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The Power of Connections: Analyzing Director’s Networks and ESG
Performance in Malaysian Corporations
Mohd Faizal Jamaludin
1,2*
, Roshidah Safeei
1
, Nor Balkish Zakaria
2
, Deliana Deliana
3
, Rizki Syahputra
3
1
Faculty of Accountancy, Universiti Teknologi MARA Kedah Branch, Sungai Petani Campus, Kedah.
2
Accounting Research Institute, Universiti Teknologi MARA, Shah Alam, Selangor.
3
Politeknik Negeri Medan, Medan, Sumatera Utara, Indonesia.
*Corresponding Author
DOI: https://dx.doi.org/10.47772/IJRISS.2025.910000416
Received: 13 October 2025; Accepted: 21 October 2025; Published: 13 November 2025
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.
Keywords
: Director Networks, ESG, Company Performance, Board of Directors, Sustainability Practices.
INTRODUCTION
In recent years, the concept of Environmental, Social, and Governance (ESG) practices has attracted growing
global attention as investors, regulators, and other stakeholders demand higher levels of corporate transparency
and accountability. Companies are increasingly expected to embed sustainability principles within their
operations, not only to safeguard environmental resources but also to promote social equity and sound
governance. These expectations have reshaped corporate strategies, influencing both financial outcomes and
reputational standing (Kotsantonis & Serafeim, 2023; Eccles & Klimenko, 2022). In Malaysia, the momentum
toward ESG adoption has intensified as market regulators and institutional investors advocate for sustainable
practices. The Securities Commission Malaysia (2023) reports a steady rise in ESG-related disclosures among
public-listed companies, reflecting national progress toward responsible corporate behavior. Nonetheless, the
uneven pace of ESG integration across industries underscores the need to better understand the internal and
external factors that shape corporate sustainability practices (Yusoff & Mohamad, 2023).
Recent Malaysian studies have also highlighted the growing influence of corporate governance mechanisms on
sustainability-related disclosures. For instance, Adenan, Said, and Joseph (2024) found that board composition,
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independence, and audit mechanisms significantly affect sustainable supply chain management disclosure
among Malaysian firms. While such studies underscore the relevance of governance structures, the relational
dynamics of board directors—their interlocking networks—remain underexplored in shaping sustainability
outcomes. This study builds upon that foundation by examining how directors’ network centrality influences
ESG performance within the Malaysian corporate landscape.
Among these determinants, the role of directors’ networks has gained scholarly interest as a subtle yet powerful
influence on corporate outcomes. Previous research suggests that directors with broad and well-connected
networks can mobilize valuable social and informational capital, which facilitates the diffusion of governance
knowledge and sustainability-oriented practices (Larcker, So, & Wang, 2013). Well-networked directors are also
positioned to leverage their relational capital to advocate for ethical conduct and improved environmental
stewardship within the organizations they serve (Engelberg, Gao, & Parsons, 2013; Horton & Serafeim, 2012).
Traditional governance studies have often emphasized board composition attributes such as gender diversity
(Mateos de Cabo et al., 2021), independence (Kim & Lu, 2011; Sharma, 2014), and expertise. However, the
relational dimension of boards—the patterns of interlocking connections among directors—remains
underexplored, particularly in Southeast Asian contexts where business and political ties are deeply intertwined.
Boards of directors play a central role in ensuring effective governance and maintaining investor confidence in
Malaysia and Indonesia. Yet, while structural characteristics of boards have been widely examined, the
governance implications of directors’ networks remain less understood. These networks represent an intangible
but critical element of board dynamics that can influence decision-making, monitoring effectiveness, and
ultimately, sustainability outcomes. Much of the existing research focuses on dyadic relationships, such as those
between executives and CEOs in setting compensation (Engelberg et al., 2013; Horton et al., 2012), or between
analysts and directors in shaping market information flows.
However, the broader macro-level effects of director interlocks on ESG outcomes have yet to be empirically
established. Board appointments often create ripple effects within the corporate landscape, as nominations are
influenced by existing professional and social ties. Well-connected directors can transfer governance practices
across companies, potentially leading to a convergence of norms that may either enhance or undermine corporate
value (Bouwman, 2011). Historical corporate collapses such as Enron and WorldCom in the United States (Fich
& Shivdasani, 2006) and Transmile Group Berhad or Megan Media Holdings Berhad in Malaysia (Mahmud et
al., 2009; Norwani et al., 2011) illustrate how weak governance networks can magnify systemic risk and erode
public trust.
A recent systematic review by Said, Joseph, and Adenan (2024) synthesized existing evidence on how corporate
governance mechanisms influence sustainable supply chain management and found that most studies concentrate
on traditional governance attributes—such as board size, independence, and audit quality. However, relational
aspects of governance, particularly the network structures that connect directors across firms, remain largely
underexplored. This study extends that line of inquiry by examining how directors’ network centrality
contributes to ESG performance, thereby addressing an emerging gap in the governance–sustainability literature.
