Board Profile and Pandemic Covid-19 Effect on Improving Level of

Environmental, Social, And Governance (ESG) Disclosures:

(Evidence from Energy Companies listed on the Indonesia Stock

Exchange in 2018-2020)

ALOYSIUS HARRY MUKTI, TRIANA YUNIATI

Department of Accounting,

Universitas Bhayangkara Jakarta Raya,

Jakarta,

INDONESIA

Abstract: - Environmental and social issues brought new emerging issues in running the business; profit was no

longer the ultimate goal for sustainability, but concern to improving environmental, social, and governance

quality is the one way to achieve sustainability. This study examines the effect of the BOD profile on the level

of Environmental, Social, and Governance (ESG) disclosure. The CEO’s educational background measured

proxies of BOD profiles, the proportion of gender diversity in the Board of Directors, and the CEO's age. This

study uses quantitative methods and multiple regression analysis to test the hypothesis. The sample in this study

are companies listed on the Indonesia Stock Exchange in the energy sector, with a total sample of 62 firms

years. The results showed that the CEO's educational background and CEO Age positively affect the level of

ESG disclosure. Board gender diversity and the COVID-19 pandemic did not affect the level of ESG

disclosure.

Key-Words: - BOD, ESG, Covid-19, CEO’s, Energy Sectors, Gender Diversity.

Received: June 23, 2022. Revised: September 21, 2023. Accepted: October 23, 2023. Available online: November 22, 2023.

1 Introduction

Environmental, social, and governance (ESG)

practices have been significantly increased because

of the critical effect on business going concern, [1],

provide benefit to society at large and, at the same

time, maximize shareholder wealth, [2]. The ESG

factor has become a key consideration for

institutional and individual investors. More and

more companies have shown a greater commitment

to ESG activities to be recognized as socially

responsible. At the same time, many asset managers,

pension funds, and institutional investors have

begun to assess the activities of companies when

making investment decisions, [3]. Even though

these practice has been spread and become

legitimate, many cases still exist. Climate lawsuits

are still an unsolved problem in developed countries

during 2022, [4]; these issues are also becoming

government attention in several developing

countries such as Indonesia. The forest destruction

to gain profit is still going on and under the

supervision of the Ministry of Environment and

Forestry, [5].

Due to the cases, The Indonesia Stock Exchange

(IDX) has put more concern in business practices,

particularly in the energy sector, because Indonesia

is a region rich in minerals and energy sources. Still,

on the other side, the existence of this company has

an impact on the environment.

Previous research studies have examined several

factors that affect ESG disclosure. The most

common factor was board diversity and gender.

From the earlier studies, there’s a perspective that it

will differ when a woman is part of the board. The

matter of sensitivity will vary from the masculinity

stereotype, [6], [7], [8], showing mixed results. Still,

notably, [6], the result suggested that the greater the

diversity, the more excellent ESG performance. The

age of the CEO also plays an important role;

companies expect that the age will reflect the

experience managing the company in any kind of

issues, [9], [10]. These studies show that the CEO’s

age does not affect the level of ESG disclosure.

The partial observation year of this research was

conducted during the pandemic COVID-19 era. We

should control the effects of ESG activity before and

during the COVID-19 pandemic, [11], [12], [13].

The firm’s performance can also affect the

company's ability to do additional activities such as

ESG. The more the company performs, the more it

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will increase its ability to absorb ESG activity. Then

we should also control the different performances

among companies, [14], [15]. Several research

questions were raised from previous research with

mixed results and problematization above. “Is there

any effect of board profile and during the COVID-

19 pandemic on the level of ESG disclosure? “.

This paper will contribute to several areas, first

simultaneously board profile and during the

pandemic covid-19 in one research model, that this

result is still rare, particularly ESG disclosure on

pandemic covid-19. Second, it will enrich the

variability of results, particularly in energy sectors

that operate the natural resources specific to the

Indonesian context. Further, the structure of this

article is as follows: section two will be a literature

review discussing the theory, ESG itself, and

hypothesis development, section three will be

methodology, section four will be the result, and

discussion and Section five will be the conclusion,

limitation and further research.

