Board Diversity and CSRR: Preliminary Evidence

Ms. Kathy Rao and Prof. Carol Tilt

Flinders Business School

Purpose

• Descriptive: The relationship between Corporate Governance (CG) and Corporate Social Responsibility Reporting (CSRR) - top 150 Australian companies

– Describes the trends in CSR disclosure and boardroom diversity

– Provides a preliminary view/insight into the potential effects of board diversity on CSR disclosure.

Importance

• CSR disclosure– Minimal but increasing in Australian companies– Traditional explanation looks at external factors only

• Gap in the literature– Little attention has been given to how specific board

attributes influence CSR and CSRR

– Need to extend traditional board composition research

– Need for longitudinal studies

CSR and CSRR

• CSR: A "concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis" (COM 2001, p.366).

• CSR Reporting (CSRR): Corporations voluntarily communicate their actions or initiatives towards CSR to its broad range of stakeholders (Golob & Bartlett 2006)

…CSR and CSRR

• CSR disclosure by organisations in Australia has been minimal. – CPA Australia (2005) report: Two significant Australian

studies (by the University of Sydney and KPMG) – Australian companies when compared to other

developed countries are well behind in achieving CSR (Chen and Bouvain, 2009; Truscott et al. 2009)

– Conflict between responsibility and profitability

• Corporate governance - A critical element for driving excellence in CSR (Shahin & Zairi 2007)

Corporate Governance (CG)

• Definition: Narrow perspective (Shareholder oriented) Broader perspective (Stakeholder

oriented)

– ‘… good corporate citizenship, being accountable not only to shareholders, but also to other stakeholders and to the wider community within which they exist” (Ingley, 2008, p.18).

– Ensures that corporations discharge their responsibility and accountability towards both their shareholders and stakeholders.

CG, Board Composition and CSRR

• Transparency/accountability – integral part of corporate governance

• Board composition - major players in CG– Boards of directors are likely to have some influence on

CSRR– directors’ attributes (values, perceptions and motives)

are attributed much less importance in the CSR literature.

Board diversity and CSRR

Board Diversity: “board composition and the varied combination of attributes, characteristics and expertise contributed by individual board members in relation to board process and decision making” (Walt & Ingley 2003, p.219)

– decisions with regard to CSRD is complex: Various alternatives/ options, and in-depth discussion/debate facilitated by diversity will definitely result in high quality decisions at board level

– do confirm a positive relationship

Theoretical Framework: Diversity in the boardroom and CSRD

Stakeholder Theory: Extends boards’ accountability

to stakeholders Enhances boards’ role to CSR

related issues 

Resource Dependency Theory: Enhances internal board resources

(More pooled resources among board members)

Enhances external resources (Network connections)  

 

Improved Corporate Social 

Responsibility Disclosure (CSRD)

Boards of Directors  

 

Better CSR decisions

Better CSRcommunication

Board Diversity:Gender

AgeIndependence

Multiple Directorships

Tenure

Research Design and Methodology • Quantitative analysis with a longitudinal study

– Sample: Top 150 Australian firms’ annual reports listed on Australian Stock Exchange (ASX)

– Data collection: Connect 4, OSIRIS database, annual reports and company websites

– Measurement of quantity of disclosure: Content Analysis• Research Instrument: containing six major themes

(Governance, Environmental, Employee, Community, Product and others)

– Measurement of Explanatory variables…

… Research Design and Methodology

• Measurement of explanatory variables:– Proportion of Independent Directors: The number of

independent/non-executive directors / the total number of directors on board.

– Director Age: Classified as <40, 40-49, 50-59, and 60+– Director tenure: The number of years each board member has

been employed as a director by their current company.– Percentage of Female Directors: The number of female

directors / the total number of directors on the board.– Percentage of directors with Multiple Directorships: The

number of directors holding multiple directorships / the total number of directors on the board.

– Other variables: Firm size, profitability, industry sector, board size and CEO duality.

N Minimum Maximum Mean Std. Deviation

Market Cap333 25309.37 146660763.98 8307079.48 17260846.22

Total Assets345 26975.00 685952000.00 29853944.00 106867558.18

ROE340 -255.34 100.86 11.48 29.82

Preliminary Results: Sample Overview

Preliminary Results: Disclosure based on Industry

CSRR based on Industry

Preliminary Results: Trends in CSR disclosure

Trends in governance disclosureTrends in social and environmental  disclosure

Preliminary Results: Age Diversity and CSRR

Age < 40 and CSRR Age 40-49 and CSRR

 

Age 50-59 and CSRR Age 60+ and CSRR

Variation in age from 2009-2011

 

Preliminary Results: Tenure Diversity and CSRR

Variation in tenure from 2009-2011

 

Tenure based on Industry

CSRR based on Industry

Preliminary Results: Board Independence and CSRR

Variation in board independence   CSRR and independence

Preliminary Results: Gender Diversity and CSRR

Variation in gender 

Gender and CSRR 

Gender Based on Industry CSRR Based on Industry

Conclusion

• Board diversity perspective - its influence on CSRR– An initial overview: Small boards with a majority of

independent/non-executive directors, more likely to have older aged directors and very few have female representation.

– Trend- 2009-2011: There have been changes in both CSR reporting and board attributes over the three year sample period.

– Board diversity and CSRD: The gender, non-executive directors, age, and percentage of multiple directorship influences the level of CSR reporting in Australian firms.

Thank you

Questions?