While the board’s influence on financial performance has been extensively studied, limited attention has been
paid to how directors’ network structures affect broader performance dimensions such as ESG. This study seeks
to fill this empirical void by examining the relationship between the structural configuration of directors’
networks and corporate ESG outcomes in Malaysia. Using social network analysis (SNA), the research
constructs inter-director networks across the 100 largest publicly listed companies to assess how various
centrality measures—degree, eigenvector, closeness, and betweenness—relate to companies’ ESG scores.
Specifically, the study investigates whether directors’ centrality positions facilitate access to strategic
information that enhances sustainability performance.
The research also explores whether directors’ demographic and sociocultural diversity—encompassing
ethnicity, gender, religion, and education—modifies these relationships. Such diversity is particularly relevant
in Malaysia’s pluralistic setting, where governance outcomes may be shaped by distinct social and institutional
dynamics. Moreover, the study extends prior work on political connections (Jomo, 1998; Johnson & Mitton,
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2003), examining how these linkages intersect with directors’ networks to influence governance and ESG
practices. By addressing these dimensions, the study aims to contribute both theoretically and empirically to the
understanding of networked governance in emerging markets.
The objectives of this research are threefold: (1) to map and describe the structural characteristics of directors’
networks among Malaysian public-listed companies, (2) to examine how these networks influence ESG
performance, and (3) to identify key network attributes that drive sustainable governance outcomes. The article
proceeds as follows: the next section reviews relevant literature on ESG practices and board interlocks; this is
followed by the research design and methodology; the subsequent sections present and discuss the empirical
findings; and the paper concludes by outlining implications for theory, policy, and corporate governance
practice. Through this inquiry, the study aims to deepen understanding of how directors’ relational structures
function as a strategic governance mechanism that shapes corporate sustainability in Malaysia’s evolving
economic landscape. Given Malaysian unique business culture and institutional environment, examining director
networks provides insights into how relational and cultural dynamics interact with formal governance structures.
PRIOR STUDIES
Network centrality within the board of directors has emerged as a critical lens for understanding how ESG
practices are shaped and executed within corporations. As an indicator of a director’s prominence within a
network, centrality captures the scope of influence and the extent of connectivity a board member possesses,
both within and beyond the firm. Scholars increasingly acknowledge that directors who occupy central positions
in professional networks can leverage their relational capital to secure information, resources, and opportunities
that strengthen ESG initiatives. Companies with well-connected boards are often equipped with richer social
capital, enabling them to align corporate strategy with sustainability objectives and enhance governance
outcomes (Harjoto et al., 2020).
The theoretical foundation linking network centrality and ESG performance draws primarily from Social Capital
Theory and Social Network Theory, both of which emphasize how relationships serve as conduits for resource
mobilization and influence. Well-connected directors are typically more capable of engaging diverse
stakeholders and coordinating collective action—skills that are indispensable for implementing ESG-related
strategies. Empirical evidence by Lei et al. (2022) reinforces this view, demonstrating that board network
configurations substantially influence the degree to which companies embed sustainability principles within their
operations.
Within the Malaysian context, the adoption of ESG practices has gained considerable traction. The Malaysian
Code on Corporate Governance (MCCG) continues to drive transparency and sustainability reporting among
listed companies, fostering a gradual shift toward responsible business conduct. Despite these advancements,
ESG integration remains uneven across sectors, suggesting that the composition and connectivity of board
members may partially explain such disparities (Hassan et al., 2023). Recent studies focusing on Malaysian
companies indicate that directors who hold multiple directorships or maintain extensive external linkages are
more inclined to champion ESG initiatives. This advantage arises from their exposure to broader perspectives
and the transfer of best practices across companies (Rashid et al., 2022). Furthermore, the visibility of well-
networked directors often signals a firm’s commitment to ethical and sustainable governance, strengthening
investor confidence and corporate reputation (Yap et al., 2023).
Consistent with the MCCG’s principles, governance quality has been identified as a major determinant of
corporate sustainability disclosure. Adenan et. al., (2024) demonstrated that internal governance mechanisms,
such as board independence and audit oversight, play a crucial role in enhancing sustainable supply chain
management transparency. Their findings highlight that effective governance structures strengthen firms’
commitment to sustainability, suggesting that directors’ influence extends beyond compliance toward shaping
ethical and responsible corporate conduct. Building on this evidence, the present study shifts focus from
structural mechanisms to relational ones—specifically, how directors’ network centrality contributes to ESG
performance through information diffusion and social capital formation.