2 Literature Review and Hypothesis

Development

2.1 Legitimacy Theory

A social contract is a keyword; there’s an obligation

or agreement for a corporation to operate within or

respect social boundaries, which needs to be ensured

to maintain the corporation in the long run or to fill

the sustainability aspect, [16]. Emphasizing the link

between ESG and legitimacy theory is crucial for

the needs of stakeholders because they are putting

increasing pressure on firms to engage in greening

conduct to enhance ESG activity, [17]. Therefore,

companies should adopt practices that can influence

societal appraisal to increase their legitimacy, such

as social and environmental practices, including

actual activities and disclosure, [18], [19], [20]

2.2 Environmental, Social and

Governance (ESG)

Starting in 2000, Secretary-General Kofi Annan

aimed to implement universal principles in business

by establishing the link between environmental,

social, and governance. Then, ESG became a

worldwide issue and concern, [21]. With increasing

environmental problems, stakeholders need

environmental information disclosure (EID) as a

channel for stakeholders or external interests to

understand environmental management activities,

[22], [23]. ESG is also needed as a basis or indicator

to measure the economic performance of the

company; sometimes, financial indicators do not

provide accurate information on the overall

performance therefore, ESG currently become a

strategy as well as a tool for future cash flow, [24].

2.3 CEO Education Background on the

Level of ESG Disclosure

Implementing and realizing that ESG is crucial to

companies’ performance can be obtained if the CEO

has a broader perspective and is willing to learn

what is new and give added value to the companies.

Selective information is needed to adopt new

standards and activities carefully. Therefore, we

assume education plays a vital role for the CEO to

have this particular board perspective for

implementing and extending the ESG practice. This

assumption was also aligned with the previous

studies, [25], [26]. This behavior of the CEO also

supports the legitimacy theory; the CEO needs to be

accepted among other CEOs in one industry. It

shows that the CEO was legit in the operational

activity that did not harm the environment, social, or

governance aspects. Based on previous research, the

first hypothesis is as follows:

H1: Educational Background of the CEO Has a

Positive Effect on the Level of ESG Disclosure

2.4 Board Gender Diversity on the Level

of ESG Disclosure

Accepting women’s gender on the board or in the

companies is representative of sensing being

diverse, [6], [7], [27]. ESG score was increased

when the board was diverse, or there was a female

gender on the board, [8]. This diversity represents a

comprehensive resource for the board for decision-

making in the business environment in Asia,

particularly in Korea. The study, [28], shows the

importance of women on the board for prioritizing

stakeholders’ interests. Practice diversity among the

board currently influences the boards. Therefore, the

board will act according to the industry and society

by caring about social issues and supporting the

legitimacy theory. Based on previous research, the

second hypothesis is as follows:

H2: The gender diversity of the Board Has a

Positive Effect on the Level of ESG Disclosures

2.5 CEO Age on the Level of ESG

Disclosure

Issues on Environmental and social concerns got

stronger after the year 2000, so there’s a different

style of management, [29]; the requirement after

2004 suggests that companies no longer focus on

profit only as a performance indicator but should

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consider non-financial measurement. Due to current

issues, we assume that younger CEOs will be more

familiar with dan paying attention because there's a

different age culture to running the business. By this

assumption, [10], also predicts that younger CEOs

will tend to increase ESG awareness. That means it

will also increase the ESG disclosure. The study,

[9], showed different results that the Age of the

CEO does not affect ESG Activity in the context of

the Italian company. Despite the mixed results from

previous studies, we believe the cultural age gap is

essential in the Indonesian context, and innovative

management techniques will be shown in the

younger CEO. Based on previous research, the third

hypothesis is as follows:

H3: CEO age has a negative effect on The Level of

ESG Disclosure.

