Unmasking Independent Directors: Corporate Social Responsibility Strategy as a Mediator of <scp>ESG</scp> Controversies in European Firms

ABSTRACT This paper contributes to the literature by being a pioneer in investigating the role of independent directors in influencing ESG controversies in European firms, examining CSR strategy as a mediating mechanism. Using data from STOXX Europe 600 Index listed companies from 2007 to 2023, the results reveal that while independent directors enhance CSR strategy, they are also associated with higher reported ESG controversies. This negative outcome is partially mitigated by CSR strategy, highlighting its effectiveness as a strategic mechanism to mitigate ESG risks. Board size positively moderates the relationship between independent directors and CSR strategy. Robustness tests confirm the validity of the findings. The study highlights the importance of a combined theoretical approach by using agency theory, legitimacy theory, social capital theory, and resource dependence theory to understand the role of independents and CSR strategy in managing ESG controversies and suggests specific policies for corporate managers, policymakers, investors, and stakeholders.