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Despite these contributions, notable research gaps persist, especially concerning how board networks function
within the Malaysian institutional environment. Much of the extant scholarship originates from Western
economies, which differ significantly in governance structures, cultural norms, and regulatory oversight.
Addressing this gap, the present study investigates how network centrality influences ESG outcomes by focusing
on the structural characteristics of Malaysian board interlocks and their implications for sustainability
integration.
Empirical findings on the relationship between directors’ networks and firm performance remain mixed. While
several studies report significant effects, others reveal weak or inconsistent associations (Abdul Wahab et al.,
2020; Fracassi & Tate, 2012). Earlier research explored how social networks shape decision-making, monitoring,
and overall corporate performance, recognizing that effective governance is closely tied to the strength of
directors’ professional relationships. Networks have been linked to a variety of organizational outcomes,
including executive compensation, policy choices, and political affiliations (Jamaludin & Hashim, 2017; Dicko
& Breton, 2011; Horton et al., 2009; Kim, 2005; Larcker et al., 2005, 2012; Nicholson et al., 2004; Smith, 2009).
They also play a vital role in providing strategic information and advisory support, thereby enhancing board
effectiveness (Carpenter & Westphal, 2001; Chenhall et al., 2010; Durbach & Parker, 2009; Stuart & Yim,
2010).
Nevertheless, empirical studies exploring the consequences of internal corporate networks remain limited
(Kleinbaum & Stuart, 2014). Prior research suggests that both internal and external director networks influence
firm performance and governance effectiveness (Brass et al., 2004; Mehra et al., 2006; Tsai, 2001; Tsai &
Ghoshal, 1998). Directors who maintain broad connections contribute to the accumulation of social capital,
fostering innovation, collaboration, and long-term value creation. Yet, the strength of these effects depends on
the directors’ ability to transform relationships into actionable resources and strategic knowledge (Berberich &
Niu, 2011; Field et al., 2013; Westphal & Stern, 2006).
This study adopts an integrative theoretical approach that combines Social Network Theory, Resource
Dependency Theory (RDT), Stakeholder Theory, and Agency Theory. Social Network Theory underscores the
importance of structural positioning, arguing that directors who occupy central or bridging roles have superior
access to information and influence (Burt, 2004). Empirical evidence indicates a comprehensive relationship:
while degree centrality—representing direct links—may sometimes correlate negatively with ESG outcomes
due to information overload and managerial distraction, eigenvector centrality—denoting connections to other
influential actors—often yields positive effects by facilitating access to strategic resources and elite information
channels.
From the perspective of RDT, directors serve as boundary spanners who connect the firm with external
stakeholders and resources (Pfeffer & Salancik, 1978). Excessive networking, as captured by degree centrality,
can generate inefficiencies and reduce governance quality by stretching directors’ capacity to monitor
effectively. Conversely, higher eigenvector centrality enhances the firm’s ability to acquire critical knowledge
and institutional support, thereby improving ESG performance.
Stakeholder and Agency theories further enrich this framework by highlighting the tension between directors’
external affiliations and their monitoring responsibilities. Agency Theory warns that extensive directorships may
dilute oversight and exacerbate conflicts of interest (Jensen & Meckling, 1976). In contrast, Stakeholder Theory
posits that directors embedded in diverse networks can foster stronger stakeholder engagement and ethical
accountability (Freeman, 1984). The combined theoretical insights suggest that optimal ESG outcomes arise
when boards maintain a balance between connectivity and control, ensuring that network capital is strategically
leveraged without undermining governance integrity.
Collectively, these perspectives reveal that board networks are neither universally beneficial nor detrimental.
Their effectiveness depends on how directors utilize their connections to enhance governance processes, align
stakeholder interests, and support long-term sustainability. Understanding these comprehensive relationships
provides the theoretical foundation for this study’s empirical investigation of how directors’ network centrality
influences ESG performance within Malaysian public-listed companies.
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METHODOLOGY
This study adopts a quantitative research design to examine how the network centrality of board directors
influences ESG practices among public listed companies in Malaysia. Framed as a cross-sectional analysis, the
research captures data at a single point in time to evaluate the relationship between directors’ network structures
and corporate sustainability outcomes. Such a design enables a focused assessment of the existing state of ESG
implementation and its linkages to board connectivity and influence (Hsu & Wu, 2022; Wang & Xu, 2023).
Although the study adopts a cross-sectional approach which is appropriate to examine current director’s
relational structures, it does not capture changes in director networks or ESG outcomes over time. Therefore,
future research could adopt a longitudinal approach to determine the causality between the dynamics of director
networks and sustainability performance.