3 Methodology

The population in this study uses energy sector

companies listed on the Indonesia Stock Exchange

(IDX) with annual company reports for the 2018-

2020 period. The purposive sampling method was

used as a sample to meet the criteria determined

based on specific considerations by the research

objectives. So, the total sample in this study was 62

firm years. This research was carried out

quantitatively with SPSS software. The multiple

linear regression equation models used are as

follows:

𝒀 = 𝜶𝟎 + 𝜶𝟏𝑿𝟏 + 𝜶𝟐𝑿𝟐 + 𝜶𝟑𝑿𝟑

+ ∑𝜶𝟒𝑪𝒐𝒏𝒕𝒓𝒐𝒍𝒔 + 𝜺

These are : Y = ESG Disclosure (Appendix 1.ESG

Items Disclosure from Nasdaq, 2019), α0 =

Constant, X1 = Education Background of the CEO,

X2 = Gender diversity of the Board of Directors, X3

= Age of CEO, X4 = ROA (control), X5 = Dummy

Covid Year (control), 1- 4 = Partial Regression

Coefficient, ε = Error/Other variables not identified

in the model. The variable measurements are

presented in Table 1 (Appendix).

4 Results and Discussion

The total sampling, in the beginning, was 71 firms

per year or consisting of 28 companies; because this

regression is not data panel or in this article using

cross-section, we ignored the balanced sampling for

three years of observation after several criteria such

as data availability on stock exchange website and

data outlier, the data that available is 62 firm years.

Table 2 (Appendix) shows that from education,

almost less than half the CEO has an education from

MBA. The board gender diversity showed that the

value of mean 0,10 is near to the minimum value, or

in other words, quite a small number of women on

the board in this research sample.

The age of the CEO shows that the minimum

age is 37 and the maximum age of the CEO is 62

years, with the mean of Age CEO being 52, near to

the maximum value, which means the seniority of

the CEO of this research sample is quite dominant.

The level of ESG disclosure, from 30 indicators,

showed that the maximum value is 73% or almost

22 items were disclosed in their annual report. If we

see the near mean value to the maximum value, their

disclosure of ESG activities is high or above

average. Minta

4.1 Correlations

Table 3 (Appendix) shows two significant

correlations as a pre-test before we proceed with the

regression. The education of the CEO has a negative

correlation with the board gender diversity, and age

has a positive correlation with the level of ESG

disclosure.

4.2 Model Fit and Hypothesis Result

Based on Table 4 (Appendix), it can be seen that the

significance value is 0.021. This indicates that 0.021

<0.05. So, it can be concluded that the independent

variables consisting of the educational background

of the CEO, the gender proportion of the board, and

the age of the CEO simultaneously affect the level

of ESG disclosure. As well as the variables in this

study declared fit to be used or included in the

research model. It can be seen that the value of

Adjusted R Square is 0.136 or 13.6%. This means

that the ability of the independent variables,

consisting of the educational background of the

CEO, the gender proportion of the board, and the

age of the CEO, can explain the effect on the level

of ESG disclosure by 13.6 %. At the same time, the

remaining 86.4% is influenced by other independent

variables that have not been observed in this study.

4.3 Discussion

4.3.1 CEO Education Background on the Level

of ESG Disclosure

The result in Table 4 (Appendix) shows that the

educational background of CEOs, particularly MBA

graduates, positively affects the level of ESG

disclosure, aligning with the previous studies, [25],

[26]. MBA graduate was one of the majors that

accommodated students in operating businesses

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within social boundaries. This major also discusses

the new and innovative trends regarding business

development. So, in these results, the higher

proportion of CEOs with an MBA will increase

ESG disclosure. They realized that financial

indicator is no longer the only measurement

companies being legit among other companies, so

legitimacy theory plays a vital role; CEO need to be

accepted within their industries to represent the

priority on environmental and social issues.

