Examining the social pressures on voluntary CSR reporting: the roles of interlocking directors

Abstract

Purpose Corporate social responsibility (CSR) reporting is a widely accepted procedure for firms to disclose their performance in multiple domains, including environmental protection, labour welfare, protection of human rights, community services, contribution to society and pursuit of product safety. This study aims to investigate whether and how board interlocks affect firms’ decisions with respect to CSR reporting. This study argues that board interlocks act as an important source of social pressure and firms are influenced by their peer firms to adopt CSR reporting. Design/methodology/approach This paper sampled listed companies on China’s Shanghai and Shenzhen Stock Exchanges from 2009 to 2015. The data were collected from Runling database and China Stock Market and Accounting Research database. A multi-period logit model was used to conduct the main regression analysis and the propensity score matching method was used in the robustness checks. Findings A study based on a sample of Chinese publicly listed firms from 2009 to 2015 confirms the argument and shows that sharing a common director on the board with a previous CSR reporter facilitates the firm’s engagement in CSR reporting. Furthermore, this study shows that the influence of board interlocks on CSR reporting depends on the following three characteristics: status of the interlocking director, size of the linked CSR reporter and performance implications of previous CSR activities. Research limitations/implications The interpretation of the current findings should be considered in light of these limitations. First, while board interlocks are an important social aspect of institutional pressure, other types of social pressure exist. Second, the focus is on CSR reporting decisions. However, CSR reporting can also be symbolic, with little substantive quality to improve CSR-related activities. Third, this study argues that both regulatory and social pressures influence the decision to report on CSR. However, this study was unable to determine the weight of each pressure. Future research should follow this direction. Finally, the influence of certain behaviours through interlocks is stronger in the initial stage of the institutionalisation process. Practical implications The findings of this study have important implications for practitioners. First, the messaging role of interlocking directors suggests that director selection should consider the effectiveness of information transfer. Knowing and analysing specific interlock and its links with the firm’s strategy is very important. Meanwhile, firms should be vigilant that the balance between the access to information and loss of autonomy because searching for information related to firms’ strategic decisions might challenge current strategy. Second, the results of the study suggest that to effectively urge companies to engage in CSR reporting, government and policy makers should consider beyond institutional pressure, but also be sensitive to the social pressure exerted upon the companies. Social implications The positive role of board interlocks on corporate voluntary CSR reporting can not only make valuable contributions to the Chinese society but also, as an important participant of global economy and trade, the Chinese interlocking directors’ contribution to CSR reporting have global benefits. Originality/value This study extends the institutional perspective on CSR reporting by uncovering the effect of social pressure. It advances the literature on the antecedents of CSR reporting by linking board interlocks to CSR reporting. Finally, the study enriches the broader interlock literature by delineating three specific characteristics of interlocks that influence CSR reporting.

Show me? Inspire me? Make me? An institutional theory exploration of social and environmental reporting practices

“…Interlocked directors tend to be independent from management which is likely to make their voice nonredundant (Amin et al , 2020). However, such individuals are more powerful if they possess elite credentials (Liang et al , 2022a), perhaps related to their reputation or their centrality in important networks (Harjoto and Wang, 2020). For those reasons, high reputation individuals are more likely to serve on multiple boards.…”

Does board chairperson experience matter? Examining the relationship between board attributes and human rights reporting in Kenya

“…Researchers have emphasized the importance of firms investing in human rights initiatives into their core strategies to meet stakeholder demands (George et al , 2016; Gold et al , 2018; Cormier et al , 2011; Kiliç et al , 2015). Specifically, firms are confronted with the need to incorporate human rights agenda into social responsibility policies and report on key aspects that influence employee rights (Čertanec, 2021; Liang et al , 2022). A responsible business enterprise is expected to avoid adverse human rights impacts and in some situations leave the rights improved.…”