Article review
‘Corporate Governance and Corporate Social Responsibility (CSR): The
Moderating Roles of Attainment Discrepancy and Organization Slack’
After reading the article by Punit Arora and Ravi Dharwadkar, I realized that efficient
governance has a symmetric effect on Corporate Social Responsibility (CSR), reducing both
positive and negative CSR. To put it another way. They discovered that the amount of slack and
positive achievement gap influences the correlations between effective governance and positive
and negative CSR. "The influence of governance on positive CSR is more evident under low
slack conditions, whereas the impact of governance on negative CSR is more pronounced under
high slack situations," they concluded.
The set of methods, processes, and relationships utilized by diverse stakeholders to regulate and
administer a business is known as corporate governance. Electing a Board of Directors (BoD) or
conforming to International Standard Organization (ISO) norms are two examples. It may also be
thought of as the power balance between owners and management. According to Wikipedia,
corporate social responsibility (CSR) is a type of worldwide private business self-regulation that
tries to contribute to philanthropic, activist, or charitable societal goals by engaging in or
promoting volunteerism or ethically-oriented behaviors.
In regard to CSR, the paper also discusses the Behavioral Theory of the Firm (BTOF). The
theory focuses on the decision-making process and aims to anticipate behavior in terms of
pricing, production, and resource allocation decisions. The Behavioral Theory of the Firm is not
the same as the Behavioral Theory of Management, which is concerned with human interactions
in the workplace. The BTOF also aided the article's authors in developing the ideas of
Organizational Slack and Attainment Discrepancy, which aid in understanding not just the
consequences of corporate governance but also why corporations may participate in positive and
negative CSR in different ways.
The research was carried out using cross-sectional regression analysis and time series, with CSR
as a dependent variable and Corporate Governance as a control variable. Using Industry, Firm
Size, Cash Dividend, R&D Intensity, Product Differentiation, CEO Age and Tenure, Industry
Level Managerial Discretion, and Capital Intensity as independent variables, and identifying
control variables like Industry, Firm Size, Cash Dividend, R&D Intensity, Product
Differentiation, CEO Age and Tenure, Industry Level Managerial Discretion, and Capital
Intensity as control variables. The results revealed a favorable relationship between the control
variables and the two CSR dimensions, namely positive and negative CSR.
Despite its limitations, the study concludes that the relationships between effective governance
and positive and negative CSR are dependent on the level of slack and positive attainment
discrepancy, and that the impact of governance on positive CSR is stronger under low slack
conditions, while the impact of governance on negative CSR is stronger under high slack
conditions.
If management thinks they cannot pursue CSR initiatives because they are afraid of a stock price
drop, supporters of CSR might instead focus on institutional owners and persuade them that it is
in their best interests to be more aggressive. Alternatively, the paper indicates that if executives
communicate with shareholders about the long-term benefits of corporate social initiatives, they
may be able to encourage them.