The target population comprises the 100 largest companies listed on Bursa Malaysia, ranked by market
capitalization. This purposive sampling strategy is intended to capture companies with substantial market
presence, mature governance mechanisms, and well-developed board structures. Concentrating on leading
companies ensures the representativeness of organizations most actively engaged in ESG disclosure and provides
a meaningful context for evaluating complex board networks (Kumar & Mian, 2022). The selection of top 100
companies in Malaysia provides a relevant setting for analyzing established governance structures, this focus
may be due to established companies with most likely have more formalized ESG approach. Therefore, results
may not reflect the dynamics of smaller or emerging companies, where informal or family networks may exert
greater influence.
Multiple data sources were used to enhance validity and completeness. Information on board interlocks and
directors’ affiliations was obtained from annual reports, official company websites, and verified professional
networking platforms such as LinkedIn (Smith et al., 2023). Variables included the number of concurrent
directorships, interlocking board memberships, and external professional associations. ESG performance data
were extracted from sustainability and CSR reports, complemented by third-party ratings from agencies such as
MSCI and Sustainalytics (Johnson & Lee, 2023). Although third-party ESG ratings namely MSCI and
Sustainalytics provide standardized and comparable data, differences in rating methodologies may introduce
measurement bias. To mitigate this, cross-verification with Thomson Reuters ASSET4® scores was conducted
to ensure consistency in relative ESG rankings (Thompson & Garcia, 2023). Financial indicators, including firm
size, revenue, and market capitalization, were gathered from company financial statements and commercial
databases such as Bloomberg and Thomson Reuters (Davis & Thompson, 2023).
The analysis combines descriptive and inferential statistical methods. Descriptive statistics are used to
summarize sample characteristics and illustrate distributions of ESG scores and network measures (Harrison &
Lin, 2023). Pearson correlation analysis assesses the strength and direction of bivariate relationships between
centrality metrics and ESG indicators (Nguyen & Sim, 2022). Subsequently, multiple regression models evaluate
the influence of directors’ network centrality on ESG performance while controlling for company-specific
variables such as firm size, industry classification, and profitability (Lee & Carter, 2023).
To visualize and quantify inter-director relationships, the study employs social network analysis (SNA).
Measures of degree, betweenness, closeness, and eigenvector centrality are computed to capture different
dimensions of network prominence and influence (Zhang & Wang, 2022). The sample excludes financial
institutions, companies classified under PN17, and companies lacking 2022 annual reports. These four centrality
network measures were chosen because they capture distinct yet complementary aspects of board influence:
Degree reflects direct relational density; Eigenvector captures relational quality and prestige; Closeness indicates
communication efficiency; and Betweenness measures brokerage potential. Together, they offer a
comprehensive lens for evaluating how both direct and indirect board ties shape ESG performance, consistent
with prior governance network studies (Larcker et al., 2013; Gao & Wang, 2023). After applying these criteria,
100 companies and 1,012 directors were retained for analysis. Directors’ information was hand-collected. All
network computations were conducted using UCInet software (Harris & Zhu, 2022).
To uphold data integrity, independent researchers performed data entry, screening, and verification, resolving
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discrepancies through consensus (Robinson & Hill, 2023). The study applies four recognized measures of
centrality: degree (both direct and indirect), eigenvector, betweenness, and closeness (Jackson, 2023). Degree
centrality reflects the number of direct board linkages a director maintains, denoting influence derived from
immediate relationships (Freeman, 1978; Bonacich, 1987). Eigenvector centrality evaluates the extent to which
a director is connected to other influential peers, emphasizing indirect influence within the network (Bonacich
& Lloyd, 2015). Betweenness centrality identifies directors occupying intermediary positions, capable of
brokering or filtering information between otherwise disconnected clusters (Freeman, 1978; Barnea & Guedj,
2006). Closeness centrality measures a director’s efficiency in reaching others in the network, capturing the
speed and effectiveness of communication and coordination (Horton et al., 2012; Nicholson, Alexander, & Kiel,
2004).
Each of these metrics was computed at both the individual and firm levels, with aggregated measures reflecting
the collective influence of directors within a given company (Horton et al., 2012). By integrating data from
multiple verified sources and applying robust statistical and network analysis techniques, this study aims to
provide rigorous empirical evidence on how board networks function as a mechanism of corporate governance
and sustainability (Gao & Wang, 2023).
FINDINGS
Figure 1 presents the graphical configuration of directors’ interlocking relationships across the sampled
Malaysian public-listed companies. The overall Network Centrality Index (NCI) of 0.72 signifies a low-density
structure, suggesting that connections among directors are relatively sparse. The visualization reveals a large,
interconnected cluster—represented by blue nodes—comprising directors who maintain multiple shared board
memberships. Surrounding this main component are several smaller, loosely connected clusters, indicating
limited cross-board interactions among other directors.
