Which Corporate Governance Mechanisms Drive CSR Disclosure Practices in Emerging Countries?

Abstract

Although several studies have analyzed the role that specific corporate governance mechanisms have on Corporate Social Responsibility (CSR) reporting practices, their findings have not been conclusive and the evidence from developing countries is scarce. The theoretical support for this relationship in the previous literature is found in Stakeholder, Agency, Legitimacy, and Good Management theories. Undoubtedly, as the institutional environment has an important impact on CSR reporting practices, it would be relevant for this field of research to analyze this relationship in companies from emerging countries. It is suggested for the sake of convenience to consider different levels of corporate governance mechanisms together due to the high interdependence among them. Consequently, the aim of this paper is to analyze whether different levels of corporate governance mechanisms (at the institutional, group, and firm level) are determinant factors of the CSR reporting practices in BRICS countries (Brazil, Russia, India, China, and South Africa). The final sample was composed of 281 companies. On the basis of our results, we conclude that institutional corporate governance mechanisms influence the company’s CSR reporting strategy and that both CSR disclosure practices analyzed are affected by group-level corporate governance mechanisms in companies from family-based societies. Our findings support the appropriateness of separately analyzing this issue in emerging countries.

Rethinking the Way of Doing Business: A Reframe of Management Structures for Developing Corporate Sustainability

“…The corporate governance structure plays an important role in the implementation of the sustainability strategy, especially in the face of the scandals and risks of fraud that the corporate world has faced [33,77]. Governance is the system according to which the company is directed, monitored and encouraged, aiming at the existence of a harmonious relationship between its stakeholders [78]. Reliable quality governance enables the creation of a decision-making environment in which transparency, accountability, responsibility; and fairness prevail in all organizational operations and relationships [77,[79][80][81].…”

“…but the achievement of social and environmental balance will require the adoption of other CG mechanisms, such as the legal and political system and ownership and board structures [33]. The legal and political system of the company deals with issues of regulations, norms, values and organizational culture [78]. The values that guide governance may be present in codes of ethics and conduct, which, added to the governance manual assist the top management in the exercise of its activities [79,80].…”

“…Governance codes are corporate regulations that guide the board of directors and managers to make decisions that are aligned with organizational goals and strategies (Baumgartner 2014;Eccles et al 2014). They are influenced by the determinant mechanisms of CG such as the aforementioned legal and political system and the ownership and board structures [78,82].…”

“…The ownership structure represents the concentration or dispersion of ownership among shareholders, which affects the degree of risk diversification, since the greater the concentration of ownership, the more active in the corporate decisions and the more risk averse will be the shareholder. On the other hand, the greater the dispersion of ownership, the greater the pressure from shareholders on managers for disclosure of information about the business [78].…”

“…As a result, the ownership structure may cause conflicts of interest between majority and minority shareholders, or between shareholders and the board [78]. For this reason, it is considered an important mechanism of CG and, although there is no consensus on its ideal configuration, the transparency in internal corporate control processes from the board structure is considered indispensable for the sustainability of the ownership structure [33].…”