Companies in oil palm industry are facing an increasing global attention, firstly, due to the increase global demand for their products (oils and fats), and secondly, due to the negative effect of their operation towards the environment[1]. Understanding the nature of environment performance of companies in this industry is very important because past studies highlight the possible wealth creation of companies that take care of the environment and society. Companies that take care of the environment and operate in environmentally friendly management practices create value that beneficial to shareholders and stakeholders. Additionally, corporate governance mechanisms practiced is another key element that lead the performance of a business. However, despite the growing number of environmental problems, stakeholder pressures and media attentions, there are relatively few studies that consider the role of corporate governance mechanisms in influencing the corporate environmental performance and firm value. This study investigates this phenomenon built upon the stakeholder theory. This theory deliberates the expectations of diverse stakeholder groups within society upon corporate governance and environmental performance. Sample of this study includes all companies in palm oil industries, listed on the Main Board of Bursa Malaysia. Environmental performance is measured based on the severity of environmental problems caused by the companies. The data provided by the Malaysian Department of Environment. Companies’ value is measured based on the accounting and market data. The corporate governance mechanism variable is developed based on the Malaysia Code of Corporate Governance (2012). The results show that corporate governance is positively associated with environmental performance and firm value. The findings provide an input to companies to develop specific abilities and resources in prioritized areas that can enhance companies’ value.

[1] For every metric ton of palm oil produced, 2.5 metric tons of effluents are generated from processing the palm oil in mills.