Evaluating Board Roles performance in adopting CSR practices
Mohammed Naif Z Alshareef
University of New England,
UNE Business School
Armidale, Australia
Email: malshar4@myune.edu.au
Kamaljeet Sandhu
University of New England,
UNE Business School
Armidale, Australia
Email: abazhair@myune.edu.au
ABSTRACT
Purpose: The purpose of this paper is to provide understanding in evaluating the board roles that make a board
effective in the performance of adopting the CSR practices. This paper examining directors’ perception in three
main roles: Monitoring, Service and Strategic, which provide tools for critically understanding how the board
adds the value in moving the organization towards more social responsible practices. The Stakeholder theory is
used to distinguish the influence of the three main roles in adopting of CSR practices.
Design/ Methodology: Primary data was collected for this research. Primary data was collected by conducting
structured questionnaires with a sample size of 461 directors from Saudi listed companies for the purpose.
Findings: The results show that an appropriate mix of directors’ roles and the development of a sound board
monitoring and service roles are most crucial determinants of adopting CSR in Saudi listed companies.
Originality/value: As the extant corporate governance and corporate social responsibility literatures does not
provide a clear perspective with contradictory outcomes about board roles in influencing CSR practices, the
paper’s originality is its contribution by evaluating the directors’ perception of developing the direct relationship
between the board roles and adopting of CSR practices. Furthermore, the use of the Stakeholder theory provides
additional insights into identifying the most Board Role’s factors enhancing stakeholder expectation of CSR
practices.
KEYWORDS: corporate social responsibility, board monitoring role, board services role, board
strategic role.
PAPER TYPE: Research paper
INTRODUCTION
A vast amount of literature concentrate on the diverse matters associated to the stakeholders of the organization
(Jones, 1995; Freeman, 2001; Jensen, 2002; Freeman, Wicks & Parmar, 2004). The major issues are to what
level does management of stakeholders is affected by corporate governance in business organizations. Also,
while the management of stakeholders by business organizations, what role is performed by board of directors.
Finally, while protecting the well being of organization and enhancing the adopting of CSR practices what is the
most significant role played by directors. In responding to all these queries, the study tries to fill up the gap in
the management literature by examining as well as calculating the three roles played by directors of Saudi listed
companies in adopting CSR practices which are: Monitoring, Service and Strategic roles.
Ayuso and Argandoña (2009) along with Kolk and Pinkse (2006) stated that due to CSR violations the role
played by board of directors (BOD) in violation of CSR practices have raised many questions. Samy and
Bampton (2014) suggested that these CSR violations are the outcomes of CSR structure, policies and
executions. For instance, Code of directorship is one of CSR policies, while code of Ethics and business
standards have been included in the CSR structures which has been devised by board of directors. These
problems related to CSR have directed many investigators to identify the need to examine the role played by
board of directors in CSR (Huse & Rindova, 2001; Bear, Rahman & Post, 2010; Hung, 2011).
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In a nutshell, the basic aim of the study is to investigate the role played by board in adopting CSR practices in
perspective of corporate governance. In other words, the role played by BOD in scheming and applying the CSR
is the main focus of research. Apart from that it will provide insight into the ways companies administrate
themselves in international market arena. The study will also enhance the knowledge and understanding on
interaction between corporations and their stakeholders. Various studies suggest that this is due to the significant
role played by them in amplifying the system of corporate governance in Saudi companies such as, monitoring,
strategic and services roles (Judge & Zeithaml, 1992; Ruigrok, Peck & Keller, 2006; Hillman, Nicholson &
Shropshire, 2008). Therefore, Revathy (2012) stated that CSR violations are reduced as a result of enhancement
in CSR structures and implementations. Thus, the study tries to full fill the gap in management literature by
recognizing as well as examining the role played by perceptions of BOD in adopting the CSR practices.
LITERATURE REVIEW
Middleton (1987) and Hillman, Cannella and Paetzold (2000) highlighted that significant role is played by
corporate directors and their boards, as periphery straddling and control units in administrating interaction of
information and resources. Three sets of interconnected tasks performed by principal boards were also identified
which were strategy, service and control (Pearce & Zahra, 1991).The foremost role is preparing and publicizing
corporate objectives and strategies as well as allocation obligatory resources to execute board’s strategies. The
subsequent role is corporate control, which comprises of scrutinizing and gratifying managerial achievement
and performance. Zahra and Pearce (1989) identified that the final role is associated with institutional task of
managerial boards, which constitutes of advocating the organization’s awareness in society, connecting the
organization with external surroundings and protecting vital assets. Similarly, organizations react to their
exterior surroundings with societal actions and company’s directors can assist their firm through suitable
societal accountability actions (Cooper & Owen, 2007; Kotler & Lee, 2008). Societal accountability roles
performed by corporate directors are defined as the roles of directors while taking up the CSR actions to
generate or encourage organizational, societal and public policy results that are supportive in meeting the
stakeholder’s anticipations (Zeithaml, Keim & Baysinger, 1988; Hillman, Keim & Schuler, 2004). These roles
can also be believed as a rivulet of board level resolutions which can persuade an incorporated set of actions
deliberated to generate societal outcomes, favourable for both the firm’s welfare and society (Roberts, 1992).