4.3.2 Board Gender Diversity on the Level of

ESG Disclosure

The result shows no effect on board gender diversity

on the level of ESG disclosure. This result is not

aligned with the previous studies, [6], [7], [27], [28].

This result can be explained with several

probabilities; from the descriptive statistics, it shows

that the board gender diversity is relatively small so

that it can affect the outcome, or in the other

reasoning, knowledge sensitivity regarding

environmental and stakeholder priority is also aware

by the masculinity group. The awareness of the

environment and sustainable development cannot be

dichotomized by gender in this context. Both

women and men have a similar concern and priority

to maximize stakeholders’ value. The result did not

support legitimacy theory in this context. The

diversity of gender in the Indonesian context has a

different effect, and board diversity gender is not

relevant to assumption energy sector companies in

Indonesia.

4.3.3 CEO Age on the Level of ESG Disclosure

Table 4 (Appendix) shows that the CEO's age

positively affects the level of ESG disclosure. It

means the more senior age of the CEO will lead to

an increase in ESG disclosure. This result did not

align with the previous studies, [9], [10]. Several

reasons can cause these opposite directions. The age

of CEOs does not guarantee the level of knowledge

and sensitivity in ESG disclosure in the context of

the energy sector in Indonesia. It can also be

concluded that senior CEOs have an adequate

concern regarding the safety of the environment and

priority in social issues. Legitimacy theory still

supports these results by showing that the CEO's age

is important when companies want to expand the

ESG disclosure.

4.3.4 Controls on the Level of ESG Disclosure

We predict that there will be a different pattern

during the COVID-19 pandemic. ESG activities will

be limited due to company responses to survive the

operational COVID-19 pandemic. It might be that

companies will decrease or step aside ESG activities

because there’s another crucial aspect, for example,

maintaining liquidity or preventing companies from

bankruptcy. Still, the result shows no different

pattern before and during the COVID-19 pandemic.

It can be explained that ESG might already be part

of the company’s long-term goals to make the

business model sustainable. ROA also does not

affect the level of ESG disclosure, which means

doing ESG does not affect the capabilities of firm

performance. Compliance with regulation is above

everything. Being legit in the industry is not a

matter of profit but also having awareness and

compliance with the law.

5 Conclusion, Limitation and

Further Research

The discussion led us to several conclusions that the

importance of the educational background of CEOs

relevant to the issues for this context of research,

and MBA graduates seem to have a positive effect

on supporting ESG issues, the age of CEOs have the

opposite direction or positive impact on the level of

ESG disclosure, in the same time it also was a good

problem by knowing that old age of CEO also has

priority regarding environmental issues. Board

gender diversity is not relevant to support the level

of ESG disclosure. We can say that environmental

issues did not belong to women or men. It’s a matter

of humans that care and prioritize the environment

for sustainable business.

Several limitations can be addressed in this

research and can be an opportunity for further

investigation. First, the measurement of level ESG

disclosure uses dummy variables. Next, research can

develop another measurement, like the number of

words or sentences, to measure the extensification

of ESG disclosure. Second, educational background

is limited to MBA graduates. Next, research can add

another qualification, such as CEOs with

sustainability certification or another relevant

discipline, such as Law. The measurement of Covid

years, using a dummy given value one of the Covid

years, subsequent research can apply to the precise

number of Covid representatives, such as the

number of net income sales that might be lost during

the COVID-19 pandemic.

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APPENDIX

Table 1. Variable Measurements

Variable

Operationalization

References

Education

CEO with educational background Master of Business Administration given value 1, 0

otherwise

[26]

Board Gender

Number of Women gender over the total board

[7], [8]

Age

CEO age from he/she was born up to his/her position now as a CEO

[10]

Disclosure of

ESG

The environmental, Social, and Governance dimensions consist of ten indicators then the

total disclosure is 30 indicators (appendix1). Dummy 1 for disclosing the item and 0

otherwise

[29]

Dummy year

Covid

Year of pandemic Covid. Dummy 1 for year pandemic covid in 2020, 0 otherwise

[30]

Return on

Assets

Percentage of Total Asset over Net Income.

