Corporate Social Responsibility and Corporate Governance:

Role of Context in International Settings

Suzanne Young

Vijaya Thyil
Received: 3 July 2012 / Accepted: 10 May 2013 / Published online: 19 May 2013
Springer Science+Business Media Dordrecht 2013
Abstract This research aims to explore the relationship
between corporate governance and CSR: What are the
major factors that play a direct role in the establishment of
this relationship? How does context and institutional
background impact upon the relationship between CSR and
Governance? Using in-depth semi-structured interviews
from two types of governance systems in three countries
over three years, this study has demonstrated that in
practice, within different settings, CSR is being used both
as a strategy as well as a reaction to different drivers. We
call this adaptive governance where governance can be
dened as a exible system of action incorporating stra-
tegic and monitoring activities that determines the way a
company enacts its responsibilities to its shareholders and
stakeholders and which is determined at any given time by
the interrelationship of institutional drivers and behavioural
norms. Governance systems and their interrelationships
with CSR are demonstrated as uid according to the
national and institutional context, economic situation and
industry impact. In the eyes of practitioners corporate
governance includes both structural and behavioural fac-
tors as well as responsibilities and actions towards share-
holders and stakeholders. Contextual factors that this
research highlights to be important to the incorporation of
CSR into governance include the economic environment,
national governance system, regulation and soft law,
shareholders, national culture, behavioural norms and
industry impacts. Hypotheses on the impact of institutional
contexts, industry impacts and economic situations on
different types of CSR actions are proposed for further
research.
Keywords Australia Corporate social responsibility
Governance Institutional theory India United Kingdom
Introduction
Despite several decades of research (Aguilera et al. 2006;
Johnson and Greening 1999; Knox and Maklan 2004; Aras
and Crowther 2008; Jamali and Neville 2011), the rela-
tionship between corporate governance and corporate social
responsibility (CSR) is still far from clear (Arora and
Dharwadkar 2011; Harjoto and Jo 2011). This paper aims to
explore the links between governance and CSR in an
international setting. Specically, it provides important data
on senior decision makers and stakeholders views of
governance and corporate responsibility. This study is
important in the context of the continuing global nancial
crisis (GFC) where CSR is increasingly being discussed as a
strategy to deal with governance failures and corresponding
reputation risks. In this vein the rise in media, political and
community discourse is centred on improvements in man-
agerial and director behaviours and corporate responsibility
practices (Gettler 2008; Tudway 2008). Similarly academic
literature has highlighted that corporate governance and
CSR are strongly and intricately connected, noting that
previous literature has fallen short in capturing the nature
and essence of this relationship (Jamali et al. 2008, p. 444).
Even so many highlight the importance of the institutional
S. Young (&)
Faculty of Business, Economics and Law, La Trobe Business
School, La Trobe University, Melbourne, VIC, Australia
e-mail: s.h.young@latrobe.edu.au
V. Thyil
Accounting Economics Finance and Law Group,
Faculty of Business and Enterprise, Swinburne
University of Technology, Melbourne, VIC, Australia
e-mail: vthyil@swin.edu.au
1 3
J Bus Ethics (2014) 122:124
DOI 10.1007/s10551-013-1745-8
environment to corporate governance (Clarke 2011), and as
Robertson (2009, p. 631) observed, ultimately, the devel-
opment of CSR should be strongly inuenced by relevant
cultural, social, political, and economic factors specic to a
particular country, and thus subject to cultural adaptation.
Although Anglo-based corporations consider their
responsibilities to shareholders as their primary responsi-
bility, a broadening of responsibilities to those typically
found in relationship governance systems has been evident
over the past few years in countries such as the US, UK,
South Africa, Canada and Australia as the stakeholder
perspective has been increasingly included in soft regula-
tion such as governance codes. This research therefore, in
interviewing executives, institutional shareholders, and
analysts across the two types of governance systems,
namely Anglo and relationship, in an exploratory research
design, provides insight into the views of key actors in the
governance systems on how CSR and governance are
linked. In particular it aims to explore the nature of the
links between corporate governance and CSR and how
institutional systems and context impact on the relation-
ship. The institutional context includes the economic
structure, role of the nation state and socio-cultural orien-
tation of a country in which businesses interpret their
responsibilities towards society and which actions they
prioritise to full those obligations (Purdy et al. 2010;
Tricker 1990; Scott 2008; Orr and Scott 2008). Orr and
Scott (2008) discussed the impact of institutions on orga-
