A stakeholder‐centric paradigm bids well for the “business case” ‐ An investigation through moderated‐mediation model

Abstract

This study examines the effect of responsible governance on a firm's financial performance and corporate reputation using the lens of stakeholder theory and signaling theory. We believe that no single theory fully underpins all the hypothesized relationships. This study also investigates the indirect effect of responsible governance on a firm's financial performance and corporate reputation via corporate social responsibility (CSR). Further, drawing on contingency perspective and using the lens of upper echelon theory, we test the moderating effect of different orientations of responsible leadership on the relationship between responsible governance and CSR. After, adopting a multi-wave research design and using a survey method, we find that responsible governance significantly improves a firm's financial performance and reputation. Further, we find that CSR mediates the relationship between responsible governance and firm-level outcomes. Moreover, moderating results reveal that the orientation of a traditional economist and an opportunity seeker strengthen the relationship between responsible governance and CSR whereas the orientation of an integrator and an idealist weaken this relationship. The study concludes with its implications and directions for future research.

Responsibility beyond the Board Room? A Systematic Review of Responsible Leadership: Operationalizations, Antecedents and Outcomes

“…The survey instrument on RL orientations by Javed, Akhtar, et al [60] builds on the conceptualization of RL within different mindsets, which regulates in whom one perceives responsibility: a limited economic view and an extended stakeholder view as suggested by previous researchers [9,33]. A total of 18 items makes up the four subscales that represent different RL orientations: traditional economist, opportunity seeker, integrator and idealist.…”

“…The most frequently applied response scale in the survey instruments was a 5-point Likert response scale. The exceptions were two instruments with a 7-point Likert response scale [59,60], one instrument with a 4-point scale [72] and another with a dichotomous response option [71]. None of the survey instruments included a non-response option.…”

“…Some items are limited to the long-term planning of the organization, while other items include external stakeholders and the macro-level. Example items are 'Shows concern for availability or conservation of resources (e.g., natural resources) when planning for future business demands' [57]; 'I create long-term value for a number of stakeholders' [60]; 'Transformational leadership: Leader behaviours that transform and inspire employees to perform beyond expectations, push employees to develop innovative strategies while going beyond self-interest for the good of the organization' [61]; 'When making decisions, one should also consider future generations' [71]; and 'My supervisor is preparing the organization to make a positive difference in the future' [74]. Although many items fell within this core aspect, three survey instruments were not represented [59,72,78].…”

“…Benevolent value creator: This aspect includes items representing a wide perception of value creation (e.g., creation of knowledge and social value) and a concern for others' welfare. Sample items are 'Considers stakeholder well-being as important business outcome' [57]; 'Our organization believes all employees deserve to be actively managed as talent' [59]; 'I try to serve my stakeholders' [60]; 'I am concerned about employee emotion' [67]; 'The welfare of people and nature is important to me'; 'It is important to me to find solutions to problems that are relevant to society [71]; and 'Concerned about the customers and public interest' [72]. Only one survey instrument did not include items from this core aspect [61].…”

“…These describe more general leadership behaviours unspecific to RL. Example items are 'My immediate manager is effective' [59]; 'Even in an emergency I wouldn't feel like panicking' [71]; and 'I have minimal use for cost benefit analysis' [60]. On the other hand, some items matched several themes and could thus belong to more than one core aspect.…”