Do board industry expertise and executive compensation contribute to organisational resilience during a crisis?

<p dir="ltr">This thesis aims to provide a better understanding of how corporate governance mechanisms contribute to organisational resilience during a crisis. Drawing on resource dependence theory (RDT) and agency theory, this thesis examines how board industry experience, board industry interlocks, equity-based compensation, and environmental, social and governance (ESG) linked metrics influence firms’ ability to recover from crises. This thesis incorporates two empirical studies that examine whether and how organisational resilience is associated with board industry expertise and executive compensation during a crisis.</p><p dir="ltr">The first study examines the association between organisational resilience and industry board expertise, using a sample of 247 firms listed on the ASX500 index during the COVID-19 crisis, covering the period 2020-2021. Board industry expertise is measured by two proxies: board industry experience and board industry interlock. Organisational resilience is measured through the time it takes for firms’ share prices to recover to pre-crisis levels. Contrary to initial expectations, the analysis demonstrated that neither board industry experience nor board industry interlock had a statistically significant effect on recovery time.</p><p dir="ltr">The second study examines the association between organisational resilience and executive compensation. Executive compensation is measured through the proportion of equity-based pay and ESG-linked metrics. Organisational resilience is again measured through the time it takes for firms’ share prices to recover to pre-crisis levels. Drawing on an analysis of a sample of 280 firms listed in the ASX500 index during the COVID-19 crisis, the findings reveal that equity-based compensation, which aligns executive interests with long-term shareholder value, significantly reduces recovery time, enhancing organisational resilience. The results for ESG-linked metrics are significant and positively associated with the time to recover. The results demonstrate that firms with ESG-linked pay may take longer to recover from a crisis than those without ESG-linked pay. In turn, such firms are less resilient following an economic downturn.</p><p dir="ltr">This research contributes to the literature on corporate governance and organisational resilience by providing empirical evidence on the role of board characteristics and executive compensation in crisis management. It highlights the importance of aligning executive incentives with long-term value creation and offers practical insights for firms seeking to enhance their resilience in volatile environments. The findings also highlight the potential trade-offs associated with ESG-linked compensation, suggesting that while ESG initiatives are valuable for long-term sustainability, they may require careful balancing with short-term resource allocation during a crisis. In addition, the findings have direct relevance for refining ASX Corporate Governance Principles, especially Principles 2 and 8. Study Two informs Principle 8 on fair and responsible remuneration, showing that well-structured equity-based pay can enhance organisational resilience, align executive incentives with long-term performance, and promote proactive risk management, particularly important for firms in volatile or high-risk industries.</p>