BOARD MONITORING ROLE
Agency theory highlights that the role should be played by board in scrutinizing the actions of managers to
protect the stakeholder’s interests (Donaldson & Davis, 1991,Fama and Jensen, 1983; Eisenhardt, 1989a). Zahra
and Pearce (1989) stated that the most governance literature of view that has directed researchers on corporate
boards is the Agency theory. The agency theory was developed by big companies to tackle the contradictory
association between owners and managers Berle and Means, 1932; Jensen and Meckling, 1976 & Eisenhardt,
1989; Lan & Heracleous, 2010). The academics supporting the agency theory prospective consider on
increasing the stakeholders wealth as a crucial standard for estimating the corporate performance and how board
can further facilitate in increasing corporate performance. Boards curtail the agency cost and maximize the
wealth of stakeholders. Functionally boards also scrutinize and assess performance of company and CEO.
Stakeholder-agency theory was the extension of agency theory proposed by Hill and Jones (1992) to elucidate
the association with other stakeholders. Lorsch and McIver (1989) and later Savage, Nix, Whitehead and Blair
(1991) suggested that in context of stakeholder’s model, corporate board is potential and significant system for
resolving stakeholder’s problems. Fomburn(1996) affirmed that organizations that overlook and fail to counter
the stakeholders problems relinquish the remunerations of favourable repute, compassionate surroundings and
lesser agency, team and transactions costs (Pfeffer, 1972; Pfeffer and Salancik, 1978; Jones, 1995 Post, Preston,
& Sauter-Sachs, 2002). Oviatt (1988) and Fama and Jensen (1983) advocated that corporate board and corporate
control market are two alternative control systems, out of which corporate board is the economical option.
Similarly, to address the issues of stakeholder corporate boards are more competent and economical mechanism
as compared to varying competitive situation of company concerning various stakeholder groups. Recognizing
the stakeholder’s interests and specialized proficiency in management control are key factors in measuring the
efficacy of board (Kosnik, 1987; Lord, 1995 Forbes & Milliken, 1999). In procession with this viewpoint,
corporate directors are viewed as the agents to the office by the appointing authority. This stance assists in
emphasizing the role of directors as “agents” supporting for extensive groups and interests. Eisenhardt (1989)
and Lord (1995) Preston and Sapienza (1991) confirmed that various corporations, ecologists, consumer and
civil society groups help in managing social problems which are directly related to companies. Peripheral
components have stipulated confirmation that boards are enthusiastic to confront management’s verdicts on their
behalf (Preston, 1998; Gulati and Westphal, 1999). Hillman and Keim (2001) identified in a study comprising
of 20 firms consisting of 3268 board members that prevalence of stakeholder directors is positively allied with
performance of stakeholder and efficacy of managerial control. Substantiating this aspect, a custodian role is
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performed by directors in retaining the stakeholder’s interest that can be influenced by the organizations. This
study focus on Saudi companies where some designated directors may delegate certain stake holders groups and
fulfil the permissible liability to concentrate on their respective interests.
BOARD SERVICE ROLE
Extensive literature has illustrated the service role performed by board. Mace (1971) , Huse and Rindova (2001)
suggested that board act as the resource for offering services to the organizations and its administration. Lately,
this perspective has become component of framework for resource based view of company and related theories,
whereas the tactical resource role is played by board influencing the performance of company. Resource based
approach and resource dependency approach are associated in their deliberation of board members who act as
linking and legitimizing medium. Provan (1980) along with Borch and Huse (1993) and Ingley and McCaffrey
(2007) stated that tasks performed by boards within the service viewpoint are usually the provision of advice
and information and a medium for supplying networks. Supplying the CEO and higher management team with
proficient guidance and access to resources and information comprises the service roles performed by directors.
The role chiefly curtail from the resource dependence approach and to some degree from stewardship theory.
According to resource dependence approach, board of director’s act as a medium for designating with
companies with which the external organizations are co- dependent (Pfeffer and Salancik, 1978). Within this
perspective, four distinguished service roles of board of directors were recommended by Mintzberg (1983): (1)
appointing exterior persuaders; (2) creating acquaintances (and heaving funds) for the business; (3) enhancing
the organization‘s standing; and (4) Providing guidance and counsel to the business. Particularly, the final role
refers to the possible provision of advanced guidance to CEO by the board (Jensen, 1993; Dalton et al., 1998).
