In the global race toward sustainability, corporate boards are expected to be the compass guiding firms through the ESG (Environmental, Social, and Governance) landscape. Vietnam is no exception. With growing regulatory interest and investor demand for ESG transparency, the composition and behaviour of corporate boards are coming under closer scrutiny.
But new research published in Finance Research Letters, with contributions from RMIT Vietnam, raises a critical red flag: directors with expansive boardroom networks, once seen as sources of strength and expertise, may in fact fuel ESG controversies. The study, titled “Do board networks fuel ESG controversies?”, analysed over 15,000 US firm-year observations from 2004 to 2013 and found a consistent pattern: firms with more connected boards experience significantly more ESG controversies, such as environmental violations, labour disputes, and governance scandals.
“The findings challenge the long-held belief that more connections mean better governance,” says Dr Irfan Haider Shakri, lead author and Finance lecturer at RMIT Vietnam. “In reality, over-connected boards can become echo chambers where critical oversight is weakened, and directors are stretched too thin.”
Implications for Vietnam’s ESG journey
Vietnam’s growing integration into global supply chains and its 2050 net-zero commitment mean that ESG practices are no longer optional, they are a prerequisite for access to capital and markets. Yet, Vietnamese firms often see board interlocks as a sign of influence and prestige.
“This research should be a wake-up call,” says Dr Pham Nguyen Anh Huy, senior lecturer in Finance at RMIT Vietnam. “Vietnamese companies must balance board connectivity with independence and engagement. Too many cross-board seats can reduce the ability of directors to challenge poor ESG practices, especially when reputational risks are high.”