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 CSR communication Board Diversity: Gender Age Independence 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.

NMinimumMaximumMeanStd. Deviation Market Cap Total Assets ROE Preliminary Results: Sample Overview

Preliminary Results: D isclosure based on Industry CSRR based on Industry

Preliminary Results: Trends in CSR disclosure Trends in governance disclosure Trends in social and environmental disclosure

Preliminary Results: Age Diversity and CSRR Age < 40 and CSRR Age and CSRR Age and CSRR Age 60+ and CSRR Variation in age from

Preliminary Results: Tenure Diversity and CSRR Variation in tenure from 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 : 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?