Due to their respective links and contacts with stakeholder groups and also because of proficient and personal
kudos in these groups, directors act as company’s resource. Connection of directors is defined as the capability
of providing appropriate information and also communicating the information to environment about the
organization by directors. Murray (2003), Eisingerich and Bhardwaj (2011) suggested that repute of company is
guarded in similar manner by corporate directors as they guard the stakeholder’s interest contributing in diverse
societal activities. The manner in which directors assist the company by contributing in societal activities to
enhance a positive perception about organizations image in society comprises the social participation role
(Aguilera and Jackson, 2003; Mattingly, 2004). According to stakeholder’s theory, it is anticipated from board
members to protect precious resources and assets of company (Pfeffer and Salincik 1978). Furthermore,
stakeholder theory accentuates the role performed by board in synchronizing and harmonizing the value for
stakeholders engaged in firm (Luoma and Goodstein 1999; Hillman & Keim, 2001). The academic plurality
initiating from broad set of service roles suggests a number of precise activities such as provision of guidance
and advice for CSR initiatives, legitimizing, and contribution in devising CSR initiatives, networking and
synchronizing expectations of stakeholders that can be differentiated(Hillman and Dalziel 2003; Huse 2005 &
Chun, 2005).
BOARD STRATEGIC ROLE
Historically, there are various contradictory views on the strategic role performed by board. Various academic
approaches comprise the strategic role of board. The literature of board strategy role is divided into two schools
of thoughts on the basis of boards participation in strategy referred to as active and passive ((Judge & Zeithaml,
1992; Golden and Zajac, 2001). The advocates of active school of thought consider board of directors as
autonomous body that assist in formulating company’s strategic route and direct the administration to
accomplish organizations missions and objectives (Hung, 1998; Maassen, 1999 and Stiles, 2001). Contrary to
that passive school of thought suggests that board members have very little or no influence in formulating
company’s strategies and act as tool of management. The Board strategic role is directly connected to vigorous
action and performance dimension. It is considered to be the chief role of corporate directors and can aid in
explaining the attributes of boards and distinguish between the board and managements work (Stiles and Taylor,
1996; Colella, 2001). Miller (1992) suggested that the board leading the company should formulate the
framework of its plans, strategies and objectives and also institute polices requires to manage and administer
company.
Various management intellectuals consent that active contribution is important for corporate directors in
concluding the future of company (Lorsch and Maclver, 1989; Brenner and Cochran, 1991; Demb and
Neubauer, 1992, Mileham, 1995; Pugliese, Bezemer, Zattoni, Huse, Van den Bosch & Volberda, 2009). Stiles
(2001) after detailed investigation of 51 directors and 121 secretaries of UK based public companies
recommended that strategic actions of organizations can be influenced by directors. In order to successfully
perform a board strategic role apprehension for stakeholders is imperative for corporate directors. Russo and
Fouts (1997) stated that for example, company can fulfil stakeholders demand for decreasing contamination
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either by mounting new filtering paraphernalia, or re-designing their manufacturing procedures to decrease
contamination. A survey comprising of 2300 American directors for conducted to investigate the orientation of
directors from stakeholders prospective and it was found that discreet stakeholder groups existed in perception
of directors (Wang and Dewhirst, 1992). The directors with elevated orientation towards stakeholders were
more worried about them. Thus the first hypothesis is developed on the basis that concern for stakeholders is
positively associated with the perception about significance of the strategic role performed by corporate
directors.
Different postulations formulate a variety of viewpoints about the corporate board’s nature as a governing body.
These multiple postulations focus on various board roles. Although, various board and sub board roles are
specified, they are generally recapitulated in three major roles namely, control strategic and service (Zahra and
Pearce, 1989; Zahra, 1990). Different suppositions about board’s nature and its relation to a range of
stakeholders direct the importance on one role over another and discrepancy about board’s availability in order
to execute their tasks in adopting CSR practices. Thus, the study advocate opinions about roles performed by
board of directors in adoption CSR practices that integrated multiple stakeholders such as employees,
customers, shareholders, suppliers, environment and local community.
METHODOLOGY
The Research work comprised of an extensive project that is corporate governance factors influencing the
adopting of CSR practices and financial performance (Mohammed Alshareef). The methodology of study is
parallel to that of Ingley and van der walt (2002, 2005) and has been adopted. In accordance with previous work
it consisted of four stages which are:
Stage 1: Organize several case studies in foundation of interviews consisting of experienced directors and
senior managers to authenticate conceptualization of research:
Various studies from Saudi listed organizations were used to achieve two purposes. First purpose was the
verification of concepts recognized from literature for addition in survey instrument. Secondly, to verify results
which were obtained from the mail survey. The beginning various case studies were assembled from
chairpersons(CPSs), Senior Directors(SDs), Executive Directors(EDs) and Non Executives (NEDs). The studies
were conducted across various organizations and different industrial sectors. These various case studies
consisted of interviews which were conducted from 33NEDs, ED and SDs. The conversation from interviews
highlighted main concerns of directors to facilitate in advancement of conceptual framework for research.
