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Board Composition and CSR Performance in Swedish Listed Firms

Board Insiders, ownership Concentration and CSR performance

Written by F. F. Awung, U. Adeel & M. Haider

Paper category

Master Thesis

Subject

Business Administration>General

Year

2020

Abstract

Master Thesis: Board composition and CSR performance Recently, the board composition and CSR performance have attracted much attention. Scholars have used agency theory, resource dependence theory and voluntary disclosure to explain the concept of corporate social responsibility and the composition of the board of directors. However, recently, more and more attention has been paid to stakeholder theory to explain this relationship. Obviously, it can be concluded from previous research that before the 1990s, the necessity of the company's board of directors was to manage the company's affairs for the greatest benefit. Shareholders/investors (Baysinger & Butler, 1985: Fama, 1980). (Ahmed, Rashid and Gow, 2017: Dienes and Velte, 2016: Fernández-Gago et al., 2018) found that it is necessary to explain the needs of the board of directors and CSR performance construction from the perspective of agency, and use the theory of resource dependence to explain modern needs Board of Directors. Jensen & Meckling (1976) defined agency theory as the hypothesis of separation of company ownership and control, and both the principal (owner) and the agent (controller) can consider their own interests instead of the interests of the entire shareholders. Symmetry problem. Therefore, in order to alleviate this problem, the board of directors needs to delegate power from the owner to supervise and control the executive management. The need for the board of directors is aimed at maximizing and/or protecting the wealth of investors or minority groups from being misappropriated by prudent managers or controlling interest groups. Therefore, the board of directors needs to solve agency problems such as information asymmetry, risk aversion, and bounded rationality (Eisenhardt, 1989: Fama, 1980: Clarke & Branson, 2012 p.7). On the other hand, the resource dependence theory explains the role of the board of directors in achieving corporate social responsibility goals. The view of resource dependence theory interprets the board of directors as providing resources to manage external dependence related to environmental and social activities (Mallin et al., 2013). Hillman & Dalziel (2003) explained the main contributions of the board of directors, including improving the company's reputation, wise advice, improving external relations, and improving legitimacy by contacting different stakeholders. Provide resources for the best interests of the organization. In addition, in the corporate governance literature, it is widely accepted that the composition and attributes of the board of directors will affect the company's overall performance, including matters related to corporate social responsibility (Welsbach, 1998). 2.1.1 The composition of the board of directors The board of directors is a reflection of the company's corporate governance system, because the board of directors is the apex of organizational decision-making and the authority that plays a central role in the decision-making process ((Fama, 1980: Fama & Jensen, 2016). Functions affect the way the company is commanded and controlled, that is, the corporate governance system of the organization. On the other hand, corporate governance can be defined as the way the company is commanded and controlled through the owner, board of directors, incentives, company laws and other mechanisms. (Thomsen & Conyon, 2012 p.5) To put it simply, study the power and influence of the company’s internal decision-making (Clarke & Branson, 2012 p.3). In addition, on a global scale, the board of directors usually consists of executive directors and non-executive directors. Composition of directors. The executive director is a person directly related to the board of directors. He is the day-to-day management of the company and often serves as the company's senior management/department head. They are usually called "strategic partners of management" and more Participate in the complexity and uncertainty of the company management market (Useem, 2014 p.137). At the same time, non-executive directors, sometimes called independent boards, are those who do not participate in the management of the company, usually called “directors”. Supervision and Management" (Useem, 2014 p.137) Board composition is one of the main factors affecting corporate social responsibility performance and reporting (Hung, 2011). The composition includes diversification-internal and external for different ages, genders, experiences and education Director. According to Siciliano (1996), a more diverse board of directors has a positive impact on corporate social responsibility performance because it provides different human capital and vision. In addition, previous studies have found that different types of works have different CSR performance (Ingley, 2008: Elkington, 2006). In addition, Huang (2010)'s research found that the different characteristics of the board of directors have a great impact on corporate social responsibility performance. However, due to norms, social values, culture and strong traditional values The relationship between board composition and corporate social responsibility is more complicated at the institutional level (see Ahmed, Rashid, and Gow, 2017: Chang, Oh, Park, and Jang, 2017: Husted and Sousa-Filto, 2019). : McGuinness, Vieito, and Wang, 2017). Different countries or regions have different board structures to address corporate social responsibility issues, although global companies have increased the disclosure of non-financial data in their company’s annual reports to reflect corporate social responsibility issues s concern. Read Less