International Journal of Business Governance and Ethics (17 papers in press)
Board Characteristics, Board Leadership Style, CEO Compensation and Firm Performance
by Mohd Sarim
Abstract: The study is dedicated to researching the aspects of good governance in terms of board characteristics, board leadership style and CEO compensation; and testing their relationship with the financial performance of Indian firms. Using panel data, the regression results are generated as the main effect of corporate governance variables on financial performance and also as an interaction effect using CEO duality dummy variable. The study found that the boards of the Indian firms are not truly independent, neither in terms of the number of independent directors on the board nor in terms of independence from management. The board leadership style of vesting more power to a single person has weakened the corporate governance system and has created various agency issues. Therefore, the study does not support the stewardship theory view of appointing the CEO as the chairman and urged a balance of power among key personnel of an organisation.
Keywords: board characteristics; CEO duality; CEO compensation; financial performance; panel data.
Differences and similarities in Corporate Governance of European banks
by Burcu Gurol, Valentina Lagasio
Abstract: Due to the relevant role of banks in economies, the subject of corporate governance of banks is attracting growing attention by researchers worldwide. They generally focus on the relationships between board structure and bank performance and risk level. Unfortunately, the results of the studies are somehow contradictory. Thus, this is calling for further investigation on this topic. We have tested the effects of several corporate governance variables (board size, women size, average age and board duration) on bank performance of 46 European banks with one-tier and two-tier corporate governance models. The results show differences and similarities within the two subgroups of banks (i.e., relating to board size, independence and number of female directors). Findings are presented and commented for inspiring policy makers and regulators as well as for driving the management strategy to foster profitability.
Keywords: corporate governance; bank performance; board structure; gender; Europe.
Ethical Leadership and Employee Ethical Behavior: Exploring Dual-Mediation Paths of Ethical Climate and Organizational Justice: Empirical Study on Iraqi Organizations
by Hussam Al Halbusi, Mohd Nazari Ismail, Safiah Binti Omar
Abstract: Due to ethical lapses of leaders, interest in ethical leadership has grown, raising important questions about the responsibility of leaders in ensuring moral and ethical conduct. Research conducted on ethical leadership failed to investigate the active role that the characteristics of ethical climate and organisational justice have an increasing or decreasing influence on the ethical leadership in the organisations outcomes of employees ethical behaviour. Thus, this study examined the dual-mediations of work ethical climate and organisational justice on the relation of ethical leadership and ethical behaviour of employees. A total of 620 full-time employees from five Iraqi provinces working at 33 Iraqi organisations in the field of manufacturing, retailing, medical, insurance, information technology, legal, finance, and telecommunication responded to the questionnaire survey. Structural equation modelling (SEM) was used to test the model and data analysis was carried out using structural equation modelling-partial least square (SEM-PLS). The results revealed that there is a significant relationship between ethical leadership behaviour and the ethical behaviour of employees. Primarily, the study also found that ethical climate and organisational justice play a very significant mediating role between ethical leadership and employees ethical behaviour.
Keywords: ethical leadership; ethical climate; organisational justice; employees’ ethical behaviour.
Central Bank Regulation, Religious Governance and Standardisation: Evidence from Malaysian Islamic Banks
by Ahmad Fahmi Sheikh Hasan, Yusuf Karbhari, Habib Ahmed
Abstract: This study explores the modus operandi and regulatory influence of the pioneering Malaysian dual-layer governance system where, besides an Islamic banks in-house religious board, supervision is undertaken by the countrys central bank via its own Shariah Advisory Council (SAC). Data was collected by means of in-depth interviews with SAC members, central bank compliance officers, bank chairmen and members of Shariah boards, CEOs and other senior executives. We find that the procedures asserted by this over-arching governance structure contributes to standardising practice without hampering creativity when innovating new Shariah compliant financial products. Considerable bureaucracy is reported to exist due to the current approval process impeding efficient decision-making. In particular, the SAC is found to be decisive in resolving disputes from the widespread use of the legal reasoning (or ijtihad) principle exercised by boards providing the much needed confidence and market discipline required by stakeholders. Finally, we highlight how this form of banking operates best when left to a countrys own governance framework rather than imposing international regulation for this nascent industry.