Stage 2: Attainment of access to appropriate sample of directors for mail survey:
The study was highly desirable due to high interest of directors and senior management community of all the
Saudi listed companies. The study is also highly relevant and it is desirable to examine entire population but
cannot be achieved due to lack of data on CSR practices in some companies. Hence, it was decided to confine
research to only six listed Saudi companies in six sectors namely; agriculture & Food industries, Multiinvestment, Real Estate Development, Cement, Energy & utilities, industrial investment & building &
construction and petrochemical industries. The major reasons for selecting these Sectors are: Firstly, these
sectors signify all those companies which are ecologically susceptible in their daily operating activities. Also
companies in such sectors are highly identified for their social and ecological harms. Secondly, all these
companies are listed on Saudi stock exchange and observe the rules of the Saudi capital market authority which
imposes necessary corporate governance codes on all listed companies.
Stage 3: Development and supervision of survey instrument:
O’Reilly (1982) stated that evaluation of manager’s insight is permitted by survey method. Clover and Balsely
(1984) highlighted that this method uses structured mail questionnaires which are appropriate for attaining
respondent’s views on performance related data. Studies also identified that the professionals and white collar
workers are normally willing to respond to mail questionnaires (Sudman & Bradburn, 1982). Colver and Balsley
(1984) proposed that mailed questionnaires were suitable for use in case of population consisting of
homogenous groups of people with parallel interests, socio-economic background and education. This decisive
factor was also confirmed by directors on board. Frequently established theoretical definitions were used to
develop the survey items for the constructs. They were also affected by work of others who tried to further use
similar constructs.
Pilot testing was used to trial questionnaire and for that reason a small sample of respondents was used. The
reactions and responses of sample were scrutinized (Clark & Watson, 1995). A pre-test of 33 superior directors
and professionals related to corporate governance and CSR was conducted for companies. Respondents made
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propositions for modification and amplification of questions and items with respect to gist and clarity of each
statement, significance and sufficiency of items and any tribulations or doubts while finishing the questionnaire.
Payne (1951) highlighted problem regarding respondents whether they have sufficient information about the
subject of questionnaire design to suggest astute feedback. Schilling and Steensma (2002) suggested that those
respondents should be selected who have information and knowledge and also they should be concerned about
the issues related to field of enquiry. Content of instrument was also validated and questionnaire was circulated
among 15 senior academics in Saudi universities with extensive experience in research survey that could
critically evaluate the content (Sudman and Bradburn, 1982; Schilling and Steensma, 2002). These propositions
by experts during questionnaire development and revision guaranteed a close match between final and pre-test
version of instrument. Established construct developed by Maignan and Ferrell (2004) were used in study.
The final questionnaire comprised of a total of 16 sets statements with 43 questions along with 7 demographic
statements with a total of 7 questions. Broad variety of behavioural functions was measured by 3 sets of
statements consisting of 19 dimensions in questions. A range of items included to CSR practices in terms of
shareholder responsibility, community responsibility, ecological responsibility, employee responsibility, product
& customer responsibility and supplier responsibility were measured using 6 sets of statements containing 17
questions. The items used to measure control and service roles of board were indistinguishable to those used by
Cornforth (2011) in his study of board effectiveness in non-profit organization. Ruigrok, Peck and Keller (2006)
items were used to measure strategic role of board. 8-items on 5-point likert scale were used to evaluate the
construct of board monitoring with scales from 1= strongly disagree to 5= strongly agree. The construct covers
issues related to omission of financial management and control, supervision of firm and CEO performance,
responsibility to stakeholders, and execution of legal obligations. Evaluation of board service construct was
conducted with 5 items on 5-point Likert scale from 1 = strongly disagree to 5 = strongly agree that envelop
concerns such as support & recommendation to management, delegation of stakeholders, evaluation of board
performance and connection with important groups & organizations in lieu of company. Review of board
strategic construct was conducted with 6 items on 5-point Likert scale from 1 = strongly disagree to 5 = strongly
agree that wrap problems such as identifying the firm‘s mission and values, firm‘s vision and objectives, firm‘s
strategic direction, determining and enforcing company policies, determining corporate and financial options,
firm‘s structure and strategy execution and performance management. 17-item scale was used to measure six
CSR practices namely; community responsibility, ecological responsibility, employees responsibility, investors
responsibility, customers responsibility and suppliers responsibility. It was enquired from respondents to specify
the extent to which each item echoed their organizations on a 5-point likert scale from 1= strongly disagree to
5= strongly agree.
