterprises face a risk for which the pressure over financial sustainability crowds out their impact mission. Corporate governance mechanisms can play an important role in managing the tensions between the two objectives, by steering and driving stakeholder engagement processes. At the same time, the rise of social media has provided firms with a platform for undertaking stakeholder engagement on a large scale. Therefore, the aim of this study is to examine how the governance mechanisms of sustainable enterprises affect engagement with stakeholders on social media. Specifically, we identify three distinctive mechanisms for a governance approach to stakeholder engagement in sustainable enterprises: The legal purpose beyond profit maximization, directors' commitment to purpose, and the adoption of purpose-specific accountability mechanisms. We argue that each of them matters for the extent to which sustainable enterprises engage with stakeholders on social media, as well as the quality of this engagement. By scraping and classifying nonfinancial tweets posted by 1074 U.S. B Corps between 2014 and 2018 and those posted by stakeholders towards the firm, we find that the legal and ethical mechanisms are positively related to the quality of engagement while the accountability mechanism is related to both the extent and quality of engagement. Our study sheds light on the implications of governance mechanisms in steering social media stakeholder engagement in sustainable enterprises.

Automated summary

Sustainable enterprises face a risk of financial pressures overshadowing their impact mission. Corporate governance mechanisms can help manage this tension by facilitating stakeholder engagement. This study examines how governance mechanisms affect stakeholder engagement on social media in sustainable enterprises. The study finds that legal and ethical mechanisms positively influence engagement quality, while accountability mechanisms influence both the extent and quality of engagement. This research sheds light on the importance of governance mechanisms in steering social media stakeholder engagement.