Figure 1: Directors Networks (n= 1012, 2022, NCI=0.72%)
The existence of one prominent cluster alongside numerous isolated groups reflects a governance environment
characterized by localized connectivity rather than broad network integration. Although some directors occupy
structurally advantageous positions within their respective clusters, the network lacks a dominant or centrally
controlling individual. This dispersed configuration implies that influence and information flow are moderately
diffused, minimizing the likelihood of network dominance or resource monopolization. The relatively low
density further suggests that collaboration and knowledge exchange occur within selective circles, potentially
constraining the diffusion of sustainability-related insights across companies.
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Overall, the network structure depicted in Figure 1 demonstrates a fragmented but functional governance
network, where limited inter-cluster linkages may restrict the collective advancement of Environmental, Social,
and Governance (ESG) practices, despite the presence of several well-connected directors.
Figure 2 depicts the inter-organizational network formed through shared directorships among the top 100
publicly listed companies in Malaysia. The connections between companies are constructed based on directors
who hold multiple board positions, thereby linking companies through overlapping governance ties. The overall
Network Centrality Index (NCI) of 0.006 (or 0.6%) indicates a low-density network, implying limited
interconnectivity across companies. Similar to the director-level structure illustrated in Figure 1, the company-
level network reveals an absence of a dominant firm capable of exerting broad influence over the network.
Figure 2: Figure 2: Company’s Networks (n=100, 2022, NCI=0.6%)
The visualization shows that approximately 30 companies remain isolated, signifying the absence of any shared
directors with other companies. The remaining companies form small, localized clusters, with one relatively
prominent component—represented by larger blue nodes—indicating a group of companies that are more closely
connected through multiple shared directorships. This cluster reflects a core governance circle, where companies
potentially share strategic knowledge, governance norms, and market information through interlocking boards.
Despite this cluster, the overall network configuration suggests a fragmented governance landscape. The sparse
connectivity limits opportunities for collective learning, coordinated ESG initiatives, or widespread diffusion of
governance innovations. While central companies may benefit from enhanced access to shared expertise, the
majority operate independently, reflecting a dispersed governance ecosystem in Malaysia’s corporate sector.
Table 1: Descriptive statistics- Company’s Level (n=100, 2022)
Degree
Closeness
Betweenness
Eigenvector
ESG
Mean
1.576
1.486
0.747
6.125
57.52
Std Dev
1.480
0.336
1.437
12.747
0.435
Minimum
0.000
1.010
0.000
-0.000
27.15
Maximum
6.061
1.754
7.659
61.209
90.01
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NCI
0.6%
9.08%
6.98%
1.59%
-
N of Obs.
100
70
100
100
100
Table 1 summarizes the descriptive statistics for network centrality measures and ESG performance among the
100 largest publicly listed companies in Malaysia. The average Degree centrality of 1.576 indicates that, on
average, each firm maintains direct links with approximately one to two other companies. This moderate level
of interconnectivity suggests that while some companies are moderately embedded in the governance network,
many remain relatively independent. The minimum value of 0.000 reflects the presence of completely isolated
companies with no shared directors, whereas the maximum value of 6.061 indicates that certain companies
maintain interlocks with up to six other companies, reflecting a higher level of engagement and potential for
information exchange. The average Eigenvector centrality of 6.125 highlights the presence of companies
connected to other influential actors in the network, emphasizing relational quality rather than mere quantity of
connections. The maximum Eigenvector score of 61.209 suggests the existence of a few companies occupying
highly influential positions, capable of bridging key governance and information channels. In contrast,
companies with low Eigenvector scores are positioned on the periphery, with limited access to influential peers
or decision-making networks.
The mean Betweenness centrality value of 0.747 demonstrates that certain companies play intermediary roles
by connecting otherwise unlinked companies. The maximum score of 7.659 implies that some companies occupy
strategic brokerage positions, enabling them to mediate information flows and potentially shape governance
practices across multiple entities. Closeness centrality, averaging 1.486, indicates moderate efficiency in
reaching other companies within the network. Companies with higher Closeness scores can disseminate
information more rapidly, which may enhance responsiveness to governance or sustainability challenges.
Finally, the average ESG performance score of 57.52percent reveals a moderate level of sustainability integration
among Malaysian listed companies. The broad range of ESG scores—from 27.15percent to 90.01 percent—
suggests significant heterogeneity in sustainability adoption and reporting practices across sectors. Collectively,
the descriptive results reflect a fragmented but evolving corporate network, where a small subset of companies
demonstrate strong inter-firm linkages and high ESG engagement, while the majority operate in relative
isolation.
Table 2: Correlations
Degree
Closeness
Betweenness
Eigenvector
ESG
Degree
0.724
**
0.836
**
0.768
**
0.189*
Closeness
0.487
**
0.770
**
0.894
**
0.159
Betweenness
0.778
**
0.490
**
0.699
**
0.133
Eigenvector
0.671
**
0.463
**
0.616
**
0.197
*
ESG
0.142
0.107
0.099
0.182*
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).
