A selection of interesting articles we found recently providing insights into corporate governance.
Applying meta-ethical and normative claims of moral relativism to (shareholder and stakeholder) models of corporate governance
There has, in recent decades, been considerable scholarship regarding the moral aspects of corporate governance, and differences in corporate governance practices around the world have been widely documented and investigated. In such a context, the claims associated with moral relativism are relevant.
The purpose of this paper is to provide a detailed consideration of how the meta-ethical and normative claims of moral relativism in particular can be applied to corporate governance. This objective is achieved, firstly, by reviewing what is meant by meta-ethical moral relativism and identifying two ways in which the meta-ethical claim can be assessed. The possibility of a single, morally superior model of corporate governance is subsequently considered through an analysis of prominent works justifying the shareholder and stakeholder approaches, together with a consideration of academic agreement in this area.
The paper then draws on the work of Wong (Moral relativity, University of California Press, Berkeley, CA, 1984, A companion to ethics, Blackwell, Malden, 1993, Natural moralities: A defense of pluralistic relativism, Oxford University Press, Oxford, 2006), firstly in providing an argument supporting meta-ethical moral relativism and secondly regarding values of tolerance and/or accommodation that can contribute to the normative claim. The paper concludes by proposing an argument that it is morally wrong to impose a model of corporate governance where there are differences in moral judgements relevant to corporate governance, or to interfere with a model in similar circumstances, and closes with consideration of the argument’s implications.
Read more at: Andrew West. 2016. Applying Metaethical and Normative Claims of Moral Relativism to (Shareholder and Stakeholder) Models of Corporate Governance.
Journal of Business Ethics, 135(2), 199-215.
Board attributes, corporate social responsibility strategy, and corporate environmental and social performance
In this paper, the authors draw on insights from theories in the management and corporate governance literature to develop a theoretical model that makes explicit the links between a firm’s corporate social responsibility (CSR) related board attributes, its board CSR strategy, and its environmental and social performance. They then test the model using structural equation modeling approach.
The researchers find that the greater the CSR orientation of the board (as measured by the board’s independence, gender diversity, and financial expertise on audit committee), the more proactive and comprehensive the firm’s CSR strategy, and the higher its environmental and social performance. Moreover, they find this link to be endogenous and self-reinforcing, with superior CSR performers tending to further strengthen their board CSR orientation.
This result while positive is also suggestive of the widening of the gap between the leads and laggards in CSR. Therefore, the question arises as to how ‘leaders’ are using their superior CSR competencies seen by many scholars as a source of corporate (at times unfair) competitive advantage. Stakeholders of corporations therefore need to be cognizant of this aspect of CSR when evaluating a firm’s CSR activities. Policy makers also need to be cognisant of these concerns when designing regulation in this field.
Find more at: Amama Shaukat, Yan Qiu & Grzegorz Trojanowski. 2016. Board attributes, corporate social responsibility strategy, and corporate environmental and social performance.
Journal Of Business Ethics, 135(3), 569-585.
Corporate governance and executive compensation for corporate social responsibility
Bryan Hong, Zhichuan Li & Dylan Minor link the corporate governance literature in financial economics to the agency cost perspective of corporate social responsibility (CSR) to derive theoretical predictions about the relationship between corporate governance and the existence of executive compensation incentives for CSR.
Bryan Hong, Zhichuan Li & Dylan Minor test their predictions using novel executive compensation contract data, and find that firms with more shareholder-friendly corporate governance are more likely to provide compensation to executives linked to firm social performance outcomes. Also, providing executives with direct incentives for CSR is an effective tool to increase firm social performance. The findings provide evidence identifying corporate governance as a determinant of managerial incentives for social performance, and suggest that CSR activities are more likely to be beneficial to shareholders, as opposed to an agency cost.
The article is at: Bryan Hong, Zhichuan Li & Dylan Minor. 2016. Corporate governance and executive compensation for corporate social responsibility.
Journal of Business Ethics, 136(1), 199-213.
