Tuesday, September 17, 2013

Understanding the Influence of the Board of Directors on Corporate Social Responsibility in U.S. Public Companies that are Recognized as CSR Leaders

Karen A. Smith Bogart, Fielding's School of Human & Organizational Development

Scholars have recognized board responsibilities in strategy, resource provision, fiduciary accountability, governance, stakeholder engagement, and social responsibility (Columbia Business School, 2011; Tricker, 2009). They have also recognized its role in ensuring the firm’s long-term success (Lorsch & Clark, 2008). Practitioners have similarly described board contributions to strategy, oversight, succession planning, sustainability, ethical practices, and culture (Deloitte LLP, 2011).

This study explores whether the Board of Directors influences corporate social responsibility (CSR) efforts in U.S. public companies that are recognized as CSR leaders. It aims to surface their understanding of corporate social responsibility and its fit to business objectives. It endeavors to discern the consequences for their role, responsibility, and actions. Accordingly, it considers the emerging union of corporate governance and corporate social responsibility (Gill, 2008).

This research is situated in the nexus of organizational theory, corporate governance, corporate social responsibility, and leadership influence. It utilizes stakeholder theory and the broader literature to explore the company’s relationship with its constituents and society. It also frames expectations for organizational value creation that concurrently provides benefit to the firm and society. This qualitative study uses semi-structured interviews of 14 independent board directors of 7 U.S. Fortune 1000 public corporations recognized as CSR leaders in the MSCI KLD 400 Social Index (MSCI, 2011). The study is augmented through evaluation of text including public information from company commitments, reports, investor and marketing communications, social media, and third-party assessments.

The findings identify four primary contributors to board influence in CSR: (a) board understanding of and support for CSR initiatives are built through active involvement in strategy, (b) board influence of CSR is advanced through stakeholder engagement which surfaces alignment opportunities and risks for constituent and company interests, (c) respectful board-management relationships promote the alignment of corporate commitments, CSR investment, and practice to yield company, societal, and stakeholder value, and (d) board influence of CSR increases through use of integrated reporting and assessment of financial, operational, and sustainability metrics and performance data.

In addition, 2 propositions are asserted that flow from the literature review and the inquiry to address the research question: (a) the Board of Directors can substantively influence corporate social responsibility efforts in U.S. public companies that are recognized as CSR leaders, and (b) there is a growing convergence of corporate governance and corporate social responsibility. It is driven by business pressures and stakeholder theory-based expectations of the firm and board. This advances the latter’s role and influence in CSR.

I hope that this research will challenge scholars to further explore the intersections of CSR and governance to advance our understanding of corporate agency in sustainability. This emerging junction poses opportunity for critically assessing how CSR may be used to align and share value. This study may also encourage practitioners to exercise new approaches in governance and corporate social responsibility to realize company and stakeholder value.

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