Board composition and corporate social responsibility in an emerging market

Abstract

Purpose The purpose of this paper is to examine the effect of board composition on corporate social responsibility (CSR) for selected Malaysian companies in Bursa Malaysia. Design/methodology/approach The paper analyses board composition and CSR of Malaysian (family and non-family) firms using linear regression analysis. Findings The empirical findings indicate that non-executive directors (NEDs) and independent non-executive directors (INEDs) designate a negative relationship, while women on board indicate a positive relationship. The only variable that positively affects the level of CSR initiatives is the presence of women directors. As for family and non-family business, the main findings are: a positive relationship between NEDs and CSR initiatives in non-family business and a negative relationship between INEDs and CSR for family-controlled business. Research limitations/implications This paper is limited only to selected companies on Bursa Malaysia over a period of two years. The paper suggests that board composition in an emerging market is relatively ineffective in improving CSR initiatives, with the exception of women on board. This is more prevalent in family business, as they do not seem to contribute toward humanizing or cultivating CSR in their companies. Practical implications This paper can be used as a reference by regulatory bodies to further investigate on the means as to how board composition can further contribute toward CSR initiatives, as these board members have inherent authorities and decision-making power. Composition and role of women directors in board needs to be further deliberated. Originality/value This paper contributes to the existing literature in terms of the roles of board composition on CSR initiatives. It further highlights the difference in the aforementioned relationship between family and non-family business.

Independent directors' background and CSR disclosure

“…This includes the disclosure of higher-quality information, which aids stakeholders to make better-informed decisions. With some exceptions (Amran et al, 2014;García-Sánchez, Cuadrado-Ballesteros, & Sepulveda, 2014;Sundarasen, Je-Yen, & Rajangam, 2016) and nuances found in this relationship (García-Sánchez & Martínez-Ferrero, 2017), previous empirical studies support a positive influence (Barako & Brown, 2008;Khan, 2010;Khan et al, 2013;Kilic et al, 2015;Lone & Khan, 2016;Rao et al, 2012). With some exceptions (Amran et al, 2014;García-Sánchez, Cuadrado-Ballesteros, & Sepulveda, 2014;Sundarasen, Je-Yen, & Rajangam, 2016) and nuances found in this relationship (García-Sánchez & Martínez-Ferrero, 2017), previous empirical studies support a positive influence (Barako & Brown, 2008;Khan, 2010;Khan et al, 2013;Kilic et al, 2015;Lone & Khan, 2016;Rao et al, 2012).…”

Firms’ Board Independence and Corporate Social Performance: A Meta-Analysis

“…Many papers focus on the influence of the adoption of different CG approaches on CSP [9][10][11][12][13][14]. However, these studies have not arrived at a consensus, and report contradictory and inconsistent results (e.g., while Cuadrado-Ballesteros et al [15] and Rao et al [16] found a positive connection, Sundarasen et al [17] and Walls et al [18] found a negative association, and Walls and Berrone [19] and Harjoto et al [20] found no significant relationship).…”

“…However, several studies find a negative connection between the independence of a company's board and CSP [17]. Hanniffa and Cook [14], Nurhayati et al [130], Walls et al [18] and Ortiz-de-Mandojana et al [130] all found that the presence of non-executive and independent directors on company boards has a negative influence on CSP.…”

An international approach of the relationship between board attributes and the disclosure of corporate social responsibility issues

“…Agency perspective is the most prominent theory used to examine the association between corporate governance, such as board attributes, and CSR reporting (e.g., Jain & Jamali, 2016;Sundarasen, Je-Yen, & Rajangam, 2016). The relationship between shareholders and managers triggers agency problems due to the information asymmetries between them (Jensen & Meckling, 1976).…”

“…In this regard, CEO duality might mitigate the effectiveness of the monitoring role of directors, may restrict the transparency to shareholders and all stakeholders (e.g., Giannarakis, 2014;Sundarasen et al, 2016), and may constrain the execution of certain governance roles, such as CSR disclosure. Consistent with agency theory, it is likely that managers' personal interests will affect their commitment to CSR practices and disclosure.…”