Final survey was conducted in February 2012 and questionnaire were distributes in one time only as the data
was cross sectional in nature. It was anticipated that sample was sufficient. It was identified by Anderson and
Niebuhr (1986) that for mail questionnaire it is mandatory to attach covering letters in order to introduce the
researcher and legitimize the survey. Prologue and validation was attained through two approaches: firstly, the
article in Boardroom – the transporting vehicle for the questionnaire – and secondly on envelop of the
questionnaire itself. This helped to acknowledge the basic reason for conducting research and also identified
importance of the work with an aim to raise productive argument and further provoke opinion with gaze at
involvement of directors in organizations. The survey swathe provoked and motivated contribution from
participants by advising on worth and value of questionnaire as a tool for manifestation on participants’ own
boards, demonstrating the time required to complete a survey and also promising respondents secrecy and
discretion. The survey questionnaire also consisted of freepost return envelops along with contact details of
researcher in case of any questions regarding research. A total of 900 surveys were distributed among all listed
companies out of which only 58 were returned due to erroneous address. Supplementary copies of
questionnaires were requested by various companies to be completed by other boards that had terms and
relations with directors. A sum of 570 questionnaires was returned in a period of 5months out of which 461
responses were useable with a response rate of 67%. The major reason for lack of responses from directors was
unavailability due to business reasons. This made it impossible for them to complete and return the
questionnaire. The other reasons for non-response were mainly; misplacement of questionnaire or being
returned to late to be included in analysis, directors were either retired or not presently holding a directorship
and finally missing answers for some questions.
Stage 4: Data Analysis & interpretation:
The software used for analyzing the data was “The Statistical Package for Social Sciences (SPSS) Versions 21.
A semantic differential scale of five-point liker scale ranging from 1= strongly disagree to 5= strongly agree was
used for statements other than any single responses. Initial analysis of data was completed using normal
descriptive statistics in order to spot any oddities in frequencies. Introductory cross-tabulations were also
5
conducted. Means were used as central tendency measure and the scales were treated as metric level data.
Interpretation is similar to system of confirmation of data used by Schilling and Steensma (2002). Additional
information was summoned to remark and validate results of research as a reasonable indication of director’s
experience of board roles (scrutinizing, service and strategic) and CSR performance with provision of
supplementary quantitative insights through this authority.
RESULT AND DISCUSSION
THE DIRECTORS’ PERCEPTION ON MONITORING ROLE OF CSR ACTIVITIES
Huse and Rindova (2001) argued that the board plays an important role in implementing CSR
practices effectively. The various roles played by board and their inclination towards adopting the
CSR practices have been specified by the survey conducted for Saudi listed companies. The survey
includes three board rules which are board monitoring, service and strategic roles (Fama & Jensen,
1983; Ingley & McCaffrey 2007; Ruigrok et al., 2006). In context of stakeholders approach Ayuso
and Argandoña (2009) identified that good and accountable corporate governance ensures effective
CSR adoption. Table 1 illustrate the influence of board monitoring role on CSR adoption. Zona and Zattoni
(2007) stated that Board monitoring role is one of the main tasks performed to safe guard the rights of
stakeholders. The board monitoring role comprises of eight constructs and respondents have been asked to rate
the importance of each item on the likert scale with 1=strongly disagree and 5=strongly agree. Table 1 shows
the value of cronbach’s alpha, mean and standard deviation for the items used to compute Board monitoring
role. The value of cronbach’s alpha is used to test the internal reliability of various items used to measure a
variable (Tavakol & Dennick, 2011). The value of alpha should be greater than 0.7 to reliably calculate the
items (Hinton, Brownlow, McMurray, & Cozens, 2004). From Table 1 it is clear that values of all the
individual items are greater than 0.9 showing high reliability of items ranging from 0.926 to 0.941. The overall
value of alpha is 0.941 which explains that items are competently measuring the board monitoring role. The
value of mean in table 1 explains the average inclination of respondents where as the standard deviation (SD)
states the dispersion or spread of data from the mean. Table 1 also show that the value of mean for all the items
is between 3 to 4 showing responses which is either agree or strongly agree. The respondents placed great
importance in members effective monitoring and evaluating top management in CSR activities performance
(BMR1) as the value of mean is 4.66 and is in accordance with the work of Clarkson (1995). Responses also
identified that board effective evaluation of non-financial report of CSR activities (BMR2) is also of great
importance which is in alignment with the work of Perrini (2006) who highlighted the importance of financial
evaluation and performance in achieving organizational sustainability. Finally, respondents placed importance
on factor that is members are kept informed on the financial report of CSR activities (BMR5). This finding is
also consistent with the work of previous studies and the value of mean is 4.54 showing agreement of
respondents (Morsing & Schultz, 2006). Only one item that is board members active involvement in defining
behavioural guidelines for CSR managers (BMR9) having a mean of 2.79, is the only construct which is of least
importance for respondents. The other constructs which are; ensuring accountability to the organization’s
Table (1): Cronbach's Alpha, Means, standard deviations and responses (%) to the first factor, Board Monitoring Role
Code
BMR1
Factor : Board Monitoring Role : total Cronbach’s α= 0.941
α
Our board members effectively monitors and evaluates top
Mean
Standard
SD
D
N
A
SA
Deviation
%
%
%
%
%
1
2
3
4
5
0.929
4.66
0.53
0
0
2.8
28.5
68.7
management in CSR activities performance
BMR2
Our board members evaluate the non-financial report of CSR activities
0.929
4.34
0.60
0
0
7
52.6
40.4
BMR3
Ensure accountability to the organization’s Stakeholders
0.929
3.60
0.52
0
1.3
37.6
60.9
0.2
BMR4
Our board members effectively monitor and evaluates CSR budget.