Keywords: religious boards; legal reasoning; Islamic finance; standardisation; governance; Malaysia.
An Ethical Reading of the Political Marketing Mix through a Habermasian Lens: Theory of Communicative Action
by Rand Irshaidat, Harald Borgebund
Abstract: Basing on Habermas theory of communicative action (TCA), the paper bestows a detailed reading to a number of ethical dimensions in the activities of the political marketing mix. TCA is a philosophical theory that seeks to establish ethical grounds for proper communication between actors, and extends the paradigm to integrate the life-world and social system to reorient the project of enlightenment. Given its emphasis on law, human rights, democracy and morality, TCA operates as an eligible ethical framework. Consequently, the paper offers a new reading to the political marketing mix, landing on a new model that embodies a number of alterations. The new construct is reciprocal persuasion to the product, communication, and news-management functions. Moreover, the model inserts the life-world as a new function to the mix, which includes cultural values, rational communication, and reciprocal persuasion. Thus, the new model affirms the significance of consensus between political actors. Finally, the model eliminates the functions of fund-raising and parallel-campaign management from the mix, due to major conflicts with TCA.
Keywords: theory of communicative action; TCA; political marketing mix.
To buy or not to buy organic food: Evaluating the moderating effect of gender using PLS-MGA
by Reza Saleki, Farzana Quoquab, Jihad Mohammad
Abstract: Grounded in the theory of planned behaviour (TPB) and norm activation model (NAM) this study aim to examine the effect of factors such as attitude, subjective norm, perceived behavioural control and moral norm that may motivate consumer to purchase organic food in the context of Malaysia. Additionally, this research intends to extend the TPB by incorporating moral norm into the model. Moreover, this study aims to examine the moderating role of gender with respect to all relationships. Survey method was used and collected 120 responses from male and 126 from female. Data were analysed by using partial least square and multi-group technique. Findings revealed that attitude, subjective norm, perceived behavioural control and moral norm have significant positive effect on purchase intention. Contrary to expectation there was no significance difference between male and female for all developed relationships. Theoretical and managerial implications are discussed.
Keywords: organic food; theory of planned behaviour; TPB; purchase behaviour; moral norm; gender; norm activation model; NAM; Malaysian consumers.
Mediation Effect of Reputation on the Stakeholders Centric CSR and Financial Performance Relationship
by Neha Kumar, Parul Kumar, Devesh Nigam
Abstract: This paper aims to investigate the relation between stakeholder led CSR, reputation and the financial performance. The stakeholders considered in the research were employees, environment, community, customers and investors. The reputation of the company has been taken as the mediator to analyse the change in CSR and financial performance relationship. A questionnaire was designed having 30 items enumerating the seven constructs. The structured equation modelling has been used to analyse the conceptual model of the impact of CSR on reputation and then on financial performance. The results concluded that all the stakeholders were significant in influencing the CSR decision making, with employees and investors being the most significant ones. It was also concluded that CSR positively impacts the reputation and reputation fully mediates the relationship between CSR and financial performance. Thus, major implication of the study is that managers can adopt the stakeholders centric CSR activities so as generate the positive reputation which in turn would positively impact the companys sales revenue and profit.
Keywords: company’s act; corporate social responsibility; CSR; employees; women director; structured equation modelling; investors.
Does Board Structure Index and Ownership Structure Index Impact on top listed Indian Companys Performance?
by Waleed M. Al-ahdal, Twinkle Prusty
Abstract: This study investigates the association that exists between board structure index, ownership structure index and the financial performance of Nifty 100 Indian companies listed on the National Stock Exchange. The study intends to determine whether board structure index and ownership structure index have an impact on companies performance measured by return on assets (ROA) and return on capital employed (ROCE). It provides empirical investigation for 73 non-financial firms in India from 2009 to 2016. The fixed effect model (FEM) regression was used to measure the association between the variables. Results indicate that board structure index and firm size have a significant impact on return on capital employed and return on assets. It is also observed that the ownership structure index and leverage have positive but insignificant impact on firms performance. The research, therefore, proposes that policymakers and legislative bodies interpret this proof as a motive for them to improve the procedures of corporate boards to cope efficiently with the distinctive characteristics of corporate governance in emerging markets such as India by using Nifty 100 as a case.