[14], [15],

[31]

Table 2. Descriptive Statistics

Minimum

Maximum

Means

Std Deviation

Education

0,00

1,00

0,3226

0,4712

Gender

0,00

0,40

0,1044

0,1150

Age

37.0

62,00

52,645

5,9783

ROA

0,00

0,21

0,0571

0,0490

D.Covid

0,00

1,00

0,3065

0,4647

ESG

0,33

0,73

0,5565

0,1090

Source: SPSS data Processed, 2023

Table 3. Descriptive Statistics

ROA

Educ

Gender

Age

d.covid

ESG

ROA

Educ

-0,064

Gender

-0,163

-0,390**

Age

0,118

-0,197

-0,192

D.Covid

-0,060

-0,10

-0,053

0,046

ESG

0.207

0,108

-0,069

0,358**

0,009

Sig Level : * 10%** 5%, *** 1%

Source: SPSS data Processed, 2023

Table 4. Hypothesis Result

Model

Unstandardized

Coefficients

Standardized

Coefficients

Beta

Sig.

std. Error

Constant

0,104

0,131

0,798

0,428

Education

0,060

0,032

0,258

1,887

0,064*

Gender

0,104

0,100

0,143

1,039

0,303

Age

0,008

0,002

0,412

3,237

0,002***

ROA

0,4410

0,272

0,199

1,623

0,110

D.Covid

0,003

0,028

0,012

0,101

0,920

F-Test : 0,021

Adjusted R Square : 0,136

Dependent Variable : ESG

Sig Level : * 10%, ** 5*, *** 1%

Source: SPSS data Processed, 2023

WSEAS TRANSACTIONS on COMPUTER RESEARCH

DOI: 10.37394/232018.2024.12.17

Aloysius Harry Mukti, Triana Yuniati

E-ISSN: 2415-1521

179

Volume 12, 2024

Appendix 1. ESG Items Disclosure from Nasdaq, 2019

Environmental

Social

Governance

E1. GHG Emissions

S1. CEO Pay Ratio

G1. Board Diversity

E2. Emissions Intensity

S2. Gender Pay Ratio

G2. Board Independence

E3. Energy Usage)

S3. Employee Turnover)

G3. Incentivized Pay

E4. Energy Intensity)

S4. Gender Diversity)

G4. Collective bargaining

E5. Energy Mix)

S5. Temporary Worker

Ratio

G5. Supplier Code of Conduct

E6. Water Usage

S6. Non-Discrimination

G6.Ethics & Anti-Corruption

E7.Environmental Operations

S7. Injury Rate

G7. Data Privacy

E8. Climate Oversight / Board

S8.Global Health & Safety

G8. ESG Reporting

E9.Climate Oversight/

Management

S9. Child & Forced Labor

G9. Disclosure Practices

E10.Climate Risk Mitigation

S10. Human Rights

G10. External Assurance

Contribution of Individual Authors to the

Creation of a Scientific Article (Ghostwriting

Policy)

The authors equally contributed in the present

research, at all stages from the formulation of the

problem to the final findings and solution.

Sources of Funding for Research Presented in a

Scientific Article or Scientific Article Itself

No funding was received for conducting this study.

Conflict of Interest

The authors have no conflict of interest to declare.

Creative Commons Attribution License 4.0

(Attribution 4.0 International, CC BY 4.0)

This article is published under the terms of the

Creative Commons Attribution License 4.0

https://creativecommons.org/licenses/by/4.0/deed.en

_US

WSEAS TRANSACTIONS on COMPUTER RESEARCH

DOI: 10.37394/232018.2024.12.17

Aloysius Harry Mukti, Triana Yuniati

E-ISSN: 2415-1521

180

Volume 12, 2024