0.941
3.11
0.45
0
5.2
78.3
16.5
0
BMR5
Our board members are kept informed on the financial report of CSR
0.937
4.54
0.58
0
0
4.6
36.5
58.9
0.935
3.91
0.53
0
0.4
17.8
72.4
9.3
0.933
3.34
0.54
0
3.3
59.3
37.4
0
0.926
2.79
0.42
0
21.5
78.3
0.2
0
3.79
0.44
0.0
4.0
35.7
38.1
22.2
activities
BMR6
Our board members effectively monitors and evaluates CSR operations
performance
BMR8
Our board members ensure the organization has adequate CSR financial
systems and procedures
BMR9
Our board members is actively involved in defining behavioural
guidelines for CSR managers
Total
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Stakeholders (BMR3), effectively monitoring and evaluating CSR budget (BMR4), evaluating the non-financial
report of CSR activities (BMR6) and ensuring that organization has adequate CSR financial systems and
procedures (BMR8) have means greater than 3 showing a response between neutral and agreement which is also
in accordance with previous studies ((Morsing & Schultz, 2006; Rasche & Esser, 2006).The individual
percentage for responses were high for agree and strongly agree which is 38.1 % and 22.2 % showing most
responses were agreeing. The overall mean is 3.79 showing that the respondents agreed that board monitoring
role has an effect on adoption of CSR practices (Zandstra, 2002). SD is 0.44 that is close to mean showing the
data is less dispersed.
THE DIRECTORS’ PERCEPTION ON SERVICE ROLE OF CSR ACTIVITIES
Table 2 demonstrate the influence of board service role on CSR adoption. Huse and Rindova (2001)
identified that board act as a facilitator in providing services related to information and suggestions. Du,
Bhattacharya and Sen (2010) states that board service role can positively change stakeholder’s attitude and
fortify the long term relation. Table 2 demonstrates that alpha for items are from 0.881 to 0.904 and
overall value is 0.915 showing high consistency of items in measuring board services role. The result
findings highlighted that respondents placed high importance in board members effective provision of
advice and counsel in discussions for formulation of CSR activities with top management (BSR1) and the
mean value is 4.72. This is parallel to the findings of work done by Ingley and McCaffrey (2007) that
highlighted the importance of board members in facilitating information in and out of social networks.
Another important factor highlighted by respondents is member’s effective provision of advice and
counsel in CSR financial issues (BSR2) with a mean of 4.59 showing most responses were agreeing to
statement. The research finding by Nicholson and Kiel (2004) also stated that effective good governance
by board helps to resolve legal issues and increase organizational performance. Finally responses also
showed that board members effective provision and assistance in obtaining knowledge and Information of
CSR activities from outside the company is in accordance with the work of Ingley and McCaffrey (2007)
and has a mean of 4.03. The only item (BR4) stating “board members effectively providing firm with
external legitimacy and reputation” has been not highlighted as a major factor in measuring the board
service role. The overall mean is also 3.88 showing that board services role affect the adoption of CSR
practices (Hillman et al., 2008). The data is also less fluctuated as SD is 0.46 showing responses of
individuals were less divergent from the mean responses
Table (2): Cronbach's Alpha, Means, standard deviations and responses (%) to the second factor, Board Service Role
Code
BSR1
Factor: Board Services Role (BSR) total Cronbach’s α= 0.915
Our board
α
members effectively provide advice and counsel in discussions
Mean
Standard
SD
D
N
A
SA
Deviation
%
%
%
%
%
1
2
3
4
5
0.881
4.72
0.57
0.2
0.7
3
19.6
76.5
0.904
4.59
0.62
0.2
0.7
3.7
31.1
64.3
0.886
3.18
0.52
0.4
4.6
71.5
23.5
0
0.897
2.88
0.41
0.9
12.4
84.6
2.2
0
0.882
4.03
0.56
0.2
1.1
10
73.3
15.4
3.88
0.46
0.4
3.9
34.6
29.9
31.2
of formulation of CSR activities with top management
BSR2
Our board members effectively provide advice and counsel in CSR financial
issues.
