Independent Board of Directors Group Faultlines and <scp>CSR</scp> : Evidence From India

ABSTRACT This study, leveraging group faultline and upper echelons theories, explores how relation and task‐based faultlines among independent board members influence CSR investment under the contingency effect of the financial slack of the firms. This study, leveraging the concept of group faultline and upper echelons, first hypothesizes how the supra‐top management team (TMT) influences CSR investment. Specifically, the study explores the role of relationship‐related and task‐related faultlines among independent board members in influencing firms' CSR investments. This study further suggests the moderating effects of financial slack on the relationship between independent directors' group faultlines and CSR investment. Drawing on a sample of 942 firms from India for 4 years (2014–2018), we explore how relationship‐related faultlines (like gender, education, and age) and task‐related faultlines (like functional background and tenure) among independent board members are associated with CSR investment. The study finds that relationship‐related faultlines, gender, education level, task‐related faultlines, functional background, and tenure would influence CSR investment by firms. Relationship‐related faultlines among independent board members decrease CSR investment, but task‐related faultlines increase CSR investment. Further, financial slack decreases the negative influence of relationship‐related faultlines and enhances task‐related faultlines' positive influence among independent board members on CSR investment. The study contributes to the CSR literature by examining how relationship‐ and task‐related faultlines among supra‐TMT influence a firm's ethical and sustainability behavior. This study has significant practical and policy implications, such as whether it would be wise for a firm to configure and reconfigure independent directors depending on financial slack. This strategy will help firms maximize the value of a diverse, independent board of multiple subgroups and reap the benefits of appropriate CSR behavior.