Table 2 reports the correlation coefficients between the four network centrality measures—Degree, Closeness,
Betweenness, and Eigenvector—and companies’ ESG performance. The results reveal consistently strong and
positive interrelationships among the network variables, with correlation coefficients exceeding 0.50 and all
significant at the 1 percent level. This pattern indicates that the different centrality dimensions capture related,
yet distinct, aspects of board connectivity. The high correlations suggest that companies with directors who hold
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more interlocks (Degree) also tend to have shorter paths to other companies (Closeness) and greater influence
within the broader network (Eigenvector).
Among the network metrics, Eigenvector centrality exhibits a positive and statistically significant correlation
with ESG performance (r = 0.197, p < 0.05). This finding implies that companies whose directors are connected
to other influential actors tend to demonstrate stronger ESG outcomes, supporting the argument that relational
quality and access to elite networks enhance sustainability integration. Likewise, Degree centrality shows a
weaker but still significant positive relationship with ESG performance under Spearman’s rank correlation,
indicating that a higher number of interlocks modestly improves ESG engagement through increased exposure
to governance knowledge and best practices.
The intercorrelations between the network measures are notably high, particularly between Closeness and
Eigenvector centrality (r = 0.894, p < 0.01), reflecting strong convergence between direct and indirect measures
of influence. The significant positive correlations across all network dimensions reinforce the internal
consistency and robustness of the social network indicators used in this study. Overall, the results provide
preliminary empirical support for the view that director connectivity—especially through influential and well-
positioned networks—plays a meaningful role in shaping corporate ESG performance.
Table 3: Regression (n=100, 2022)
Variables
ESG
C
0.795**
3.254
Degree
-0.105*
-1.539
Closeness
0.110
0.666
Betweenness
0.023
0.475
Eigenvector
0.008**
1.718
Adjusted R
2
0.010
Std. Error
0.390
VIF
2.410
F-stats
1.168*
Obs.
100
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).
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Table 3 reports the results of the regression analysis examining the effects of directors’ network centrality on
companies’ ESG performance. The findings reveal a negative and statistically significant coefficient for Degree
centrality (β = –0.105, p < 0.05), suggesting that directors with numerous direct interlocks are associated with
weaker ESG performance. In contrast, Eigenvector centrality exhibits a positive and significant relationship (β
= 0.008, p < 0.01), implying that indirect or second-level connections—links to other highly influential
directors—enhance ESG outcomes. The coefficients for Closeness and Betweenness centrality are positive but
statistically insignificant, indicating that while proximity and brokerage roles contribute positively to ESG
initiatives, their effects are not sufficiently strong to reach statistical significance.
These results collectively highlight a comprehensive dynamic between direct and indirect board connections.
The negative influence of Degree centrality aligns with prior studies suggesting that excessive directorships may
create board busyness, reducing the time and attention directors can devote to governance and sustainability
oversight (Andres et al., 2013; Ferris et al., 2003; Larcker et al., 2013). Moreover, directors embedded in dense
networks may experience conformity pressures or reciprocal loyalties that compromise their independence,
resulting in weaker ESG monitoring (Mizruchi, 1996). The findings also indicate that highly interconnected
directors may inadvertently facilitate information redundancy or groupthink, diluting the quality of
sustainability-related decisions (Omer et al., 2014).
Conversely, the positive association between Eigenvector centrality and ESG performance underscores the value
of influence-based connections. Directors linked to other well-connected peers may access diverse information,
expertise, and institutional knowledge, enabling more effective strategic responses to stakeholder expectations.
This suggests that network quality—rather than sheer size—drives the positive governance effects of
interlocking directorships.
In summary, the regression results reinforce the premise that not all connections yield governance benefits.
While dense, overlapping board memberships can constrain decision quality, strategically positioned indirect
ties appear to foster knowledge exchange and accountability that strengthen ESG outcomes. This finding
supports the theoretical view that balanced network structures—those combining informational reach with
autonomy—are most conducive to sustainable governance performance.
DISCUSSION
This study set out to investigate the influence of board directors’ network centrality on Environmental, Social,
and Governance (ESG) practices among the largest publicly listed companies in Malaysia. By analyzing four
key measures of centrality—Degree, Eigenvector, Closeness, and Betweenness—the research provides empirical
insights into how board connectivity shapes corporate sustainability outcomes. The findings reveal that network
centrality plays a significant role in influencing ESG performance, supporting the notion that directors with
broader and more influential networks are instrumental in advancing sustainability practices. This outcome
underscores the growing importance of board composition and relational structure in achieving corporate
sustainability objectives, aligning with recent evidence that well-connected directors foster stronger ESG
engagement (Smith et al., 2023).
