International Journal of Business Governance and Ethics (15 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.
Personality traits and individual performance: test of the mediating role of motivation among top management
by Javad Shahreki, Jaya Ganesan, Thanh-Thuy Nguyen
Abstract: Personality traits, considered as indicators of the employee's performance and motivation which concentrated on intrinsic and extrinsic motivation (Mot), plays an important role in employee performance. This paper aims to investigate the relationships between the personality traits (conscientiousness, neuroticism, extraversion, openness to experience, and agreeableness) and the individual in-role and extra-role performance (IP). In addition, the motivation is being explored in terms of intrinsic and extrinsic of employees. To achieve these objectives, a data-set was collected by surveying 167 general managers (GMs) and general manager's assistants (Asst. GMs) of five star hotels in Malaysia. The partial least squares-structural equation modelling (PLS-SEM) was used to examine the dataset and test the hypotheses. The findings indicated a significant linkage among extraversion, conscientiousness, agreeableness, Mot and IP. On the other hand, Mot mediated the relationships among extraversion, conscientiousness, agreeableness and IP. The participants of the current study revealed a better individual in-role and extra-role performance through an appropriate implementation of personality traits practice.
Keywords: motivation; top management; personality traits; individual performance; hospitality industry.
Corporate social responsibility and cash holdings: does board gender diversity matter?
by Siwar Nasr, Nadia Lakhal, Itidel Ben Saad
Abstract: This paper investigates the relationship between corporate social responsibility (CSR) and cash holdings and whether board gender diversity influences this relationship. We use a sample of French listed companies from 2010 to 2015. Based on the instrumental variable method and the quantile regression approach, we show that there is a positive relationship between CSR and cash holdings suggesting that agency costs embedded in CSR activities could be associated with large cash reserves. Hence, managers could opportunistically use these activities to extract rents by increasing their held cash. We further show that women appointed as board directors moderate the relationship between CSR and cash holding which turns negative in case of board gender diversity. Board gender diversity is then considered as a good corporate governance device in French firms that is able to curtail the incentives of CEO to opportunistically use CSR activities at the expense of other stakeholders.
Keywords: CSR activities; cash holding; board gender diversity; governance; moderating effect.
Corporate social responsibility, innovation and firm value
by Shahbaz Sheikh
Abstract: This study argues that corporate social responsibility (CSR) and firm innovation have long-term orientation and CSR is positively related to innovation. It explicitly recognises the endogeneity of CSR and innovation and uses 2SLS instrumental variable regressions to estimate the impact of CSR on innovation. Using a sample of 841 large US companies and 3,246 firm year observations for the period 1995-2006, it finds that CSR is positively associated with firm performance in innovation measured by patents and citations. Results also show that CSR strengths (concerns) have positive (negative) impact on innovation. Additional tests indicate that firm performance in innovation is positively related to industry adjusted Tobin's Q, suggesting that innovation is one of the channels through which CSR increases firm value. Overall, the empirical results indicate that CSR is a long-term strategic investment and its impact on firm value should be measured through its impact on firm innovation which is a good indicator of long-term value.
Keywords: corporate social responsibility; CSR; innovation; patents; citations; firm value; agency theory; stakeholder theory.
Ethical Strategists in Scottish Football: The Role of Social Capital in Stakeholder Engagement
by Joshua McLeod, Andrews Adams, Katherine Sang
Abstract: Governance and leadership failings have been a common feature of Scottish football (McLeod, 2016). In response, many Scottish football clubs have adopted the approach of an 'ethical strategist' - meaning stakeholder engagement has become central to their strategies (Noland and Phillips, 2010). Such strategies are argued to necessitate sustainability (Mason and Simmons, 2012), but little is known about how they can be implemented effectively. The purpose of this paper is to address that gap and examine how social capital influences the effectiveness of stakeholder engagement-focused strategies in Scottish football. Using a multiple-case study approach, we make two contributions to the literature. First, we add to existing knowledge of how ethical strategists can utilise social capital to achieve strategic success. Second, we make a theoretical contribution to Nahapiet and Ghoshal's (1998) three-dimensional model of social capital by showing how contextual factors influence the interaction process between dimensions.
Keywords: board of directors; football; social capital; stakeholder engagement; ethical strategists.
ASEAN countries CG disclosure practices: a comparative analysis of one-tier and two-tier board structures
by Safia Nosheen, Naveed-ul-Haq, Tahseen Mohsan Khan
Abstract: Study focal point is to access the influence of CEO characteristics and audit quality on disclosure quality in the comparison between one-tier and two-tier board structures. Tobit regression model with the random effect is used to access influence on disclosure quality by using the sample of 200 non-financial firms of Indonesia, Malaysia, Thailand, and Singapore for the period from FY 2011 to FY 2015. The study empirically analyses the various characteristics of one and two-tier board structures. Findings of the study observe CEO dual role inversely and audit committee expertise directly impact disclosure quality for both structures. Further, observed audit committee size and firm size directly impact disclosure quality for one-tier structure and CEO age and leverage inversely impact two-tier structure. Finally, CEO tenure, audit quality and audit committee independence having no impact on disclosure quality for both board structure.
Keywords: disclosure quality; CEO characteristics; one-tier boards; two-tier boards; audit quality characteristics; non-financial firms.
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.