The Power of Connections: Analyzing Director’s Networks and ESG Performance in Malaysian Corporations

Abstract

This study examines how directors’ network structures influence corporate Environmental, Social, and Governance (ESG) performance. Drawing upon social network analysis, four centrality measures—degree, eigenvector, closeness, and betweenness—are employed to capture the social capital embedded within board interconnections. The analysis focuses on the 100 largest publicly listed companies in Malaysia for the year 2022, comprising a network of 1,012 unique directors. The findings reveal that network centrality enhances the diffusion of strategic information and resources, enabling companies to respond to stakeholder expectations more effectively and to improve ESG performance. However, excessive direct connections may lead to information redundancy and governance inefficiency, suggesting that the quality of network ties is as important as their quantity. The study is limited by its cross-sectional design and geographical focus, which may constrain causal inference and generalizability. Future research should consider longitudinal or multi-country approaches to provide deeper insights. Practically, the results underscore the importance for companies and regulators to design board structures that balance interconnectedness with diversity, ensuring optimal information flow and oversight. The study contributes to corporate governance literature by integrating Social Network Theory with Resource Dependency and Stakeholder perspectives, offering a comprehensive understanding of how directors’ relational positions can both facilitate and constrain sustainable governance practices.