BSR3
Our board
members effectively provides linkages to important external
stakeholders (banks, supplies, customers, government, shareholder)
BSR4
Our board members effectively provides firm with external legitimacy and
reputation
BSR5
Our board members effectively provide assistance in obtaining knowledge
and Information of CSR activities from outside the company.
Total
THE DIRECTORS’ PERCEPTION ON STRATEGIC ROLE OF CSR ACTIVITIES
Table 3 explains the influence of board strategic role in affecting the adoption of CSR practices. Board strategic
roles are the actions performed by members in formulating and implementing the strategies (Papadakis, Lioukas
& Chambers, 1998). Table 3 explains the value of alpha for items is greater than 0.9 showing high internal
reliability between items in measuring the board strategic roles (Tavakol & Dennick, 2011). The significant
construct is board members effective monitoring the top management in CSR strategic decision making whose
mean value is 4.16 showing most respondents consider it as an important for measuring the board strategic role.
This is similar to the findings of Forbes and Milliken (1999) that highlighted the role which board members play
7
in monitoring and decision making of top management. This shows that in order to adopt CSR practices it is
important for board members to properly monitor and assist the manager’s decision making (Ruigrok et al.,
2006). The value of mean for board members effective Setting the organization’s CSR mission and
values(BST1), board members are effective involvement in implementing long-term CSR strategic decisionmaking (BST2) and board members effectively making proposals on the CSR long-term strategies and main
goals(BST3) is between 2.15 to 2.82 showing responses between disagree and strongly disagree. The aggregated
value of mean is also 3.22 showing a neutral reply that board strategic role has an effect on adoption of CSR
practices (Hillman et al., 2008). The percentage of response rates that is 23% and 42.3% respectively, also show
that responses were either disagreeing or neutral. SD is 0.48 explaining less dispersion of responses from mean.
Table (3): Cronbach's Alpha, Means, standard deviations and responses (%) to the first factor, Board Monitoring Role
Code
Factor :Board Strategic Role (BST) total factor’s Cronbach’s α= 0.915
α
Mean
Standard
SD
D
N
A
SA
Deviation
1
2
3
4
5
%
%
%
%
%
BST1
Our board members effectively Sets the organization’s CSR mission and values
0.914
2.82
0.48
1.5
16.7
79.3
2.4
0
BST2
Our board members are effectively involved in implementing long-term CSR strategic
0.911
2.64
0.53
2
32
66.1
0
0
0.919
2.15
0.45
3
78.5
18.5
0
0
0.898
4.16
0.67
0.2
2
8.7
59.6
29.6
0.906
3.07
0.51
0.9
7.2
75.7
16.3
0
0.903
4.46
0.70
0.2
1.7
5.4
37.4
55.2
3.22
0.48
1.3
23.0
42.3
19.3
14.1
decision-making
BST3
Our board members effectively make proposals on the CSR long-term strategies and
main goals
BST4
Our board members effectively monitors top management in CSR strategic decision
making
BST5
Our board members reviews CSR objectives to match the mission and values, and to
form the basis of company strategy
BST6
Our board members adapts performance measures to monitor the implementation of
strategy, policies and plans, and the legal/fiduciary obligations affecting the business
and the board
Total
THE DIRECTORS’ PERCEPTION ON SERVICE ROLE OF CSR ACTIVITIES
Table 4 illustrate the importance of adopting the CSR practices for good corporate governance. CSR practices
are the responsibility of the organization to value the stakeholders and humanity (Hemphill, 2004). Simmons
(2004) stated that good corporate governance influences the CSR activities and board tasks play a major role in
that scenario. Table 4 shows that the overall value of alpha is 0.970 and individual values of alpha are also
greater than 0.9 showing high consistency between items (Tavakol & Dennick, 2011). Mean of the items is
greater than 3 showing that the responses were between agree and strongly agree. The construct measure the
organization's environmental performance (CA6) is important and has a mean of 4.34 which is also parallel to
finding of previous work (Russo & Fouts, 1997). Respondents also highlighted that incorporating the interests
of all our investors into business decisions (CA12), providing all investors with a competitive return on
investment. (CA13), Seeking the input of all our investors regarding strategic decisions (CA14), Providing all
customers with the information needed to make sound purchasing decisions (CA16) and Adapting products or
services to enhance the level of customer satisfaction (CA18) are greater than 4 showing that those items are
highly important (Barsky and Labagh, 1992; Day, Shocker and Srivastava, 1979; Papadakis et al, 1998). On the
other hand CA21 is the only construct for which responses were in disagreement. The overall mean is also 3.8
showing a response between neutral and agreement. Value of SD is 0.42 showing less fluctuation of data from
mean.