Keywords: board structure index; ownership structure index; OSI; company performance; India.
Modelling managers and subordinates ethical behavior on performance
by Halil Zaim, Lily Wisker, Atif Acikgoz
Abstract: The purpose of our study is to ascertain whether organisational team ethical standards (which eventually impact the organisational performance) are impacted by the managers' and subordinates ethical behaviour separately. A field study was conducted based on data collected from managers and employees working in companies located in Istanbul. A structural equation modelling (SEM) analysis was performed to test our hypotheses. The study results show a strong relationship between managers' and subordinates' ethical behaviours and firm performance. Our study also found the reversed effects where employees ethical behaviour influences organisational team ethical standards. Finally the results show that organisational team ethical standards partially mediate the relationship between managers individuals ethical
behaviours and firm performance.
Keywords: business ethics; firm performance; manager's ethical behaviour; subordinates' ethical behaviour; organisational team ethical standards.
The relationship between Corporate Governance and Firm Financial Performance: An Empirical Investigation of an emerging market
by Qazi Awais Amin, Stuart Farquhar
Abstract: We investigate whether the distinct nature of multinational firms (MNC) differently influence the governance-performance relationship compared to the local firms in Pakistan. We used a dynamic system GMM estimator that produces consistent and efficient estimation after controlling for dynamic endogeneity and simultaneity. Our results demonstrate that corporate governance (CG) has a significant positive impact on firm financial performance whilst CG practice of MNC firms is more effective than local firms in Pakistan. We observed two distinct financing behaviours, i.e., 'pro-active investment behaviour' of MNC firms and conservative investment behaviour' of local firms. We conclude that a well-established corporate culture, significant financial worth and firms' higher growth rate are key determinants of better CG practice.
Keywords: corporate governance; firm performance; endogeneity; system GMM.
Voluntary disclosures by family French firms
by Meriem Jouirou
Abstract: Our study investigates the extent of voluntary disclosures by family French firms under the entrenchment and the alignment of interest hypotheses. It also sheds the light on the moderating effect of board characteristics on this relation using a self-constructed index. Based on a sample of French listed companies from 2009 to 2013, we use GLS regressions for the empirical investigation. The results show that entrenched families have a negative effect on the extent of voluntary disclosures. On the other hand, in a context of alignment of interest, family firms disclose more voluntarily. In addition, our results suggest that, in the context of entrenchment of the family owners, board characteristics are proved to be inefficient in enhancing voluntary disclosure. So, the presence of entrenched majority shareholders is an obstacle to the proper functioning of the board.
Keywords: voluntary disclosure; family ownership; board characteristics; entrenchment; alignment of interests; France.
The moderating effect of personal values on the relationship between ethical leadership and whistleblowing intentions
by Albert Puni, Ibrahim Mohammed, John Bosco Damnyang
Abstract: This study aimed to investigate the relationship between ethical leadership and whistleblowing intentions by examining employees personal values as a potential moderating variable on this relationship. Using explanatory and cross-sectional survey design, the study found a significant positive association between ethical leadership and whistleblowing intention. This positive association was found to be stronger when subordinates have a higher rather than lower level of personal values, confirming the usefulness of personal values as a new moderating variable which explains the mechanism or process by which ethical leadership can have a strong or weak influence on whistleblowing intention, especially in a power-distant cultural environment.
Keywords: unethical behaviour; speaking-up; moderated relationship; insurance industry; Ghana.
Internal Corporate Governance Mechanisms and Financial Performance: Evidence from the UK's Top FTSE 100 Listed Companies
by Ibrahim K. Elmghaamez, Eritobi Akintoye
Abstract: This paper examines the relationship between internal corporate governance mechanisms and the financial performance of the UK's top FTSE 100 firms listed on the London Stock Exchange. By using a sample of 59 firms from the top FTSE 100 firms over the period from 2013 to 2018, our findings demonstrated that the lower number of board size and independent directors on the board, the better financial performance of the UK's top FTSE 100 listed firms. However, our study revealed that better financial performance is positively correlated with greater proportion of women on boards. Additionally, we found that board meeting is insignificantly associated with the financial performance of listed firms. This study has important implications for policy makers in the UK to have more women on boards and to decrease board size and the number of independent directors to the optimal size, since there is no one size fits all firms.
