Selecting board of directors for socially responsible firms using a multicriteria decision model

In the wake of the recent accounting and financial scandals that have resulted in significant losses, corporate social responsibility (CSR) is viewed by many investors as an important criterion in their investment selection strategy. In addition, social responsibility is viewed by current employees as an important source of job satisfaction and by potential employees as an attractive feature in their decision process. Corporate governance, in the form of the board of directors, serves as the ultimate internal control mechanism by aligning firm insiders and outsiders. The strength and independence of the board of directors becomes a fundamental concern, as firms with strong boards may be more likely to survive and prosper in the long run. The selection of candidates to the board of directors involves both subjective and objective information. The analytical hierarchy process (AHP) is a multicriteria decision model that can integrate both objective and subjective information. This study applies the AHP methodology to the identification of characteristics of candidates to the board of directors of socially responsible firms. The result is a dynamic model that can be used by socially responsible firms to efficiently select candidates to serve on their board of directors.