Given the increasing importance attached to both corporate social responsibility (CSR) and corporate governance, this study investigates the association between these two complimentary mechanisms used by companies to enhance relations with stakeholders. Consistent with both legitimacy and stakeholder theory and controlling for industry profile, firm size, stockholder power/dispersion, creditor power/leverage, and economic performance, our analysis of the annual reports for a sample of 222 listed companies suggests that firms providing more CSR information: have better corporate governance ratings; are larger; belong to higher profile industries; and are more highly leveraged. Our findings support the limited prior research suggesting a link between corporate governance quality and CSR disclosure in company annual reports and suggest that, rather than mandating specific disclosures, regulators might be better served focussing on corporate governance quality as a way of increasing CSR disclosures.
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It should be noted that in recent times the term ‘sustainability’ is used by some commentators instead of ‘social responsibility.’ However, to be consistent with the majority of the literature, and because we feel the term ‘social responsibility’ is wider in scope than ‘sustainability,’ we use the term CSR throughout this article.
The only mandatory CSR disclosure required by Australian Corporations Law relates to the directors’ report where the directors must state if the entity’s operations are subject to any particular and significant environmental regulation under a law of the Commonwealth or of a State or Territory and, if so, details of the entity’s performance in relation to those environmental regulations must be provided.
As a rule of thumb, a condition index exceeding 30 indicates strong multicollinearity (Gujarati 2003).
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CSR Measuring Instrument
Company Name: ________________________________
|1.1||Acknowledgment or management of corporate social responsibility|
|1.2||Disclosure of corporate objectives or policies with regard to corporate social responsibility|
|2.1||Undertaking environmental impact studies & monitoring programs/Environmental research|
|2.2||Disclosure of (reportable) environmental incidents or non-compliance/infringements or fines|
|2.2.1||- Conducting environmental (compliance) audits|
|2.3||Protecting/Improving the environment/climate change strategies/Environmental performance|
|2.3.1||- Using facilities harmonious with the environment/Water management & consumption|
|2.3.2||- Pollution control in the manufacturing process/Greenhouse gas emissions abatement|
|2.3.3||- Efficiently using material resources in the manufacturing or business process|
|2.3.4||- Environmental regulations (e.g., compliance or breaches)/Rehabilitation Bonds|
|2.3.5||- Environmental management—system/training/plan/project/audit/impact/performance/compliance|
|2.3.6||- Environmental awards/commendation/certification/performance|
|2.3.7||- Renewable Energy Certificates/Carbon Credits/Carbon Trading/Environmental Credits/Green house Gas Abatement Certificates|
|2.4||Conserving resources by using waste materials/Setting up a recycling facility/plant|
|2.4.1||- Recycling waste materials (e.g., chemicals, paper, and water)/Use of recycled products|
|2.5||Waste Management/Re-use of by-products/Taking part in or sponsoring anti-litter|
|2.6||Land reclamation, remediation, rehabilitation or revegetation/reforestation, habitat conservation/Planting trees|
|2.7||Sustainability—Using renewable energy/renewable resources/recycled materials/Sustainable management or technology or development/Conservation and research|
|3.1||Disclosing the company’s efforts to reduce energy consumption/Energy management/Awards|
|3.2||Using or marketing or producing renewable energy/Green energy|
|3.3||Disclosing increased energy efficiency of products/Research in reducing energy consumption|
|3.4||Energy Management System/Using energy more efficiently in the manufacturing process|
|3.5||Utilizing waste materials for energy production/Disclosing Energy Use|
|4.0 Human Resources|
|4.1||Promotion of employee well-being/health & safety (including accident statistics disclosure)|
|4.2||Health & Safety—Management System/Plan/Training/Audits/Compliance/Awards/Certification|
|4.2.1||- Health & Safety—Regulations/Breaches or fines/Injury prevention|
|4.3||Improvement of physical/tangible working conditions|
|4.3.1||- Employee share plan/Bonuses/Remuneration & Benefits program/Rewards/Incentives|
|4.3.2||- Redundancy program|
|4.4||Improvement of mental/intangible working conditions/environments|
|4.4.1||- Importance placed on good workplace relations/Recognition of employees’ contribution|
|4.4.2||- Importance of work, family or lifestyle balance/Well-being/Parental or Maternity Leave|
|4.4.3||- Improved communication and staff participation in decision making/Employee satisfaction|
|4.5||Training & Development—Employees and providing career opportunities/Contractors|
|4.5.1||- Training & Development—Achievement & Awards|
|4.6||Promoting equity and diversity (equal opportunity)|
|4.6.1||- Programs for retraining and placing displaced workers/Helping migrants|
|4.6.2||- Employment/advancement of women & minorities|
|4.6.3||- Employment of other special interest groups (including those with disabilities)|
|5.1||Making products safer (Quality Control)/Product improvement or development/Awards|
|5.2||Manufacturing systems improvement (e.g., to comply with international standards)|
|5.3||Research to reduce pollution effects of products/Improved recycling of products|
|5.4||Environmentally responsible products|
|6.1||Community relationships, consultation, development, or partnerships; Community complaints|
|6.1.1||- Community services (e.g., employee volunteering or fundraising program)|
|6.2||Donations and Sponsorships/Contributions|
|6.2.1||- Donations & community support (e.g., charities, arts, sporting bodies, schools, hospitals)|
|6.2.2||- Sponsoring community projects, public health projects, medical research, or scholarships/Community development fund and projects|
|6.2.3||- Award for Excellence in Community Partnerships/Job creation/Community Award programs|
|6.3||Opening company’s roads, parks and forests to the public|
|6.4||Providing for Aboriginal training, employment, royalties or welfare/Aiding disaster victims|
|6.5||Work experience programs for teenagers/Supporting education & coaching & traineeship/Youth issues|
|6.6||Using local suppliers (support Australian made goods)|
|7.0 Fair Business Practices|
|7.1||Socially responsible practices abroad/Support for minority businesses|
|7.2||Other statements on fair business practices|
|Total number of sentences|
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Chan, M.C., Watson, J. & Woodliff, D. Corporate Governance Quality and CSR Disclosures. J Bus Ethics 125, 59–73 (2014). https://doi.org/10.1007/s10551-013-1887-8
- Corporate governance
- CSR disclosure
- Stakeholder theory
- Legitimacy theory