Keywords: Corporate Governance Mechanisms; Financial Performance; Board Size; Board Meeting; Board Independence; Women on Boards.
Special Issue on: The Global Governance of Corporate Social Responsibility
CSR governance framework of South Africa, pre, during and post apartheid: a manifestation of ubuntu values?
by Esinath Ndiweni, Welcome Sibanda
Abstract: The paper examines whether and how ubuntu values were infused into the corporate social responsibility (CSR) governance framework of South Africa. It uses the CSR governance framework as an exemplar of how corporations, individuals and communities can exude ubuntu values in their daily operations. We adopted an historical cultural context approach to decipher how ubuntu principles were linked with social responsibility, pre, during and post-apartheid. We also identified dominant actors in the CSR arena and the discourses that sustained them. Our analyses revealed that ubuntu values converged with ethical values of other anti-apartheid actors during the crafting of the new CSR governance framework. We also note that the outcome of the interactions was an infusion of ubuntu values into pieces of legislation, ethics committees and industry charters. Our conclusion is that ubuntu principles are indeed manifested in South Africas CSR governance framework whose goal is to create a caring society.
Keywords: apartheid; ubuntu values; discourse; corporate social responsibility; CSR; governance.
The challenge is who rules the world: accounts and implications of transnational governance interactions
by Victoria Pagan
Abstract: Increased global interconnectivity has encouraged a prevalence of forums that seek to organise and facilitate action towards transnational governance. A body of work has examined such global forums and the theoretical contexts in which they operate but there is little which examines the dynamic interactions through these forums. This article explores the social, political and corporate struggles in the interactions through two global forums, the World Economic Forum (WEF) and the World Social Forum (WSF). These forums are pathways through which corporate, political and social actors
struggle to negotiate transnational governance as a mechanism for corporate responsibility. The article shows the lived experiences of those interacting to set goals and agendas for corporate responsibility and offers an analysis of how the agenda of transnational governance is negotiated, who is involved and the drivers and shapers of this interaction.
Keywords: corporate responsibility; multi-stakeholder interactions; global governance; global forums; transnational governance; World Economic Forum; WEF; World Social Forum; WSF.
The Chinese approach to CSR development: an analysis of CSR-government relationship in China
by Mengxing LU
Abstract: This paper probes into the Chinese approach to corporate social responsibility (CSR) governance by exploring the CSR-government relationship in the context of Chinese institutional background. Faced with the deteriorating environmental situation, the value of CSR in addressing environmental issues has been gradually recognised by both Chinese policymakers and business leaders. As a result, the recent decade witnessed
a surge in the number of CSR initiatives in Chinas policy framework, particularly in the field of environmental protection. To have a better understanding of the CSR development trajectory in China, this paper provides a theoretical analysis of the interpretation and implementation of CSR. By applying the prior academic insights into CSR-government relationships in the context of China, this paper explores the various roles that the Chinese Government could play and has already played in promoting CSR. In addition to the Chinese Government, this paper also addresses the roles of different stakeholders in this process, including state-owned enterprises
(SOEs), foreign multinational enterprises (MNEs), and non-governmental organisations (NGOs).
Keywords: CSR-government relationship; corporate social responsibility; CSR; China’s environmental situation; state-owned enterprises; SOEs.
Corporate Social Responsibility, Hydraulic Fracturing and Unregulated Space: Recognising Responsibility Without the Law
by John Pearson
Abstract: This paper considers the role of legal regulation in assessing the actions of firms in relation to CSR. Utilising recent legal developments surrounding the controversial practice of hydraulic fracturing (fracking) as an illustrative example of the issue, it questions whether judging CSR is possible in a legal vacuum. Having established the linkage between CSR and the law the piece moves to illustrate that instances of legal freedom question established conceptions of CSR and warrant a greater exploration of this connection. Whilst instances of this type are conceded as rare, they do question the extent to which, without law, the responsibility for actions can be demonstrated by firms and it is this which the paper highlights.
Keywords: corporate social responsibility; CSR; law; regulation; hydraulic fracturing.