The relationship among board of director characteristics, corporate social performance and corporate financial performance

Abstract

Purpose -The purpose of this paper is to investigate the link between qualitative measures of a firm's Board of Directors and its corporate social performance (CSP). Design/methodology/approach -CSP is a function of qualitative measures of a firm's Board of Directors, as well as firm risk and financial performance. A longitudinal sample of 104 Canadian firms is used. Findings -Board independence is positively related to social performance but shareholder orientation is not. In addition, a positive relationship between social performance with both financial performance and debt is found. Research limitations/implications -Although the sample is small and restricted to Canadian firms, the results are quite robust. Future studies should consider using qualitative measures on a larger international sample of firms. Originality/value -This paper uses qualitative measures -the degree of independence of the Board and the Board's level of shareholder orientation -to examine the interrelationship between a firm's Board of Directors and its CSP.

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

“…Similarly, Dunn and Sainty [74] studied a sample of 104 Canadian firms and concluded that companies with more independent boards generally obtain higher levels of CSP. In the same vein, Jo and Harjoto [59] studied a sample of nearly 15,000 U.S. firms, and found a positive connection between the independence of the board and CSP.…”

“…On the one hand, the independence of a firm's board has been defined as the extent to which the board of directors operates independently from executive directors [182] and it has been usually measured as the percentage of board members who are non-executive directors, outside directors and independent directors [49,50,67,183]. On the other hand, Dunn and Sainty [74] state that "the essence of CSP is the recognition or awareness that there are multiple stakeholders against which a business has responsibility towards in the longer term". This definition involves broadening the focus on financial targets and including social and environmental targets, producing a need to measure and assess economic, social and environmental performance.…”

The role of monitoring mechanisms towards company’s performance

“…In a one-tier board system, boards of directors are the highest governing body that sets company's policies and makes important strategic decisions. The board represents shareholders and other stakeholders to monitor and influence decisions and policies made by top management which have to be in line with shareholders' expectations (Dunn and Sainty, 2009 independent non-executive directors [4] and executive directors. This is to ensure the establishment of an effective board in the company.…”

Board Composition Diversity and Corporate Social Reporting: An Empirical Study in Bangladesh Perspective

“…As independent directors are less dependent on CEO's goodwill and image than executive directors, they can closely monitor and control management's activities (Jizi et al 2013). In relation with the resource dependence theory, shareholder's interest and corporate image can be best ensured by the independent board (Dunn &Sainty, 2009;Webb, 2004). This study also assumes that higher number of independent directors in the board is expected to yield better CSR disclosures.…”

“…Though there are substantial number of literatures on board attributes and CSR (Graaf & Herkstroter, 2007;Dunn & Sainty, 2009;Rao & Tilt, 2015;Ayuso et al, 2007 andMalik, 2015), no empirical study is found on Bangladeshi banking sector investigating the relationship between various diversified board composition factors and extent of CSR reporting.…”