Corporate governance and customer satisfaction as an antidote to ESG controversies

This paper investigates the relationship between customer satisfaction, corporate governance mechanisms, and corporate ESG controversies, distinguishing between financial and non-financial firms. This study relies on a large international sample of 2565 publicly listed companies included in the MSCI index, covering all sectors and multiple geographic regions over the period 2009–2023. Using fixed-effects panel models, Poisson regressions, and interaction specifications, the analysis shows that customer satisfaction significantly reduces the likelihood of controversies and plays a key moderating role by mitigating the adverse effects of both internal and external factors. Results highlight strong sectoral differences: in non-financial firms, managerial governance and board composition mechanisms are most relevant for reputational resilience, whereas, in financial firms, shareholder protection and transparency toward institutional investors are the key drivers. CSR strategies and reporting channels, while increasing external scrutiny, turn into effective tools of legitimation only when backed by high customer satisfaction. Overall, the findings suggest that customer satisfaction constitutes a form of latent reputational capital that enables governance and communication mechanisms to reach their full effectiveness.