Corporate Governance and ESG Adoption: Analysing the Role of the Board Structure in the FTSE Bursa Malaysia Top 100 Index

Shai, Pei Yee (2025) Corporate Governance and ESG Adoption: Analysing the Role of the Board Structure in the FTSE Bursa Malaysia Top 100 Index. Masters thesis, Tunku Abdul Rahman University of Management and Technology.

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Abstract

Environmental, Social, and Governance (ESG) adoption has gained increasing importance amid rising awareness of sustainable business practices. As investors increasingly consider ESG ratings as a critical factor in their investment decisions and given the relatively low average FTSE4Good (F4G) ESG scores among Malaysian Public Listed firms, the urgency for improved ESG adoption has grown. This study aims to examine the board-related factors influencing ESG adoption among companies listed in the FTSE Bursa Malaysia Top 100 Index. Specifically, the study investigates the impact of board structure variables namely Independent Directors, Gender Diversity on the Board, CEO Duality, Board Size, the Presence of a Sustainability Committee, and Frequency of Board Meetings on ESG adoption. Employing a quantitative research method with a cross-sectional design, the study uses secondary data obtained from publicly available sources such as annual reports, corporate governance reports, board charters, and ESG ratings assessed by FTSE Russell. Data from 100 companies were analysed using the Statistical Package for the Social Sciences (SPSS) Version 27. The results reveal that only the presence of a sustainability committee is significantly associated with ESG adoption. Other variables, Independent Directors, Gender Diversity, CEO Duality, Board Size, and Board Meeting Frequency do not show a statistically significant relationship with ESG adoption. This study contributes to the existing literature by highlighting the crucial role of sustainability committees in promoting ESG adoption. From a practical perspective, the findings underscore the importance for companies to establish dedicated sustainability committees to strengthen ESG adoption. For regulators and policymakers, this study suggests incorporating formal recommendations such as including the formation of sustainability committees in the Malaysian Code on Corporate Governance (MCCG) 2021, particularly for Large Companies. Lastly, this study outlines its limitations and proposes directions for future research. Keywords: Independent Directors; Gender Diversity on Board; CEO Duality; Board Size; Sustainability Committee; Board Meeting; ESG; Corporate Governance; Board Structure; Board Composition.