Based on the cross-sectional analysis for this study, the findings provide preliminary consequences from the
director’s connection relationship. Directors’ network structures and ESG outcomes may influence each other
reciprocally, suggesting a need for time-series or panel-data analysis. The study contributes to corporate
governance literature by deepening the understanding of Social Network Theory within the ESG context. It
demonstrates that the effect of director centrality extends beyond the number of ties to include the quality and
influence embedded in those connections. Integrating insights from RDT and Stakeholder Theory, the findings
suggest that director networks can serve as strategic channels for accessing resources, information, and
legitimacy. However, these same networks may also constrain oversight effectiveness if they generate
overcommitment or social conformity. The results therefore refine theoretical perspectives by showing that
network centrality can both enhance and impair ESG performance, depending on how directors manage their
relational capital.
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Empirical results indicate that Degree centrality has a negative and significant association with ESG
performance, implying that directors who hold numerous direct links may suffer from overextension and reduced
monitoring capacity. In contrast, Eigenvector centrality is positively related to ESG outcomes, highlighting the
benefits of connections with other influential and resourceful directors. These findings mirror prior research
suggesting that while excessive networking can lead to board busyness and diluted governance quality (Andres
et al., 2013; Ferris et al., 2003; Larcker et al., 2013), strategic second-level connections facilitate access to
expertise and information that strengthen corporate sustainability initiatives (Burt, 2004). The absence of
significant relationships for Closeness and Betweenness centrality indicates that indirect and intermediary roles
may not directly translate into measurable ESG improvements, consistent with earlier studies by Larcker et al.
(2013).
The observed pattern is consistent with prior Malaysian research that underscores the importance of governance
mechanisms in advancing corporate sustainability. Adenan et. al., (2024) similarly found that robust governance
structures foster more transparent sustainability disclosures, particularly in supply chain management. This
convergence suggests that both formal governance mechanisms such as board oversight and informal relational
mechanisms such as director networks serve complementary roles in shaping ESG outcomes within emerging
markets.
From a practical standpoint, the study provides guidance for companies and policymakers. Companies should
critically assess the network profiles of potential directors when designing their boards. Overly interconnected
directors may appear advantageous but can reduce governance independence and effectiveness. In contrast,
appointing directors with strong second-level connections can yield strategic benefits by improving access to
valuable knowledge and external resources. For regulators and policymakers, the findings emphasize the need
to encourage diversity and well-balanced board interconnections, which can enhance governance efficiency and
support broader ESG goals. Furthermore, the results highlight the value of limiting excessive directorships to
mitigate board fatigue and improve oversight quality (Bonacich, 1987; Bonacich & Lloyd, 2015).
This study enriches the theoretical discourse on corporate governance and sustainability by advancing the
understanding of how board network structures influence ESG performance. First, the findings extend Social
Network Theory by demonstrating that the influence of board connectivity depends not merely on the number
of interlocks but on the quality and strategic position of those connections. The positive role of Eigenvector
centrality underscores that indirect connections to influential peers—rather than direct interlocks alone—
enhance access to critical information and resources that support sustainable decision-making. This contributes
to a more refined understanding of how embedded social capital within board networks facilitates strategic
outcomes beyond traditional governance metrics.
Second, the results integrate RDT by showing that directors’ network positions determine their effectiveness in
acquiring and mobilizing external resources. High Eigenvector centrality indicates access to elite information
channels, aligning with RDT’s premise that well-connected boards can mitigate environmental uncertainty and
improve corporate adaptability. However, the negative association between Degree centrality and ESG
performance challenges the assumption that more connections always translate to better governance outcomes.
This finding introduces a paradox of connectivity within governance theory, suggesting diminishing returns
when excessive ties dilute directors’ attention or create information overload.
Third, this research broadens Stakeholder Theory by revealing that network-embedded directors enhance
stakeholder responsiveness through increased legitimacy and inter-organizational trust. Finally, by incorporating
insights from Agency Theory, the results demonstrate that overly dense networks may exacerbate managerial
entrenchment or conflict of interest, emphasizing the importance of balancing relational capital with effective
oversight. Collectively, these contributions position director network centrality as a multidimensional construct
that bridges structural, behavioral, and institutional elements of corporate governance.
While Said et al. (2024) consolidated prior research linking governance mechanisms to sustainable supply chain
practices, their review also underscored the need for broader theoretical models that capture relational and social
dimensions of governance. Responding to that call, the present study integrates Social Network Theory with
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RDT and Stakeholder perspectives to explain how directors’ network embeddedness operates as an informal
governance mechanism that enhances ESG outcomes.
As Malaysia’s corporate landscape is shaped by unique cultural and institutional factors, including strong
government-linked ownership, ethnicity diversity, and collectivist norms that emphasize relationship-based
governance. These characteristics may influence how director networks operate, commonly through interlocks
which may arise from trust-based affiliations or political patronage rather than purely strategic motives.
