Ekta Selarka

Corporate Social Responsibility Around the World—An Overview of Theoretical Framework, and Evolution

The objective of this chapter is to highlight the evolution of the concept of the corporate social responsibility around the world. Specifically, we focus on theoretical framework underpinning the corporate social responsibility. We also review various definitions highlighting some of the most widely used definitions which are exhaustive in nature. We conclude the chapter by providing a summary of various surveys conducted across the world by various agencies to understand the nature of CSR spending from differing perspectives of employees, consumers and management.

Women on Board and Performance of Family Firms: Evidence from India

This paper provides evidence on the effect of women directors on the performance of family firms with a case study of India. Existing literature on the subject has primarily focused on widely held firms, notably in the US. Given that ownership structure and governance environment of family firms are distinctly different from those of non-family firms, the evidence on the relationship between women on board and firm performance in the context of widely held firms may not apply in the context of family firms. India provides an ideal setting for analyzing this question as the presence of family firms is pervasive and since 2013 India has instituted gender quotas on corporate boards. Using a data-set of 10218 firm year observations over a ten year period from 2005 to 2014 which spans the pre-quota and post-quota years, we find robust evidence that women directors on corporate boards positively impact firm value and that this effect increases with the number of women directors on board. However, we find that the positive effect of gender diversity on firm performance weakens with the extent to which the family exerts control through occupying key management positions on the board. In addition, women directors affiliated to the family have no significant effect on firm value, whereas independent women directors do. Our results with respect to profitability are somewhat different; while as in the case of market value, women directors positively impact profitability with the positive effect driven by independent women directors, the effect does not vary with the extent of family control. Taken together, our results suggest that though gender diversity on corporate boards may positively impact firm performance in family firms in general, the extent of family control can have a significant bearing on this relationship. The findings from this study could be instructive for emerging economies like India in promoting gender-based quotas on corporate boards.

Corporate Governance, Product Market Competition and Firm Performance: Evidence from India

On one hand product market competition acts as an ultimate solution to align interests of managers and shareholders, and on the other hand, competition alone may not be sufficient because it may not prevent managers from expropriating the competitive return after the capital is sunk. These hypotheses motivate us to investigate the interaction between corporate governance and product market competition in India where predominance of owner-managers might cause corporate governance reforms to have a slow impact. Using a sample of 1,330 listed firms at the end of 2005 we attempt to capture various attributes of corporate governance by constructing an index of corporate governance based on board structure, audit quality and investor information disclosure. The index is then used along with traditional measures of competition to analyze the question of whether corporate governance and competition are complements or substitutes. In general the empirical analysis shows the weak substitution effects of product market competition which further suggests that relying on product market competition to improve corporate governance of firms may not be appropriate in the Indian setting and therefore, direct corporate governance reforms seem to be necessary and are likely to be effective.

Corporate Social Responsibility—Guidelines and Best Practices

We provide a comprehensive review of various principles and guidelines of CSR around the world describing the multi-dimensionality and the interdisciplinary approach to undertake our study in chapters that follow. The chapter summarizes all the relevant guidelines and best practices across the globe based on various published surveys and reports. We first discuss the best practices across advanced and emerging economies. Secondly, we provide a summary of guidelines that governs the CSR practices as proposed by various organisations such as UN, OECD etc.

Impact of Corporate Governance on Corporate Social Responsibility: An Empirical Exploration Using Structural Equation Technique

This chapter presents the structural equation model that address two critical issues related to the unobservability of the attributes derived from various theoretical constructs and potential measurement errors. Further the proposed model also incorporates the possibility of cross-correlations across the unobservable factors. The results show that all the four specified attributes – Structure, Financial Constraint, Corporate Governance and Duality – significantly influence the CSR spending of large Indian firms. More specifically, we find evidence that poor corporate governance coupled with insider control over the board tend to explain the variation in CSR activities across firms. The other conventional factors such as age, size and financial viability of a firm also contribute to the CSR spending by these firms.

Corporate Governance: An Overview

This chapter presents the background in the concepts and mechanisms of corporate governance and provides the state of corporate governance mechanisms in India.Further the chapter presents the argument that the concept of corporate governance is embedded into the process of resource allocation which ultimately affects the organisational behaviour in general, under the shareholder value maximisation paradigm corporate governance will have an impact on the decision of CSR spending as it is a management decision of resource allocation after the shareholder value is being realized.

Corporate Social Responsibility in India: Evolution and Progress of CSR and Regulations

This chapter elaborates the historical evolution of Corporate Social Responsibility in a phased manner along with the insight on pre and post industrialisation and globalisation scenario in India. Further the chapter presents the guidelines that have been designed over the time to conduct CSR related activities.

CSR Activities in Large Indian Firms—Descriptive Statistics

Indian companies started disclosing their nonfinancial statements which includes information on CSR and related activities only very recently which makes it a difficult assignment to capture the actual CSR spending. In this chapter we investigate the information structure of CSR related activities and expenditure by drawing patterns across disclosure of initiatives and disclosure of expenditures. We go through all possible sources of information such as annual reports, websites, business responsibility reports etc. to gather understanding about each company’s activities that can be related to social responsibility in a broader sense. We observe that Indian companies disclose CSR expenditure under various heads and terms, and not necessarily as “CSR Expenditure” as one category. During the data collection exercise, we find that companies disclose CSR spending information under different heads like donations, charity, CSR Budget, Allocation, Reserves, Provisions, Social Welfare expenses in “other expenditure”.

Impact of Corporate Governance on Corporate Social Responsibility in India—Empirical Analysis

In continuation of the previous chapter on corporate social responsibility in India, this chapter further extends the discussion by investigating the determinants of CSR activities and expenditure in large Indian corporate. Unlike developed countries, India has a specific corporate governance problem of disciplining the dominant shareholder who is in control of the management and most of the times serve on the board as well. Using a sample of largest 500 firms between 2010-2012 that are listed on Bombay Stock Exchange we find that firms which are older, larger and pay dividend are more likely to undertake the CSR activities. We also find significant positive relationship between CSR and proportion of controlling shareholders which implies that founding families or government are driven by strategic decision of investing into CSR related activities. This is also in line with the positive relationship between insiders’ control over board and CSR. In contrast, fraction of independent directors does not affect the CSR even though our univariate analysis suggests that firms with higher proportion of independent directors spend more on CSR activities. To our surprise, profitability does not have any significant relationship with CSR activities. This questions the recent mandate of diverting 2% of the profit towards CSR activities in the Companies Act 2013. It is worth noting that some of the puzzling results presented in this section could be due to the unobservable nature of our attributes such as corporate governance along with the inaccurate measurement of the proxies to capture these attributes. We attempt to address some of these challenges in the following chapter by developing a structural equation model.

Corporate Governance and Corporate Social Responsibility—Introduction

Corporate governance reform has emerged as a critical business and economic issue at the global level followed by a number of high profile corporate failures. At the same time, as early as 2005, the international economic press acknowledged the growth of Corporate Social Responsibility (CSR) initiatives of the world organisations. This chapter introduces and motivates the research framework to analyse the interaction between corporate governance and CSR and describes the objectives and contribution of this study as follows. First the study presents an extensive literature survey focusing on the interdisciplinary nature of the aforementioned research question. Second the study develops the empirical framework to account for sample selection bias and measurement errors pervasive in most of the existing studies on CSR and corporate governance. Finally, using the empirical framework the CSR score is obtained and tested on out of sample companies to predict the probability of a firm being classified into a particular range of CSR among – no CSR, low CSR, medium CSR and high CSR – respectively.