Table (4): Cronbach's Alpha, Means, standard deviations and responses (%) to the first factor, Board Monitoring Role
Total Cronbach’s α= 0.970
α
Code
Factor: CSR Adoption (CA)
CA1
CA3
Give money to charities in the communities where we operate.
Financially support community activities where we operate (arts, culture, sports,
and education).
Incorporate environmental performance objectives in organizational plans.
CA4
8
Mean
Standard
Deviation
SD
1
%
D
2
%
N
3
%
A
4
%
SA
5
%
0.968
0.968
3.80
3.91
0.50
0.50
0
0
0.4
0
12.6
8.3
72.6
64.3
14.3
27.4
0.968
4.01
0.54
0
0
6.5
53
40.4
CA5
Financially support environmental initiatives.
0.968
4.19
0.57
0
3.7
67
29.3
0
CA6
Measure the organization's environmental performance.
0.967
4.34
0.60
0
2.8
51.1
46.1
0
CA7
0.968
3.26
0.52
0
0.9
33.5
64.3
1.3
0.967
3.43
0.55
0
7.1
85.5
7.4
0
CA9
Treat all employees fairly and respectfully, regardless of gender or ethnic
background.
Provide all employees with salaries that properly and fairly reward them for their
work.
Support all employees who want to pursue further education
0.968
3.66
0.52
0
0
5.4
41.5
53
CA11
Incorporate the interests of all employees into business decisions.
0.97
3.00
0.38
0
0
3.3
32
64.8
CA12
Incorporate the interests of all our investors into business decisions.
0.966
4.48
0.60
0
0
2.4
22
75.7
CA13
Provide all investors with a competitive return on investment.
0.967
4.62
0.55
0
2.2
44.3
53.3
0.2
CA14
Seek the input of all our investors regarding strategic decisions.
0.968
4.73
0.49
0
0
6.3
50
43.7
CA15
Provide all customers with very high quality service.
0.967
3.52
0.55
0
0
1.7
18.7
79.6
CA16
Provide all customers with the information needed to make sound purchasing
decisions.
Adapt products or services to enhance the level of customer satisfaction.
0.967
4.37
0.60
0.4
49.8
49.8
0
0
0.968
4.78
0.46
2.4
94.3
3.3
0
0
Provide all suppliers of products and services with a commitment to a future
relationship.
Incorporate the interests of all suppliers of products and services into business
decisions.
0.968
2.49
0.51
0
0.4
12.6
72.6
14.3
0.971
2.01
0.24
0
0
8.3
64.3
27.4
0.2
10.8
25.4
36.9
28.6
3.8
0.42
CA8
CA18
CA19
CA21
Total
CONCLUSION
The results demonstrate that monitoring and service board roles played key role in comprehending the
perception of directors in adopting CSR practices. The high overall means for monitoring and service role
explains their importance in adopting the CSR practices. The results of evaluating the monitoring role revealed
that directors are more concerned to monitors and evaluates top management in CSR activities, monitoring the
financial report and non- financial reports of CSR activities. These significant and influential sub-roles increase
the efficacy of the board of directors in adopting the CSR practices. In the service roles context, this research
has demonstrated the important of the three services roles that have enhanced the adopting of CSR practices by
providing advice and counsel in discussions of formulation of CSR activities with top management and CSR
financial issues as well as providing assistance in obtaining knowledge and Information of CSR activities from
outside the company. It is also highlighted from the findings that board strategic role does not play a
momentous role in making board more competent in adopting CSR practices. Only two constructs which are the
board members effective monitoring of top management in CSR strategic decision making and board members
adopting the performance measures to monitor and implementation of strategy, policies and plans, and the
legal/fiduciary obligations affecting the business and the board tends to effectively measure the strategic board
role. The results for strategic role are insignificant and are parallel to the passive involvement approach of
board’s strategy role. The board strategy role is divided into two schools of thoughts which are active and
passive (Golden and Zajac, 2001). The intellectuals who support passive school of thought suggest that board
has a little or no influence in strategy formulation process. Contrary to that active viewpoint suggests that a
major role is played by board members in strategy formulation in order to fulfil company’s mission and
objectives. So, this explains the reason for the insignificant results for board strategic role because findings
show that respondents are of passive viewpoint and does not consider an influential role is played by board
members in strategic formulation process and issues.
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