Incorporating these cultural dimensions enriches understanding of how social embeddedness mediates
governance outcomes in emerging markets.
From a practical standpoint, the findings carry important implications for boards, policymakers, and regulators
seeking to enhance ESG integration and governance quality. For boards of directors
,
the results suggest that
strategic composition should focus not only on demographic or professional diversity but also on the network
quality of members. Companies should prioritize directors who possess meaningful, well-positioned connections
rather than those holding numerous overlapping directorships. Excessive direct interlocks may lead to
governance fatigue and reduced independence, whereas indirect, influential connections can strengthen strategic
collaboration and sustainability oversight.
For corporate governance regulators, the study offers empirical evidence supporting policies that promote
balanced board networks. Initiatives such as limiting the number of directorships, encouraging cross-industry
representation, and mandating transparent disclosures of interlocking directorships could mitigate excessive
concentration of power and improve information flow across companies. Investors and stakeholders can also
leverage these insights to evaluate governance quality more holistically, considering not just board
characteristics but also relational embeddedness as a proxy for network influence and information access.
In general, the findings encourage Malaysian regulators and institutional investors to continue fostering
interconnected yet diverse boards, aligned with the objectives of the MCCG
.
Strengthening relational diversity
and promoting strategic interlocks among ethical and sustainability-oriented directors could accelerate the
diffusion of ESG best practices across sectors. By recognizing the strategic value of relational capital, companies
can design governance systems that balance connectivity, accountability, and sustainable value creation.
CONCLUSIONS
This study examined the relationship between board directors’ network centrality and ESG performance among
100 of Malaysia’s largest publicly listed companies, encompassing 1,012 directors. The findings suggest that
not all network connections yield beneficial outcomes. Degree centrality, which represents direct board
interlocks, negatively affects ESG performance, while Eigenvector centrality, capturing connections to
influential peers, positively influences it. Closeness and Betweenness centrality show no significant effects,
suggesting that indirect network positions or intermediary roles do not necessarily enhance ESG outcomes.
Collectively, these results demonstrate that while extensive networking may create information redundancy and
governance inefficiencies, strategic and high-quality indirect ties contribute to better sustainability performance.
The study advances theoretical understanding by integrating Social Network, RDT, Stakeholder, and Agency
theories. It shows that directors’ positions within network structures can either facilitate or hinder corporate
sustainability depending on the balance between resource access and oversight independence. Practically, these
insights reinforce the importance of considering network attributes when forming or evaluating boards.
Companies should avoid excessive concentration of direct interlocks and instead foster broader, high-quality
linkages that strengthen ESG governance and performance.
Several limitations warrant attention. The sample is limited to Malaysia’s largest companies, which may not
represent smaller or privately held companies. The cross-sectional design restricts causal inference, and the use
of aggregated ESG scores may obscure variations across environmental, social, and governance dimensions.
Future research could employ longitudinal or panel data to examine how director networks evolve over time and
influence specific ESG pillars. Comparative studies across industries and countries would help test the
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generalizability of these findings, while qualitative analyses could further elucidate how directors’ relationships
shape ESG decision-making dynamics (Hsu & Wu, 2022; Ali & Hasan, 2023; Lee & Carter, 2023).
Future research could broaden the sample to include other category of company such as middle size or newly
listed companies to capture how director’s networks work in less formalized corporate environments. As ESG
scores depend on rating agency methodologies, they may reflect disclosure quality rather than true sustainability
performance. Future studies could employ manual content analysis or integrate qualitative sustainability
indicators to validate these measures. An inherent limitation concerns potential endogeneity between network
centrality and ESG performance where companies with greater sustainability initiatives may attract more
connected directors, creating reverse causality. Therefore, this study suggest for future studies could apply
instrumental variable regression, two-stage least squares (2SLS), or panel-based methods to mitigate this concern
and establish directionality. Future work may adopt panel-data research designs, with the inclusion of smaller
companies, employ multi-source ESG measurements, and incorporate relevant institutional variables to capture
Malaysia’s cultural embeddedness. Such extensions would enhance causal inference and contextual
generalizability.
In conclusion, this study highlights the dual nature of board networks in corporate governance. While extensive
direct ties may constrain effective monitoring, strategically connected and influential directors can enhance ESG
performance by facilitating resource exchange, stakeholder collaboration, and informed decision-making.
Understanding this balance provides valuable insights for scholars, practitioners, and policymakers seeking to
design governance structures that foster both accountability and sustainable value creation.
ACKNOWLEDGEMENT
The authors would like to express their sincere gratitude to the Kedah State Research Committee, Universiti
Teknologi MARA Kedah Branch, for the generous funding provided under the General Research Fund. This
support was crucial in facilitating the research and ensuring the successful publication of this article.
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