When do board and management resources complement each other? A study of effects on corporate social responsibility
Following resource-based and complementary asset perspectives, this paper examines the effects of board and management resources on corporate social responsibility (CSR) in a sample of large Australian public firms. Specifically, this study posits that outside directors and women on boards are complementary in that their multiplicative effect incrementally influences CSR above their individual, independent effects. The hypothesis is confirmed. Further, the study tests the interactive effect of a senior CSR manager, determining the independent and complementary effects of managerial resources upon board resources.
The results suggest that a senior CSR manager has both an independent and complementary effect, offering support for the hypotheses. The findings offer some confirmation of resource-based theory, demonstrating that board resources can be complementary within the boardroom context and complementary to management in positively affecting firm outcomes.
Find more detail at: Jeremy Galbreath. 2016. When do board and management resources complement each other? A study of effects on corporate social responsibility.
Journal of Business Ethics, 136(2), 281-292.
Board processes, board strategic involvement, and organisational performance in for-profit and non-profit organisations
Although corporate governance researchers have devoted considerable attention to the role of boards of directors in monitoring management and providing resources, less attention has been paid to whether and how they affect the strategic actions of firms in response to changing environments. Taking a process-based perspective, the authors examine how several prevalent board processes (i.e., board meetings, outside-board-meeting reviews and information utilisation) affect the involvement of boards in strategic decision-making and how such involvement shapes organisational performance. Moreover, the researchers offer an initial attempt to compare the strategic role of boards in for-profit and non-profit organisations.
An investigation of 217 for-profit and 156 non-profit organisations in Canada indicates that different processes lead boards to different levels of strategic involvement, and that such effects are contingent on the types of organisations concerned. Moreover, boards that are active in strategic decision-making enhance the performance of their organisations. These findings have implications for board research and practice.
Find out more: Hongjin Zhu, Pengji Wang & Chris Bart. 2016. Board processes, board strategic involvement, and organizational performance in for-profit and non-profit organizations.
Journal of Business Ethics, 136(2), 311-328.
Governance and virtue: the case of public order policing
For Aristotle, virtues are neither transcendent nor universal, but socially interdependent; they need to be understood chronologically and with respect to character and context. This paper uses an Aristotelian lens to analyse an especially interesting context in which to study virtue—the state’s response when social order breaks down. During such periods, questions relating to right action by citizens, the state, and state agents are pronounced.
To study this, Kevin Morrell & Stephen Brammer analyse data from interviews, observation, and documents gathered during a 3-year study of riot policing in the U.K. In doing so, the authors contribute by joining a number of other conversations within JBE, suggesting detailed empirical examination of this context is useful in opening up considerations relevant to ‘virtue’ elsewhere.
This extreme context helps raise interesting and empirically informed questions that can encourage future theoretical and empirical contributions to virtue in business ethics. One such question is on the role of habituation in virtue, which is not just the inculcation of a reflex or automaticity, but can also refer to a trained and developed tendency to behave in the right way, for the right reasons, at the right time. Whilst these authors stop short of a simplistic alignment of habituation and virtue, they show ways in which it can inform understanding of both courage and phronēsis.
See the full paper: Kevin Morrell & Stephen Brammer. 2016. Governance and virtue: the case of public order policing.
Journal of Business Ethics, 136(2), 385-398.
Gender diversity In the boardroom and risk management in R&D
Increasing gender diversity in the boardroom has been promoted as a way to enhance corporate governance and risk management. This study empirically examines whether boards with more female directors play a role in reducing R&D risk. The authors first show that female directors help to reduce the positive relationship between R&D investment and future performance volatility. They then report that firms with more gender-diverse boards exhibit a lower adverse effect of R&D on the cost of debt.
These results are robust to endogeneity analysis, alternative measures of gender diversity and risky investment, and other sensitivity tests. Overall, the results suggest that female directors improve board effectiveness in risk management with respect to R&D investment.
Find out more at: Shimin Chen, Xu Ni & Jamie Y. Tong. 2016. Gender Diversity In The Boardroom And Risk Management: A Case Of R&D Investment.
Journal of Business Ethics, 136(3), 599-621.