nizations by categorizing institutions as regulative, nor-
mative (including informal norms and values), and
cultural-cognitive (including shared beliefs and identities)
and argued that rms have been playing an active role
when confronted with institutional pressures and are not
helpless victims as portrayed by earlier theorists.
By using institutional theory this paper will highlight the
comparative and contrasting nature of Corporate Gover-
nance across developed and developing countries. Jackling
and Johl (2009, pp. 492493) commented that there is
limited research on the extent to which corporate gover-
nance issues of developed economies are applicable to
emerging economies. Moreover, the data provided by the
study encompasses the periods over which the global
nancial crisis (GFC) unfolded, thereby highlighting
important contextual variables.
We initially present the review of literature starting with
the main theoretical framework for our study, institutional
theory (Scott 2008), which highlights the importance of
context. In exploring how governance and CSR is
entwined, the paper uses Porter and Kramars (2006) model
to classify CSR actions as responsive or strategic across
four categories of moral obligation, sustainability, licence
to operate and reputation. The theoretical framework is
followed by the methodology highlighting the richness of
data emerging from in-depth interviews. The subsequent
section presents the results (data) within the context of each
countrys institutional setting after which the discussion
section analyses the data and presents hypotheses for future
research.
The papers contribution is threefold. First, it contributes
theoretically to the international governance literature by
discussing the ndings in light of the convergence/diver-
gence governance thesis; that is whether corporate gover-
nance systems are indeed converging and adopting similar
characteristics or whether the nature of the different insti-
tutional environments impacts the characteristics of the two
different governance systems, ensuring the continuation of
diversity. Second, it contributes empirically; using quali-
tative research methods it provides rich international data
from various stakeholder groups showing the different
connotations of corporate governance across diverse set-
tings. And nally conceptually it contributes to calls for
research to explore more deeply the relationship between
governance and CSR proposing hypotheses to be tested in
further research. Through using the Porter and Kramer
CSR framework these hypotheses highlight different types
of CSR actions and the contextual variables that impact on
these actions. It demonstrates the different ways CSR and
governance are regarded, discussed, and operationalized
and what variables may impact on these differences.
Theoretical Framework and Background
Corporate Governance and Corporate Social
Responsibility
Corporate Governance has been a well-researched area of
study in the last decade. However, as Cohen et al. (2010,
p. 757) observed despite the importance placed on cor-
porate governance in academia and practice in recent years,
there is still no universally accepted denition of corporate
governance. For instance, Brickley and Zimmerman
(2010, p. 236) dene corporate governance in broad terms
as the system of laws, regulations, institutions, markets,
contracts, and corporate policies and procedures (such as
the internal control system, policy manuals, and budgets)
that direct and inuence the actions of the top-level deci-
sion makers in the corporation (shareholders, boards, and
executives). Clarke (2011, p. 78) proposed a similar all-
encompassing denition of corporate governance as the
whole set of legal, cultural, and institutional arrangements
that determine what publicly traded corporations can do,
who controls them, how that control is exercised, and how
the risks and returns from the activities they undertake are
allocated. Other denitions more explicitly include cor-
porate responsibility with for instance Solomon (2009, p. 7)
2 S. Young, V. Thyil
1 3
dening Corporate Governance as the system of checks
and balances, both internal and external to companies,
which ensures that companies discharge their account-
ability to all of their stakeholders and act in a socially
responsible way in all areas of their business activity. And
linking the institutional environment to responsible cor-
porate behaviours we are increasingly witnessing an
increased focus as governance codes and principles
broaden the scope of corporate governance from legal and
control aspects to one incorporating responsibilities to
stakeholders (Solomon 2009). In this paper, we use this
broad focus of extant literature that links the institutional
environment to corporate behaviours as our theoretical
base. As the term governance seems to be dened
diversely, we were interested in understanding how expert
practitioners dene and use governance in international
settings to make sense of corporate behaviours.
Like Corporate Governance, CSR has many denitions
and connotations: from business ethics or philanthropy or
environmental policy, corporate social performance and
corporate citizenship (McWilliams et al. 2006, p. 8; Sec-
chi 2007; Windsor 2006) and social accounting or cor-
porate accountability (Crowther 2000). Dahlsrud (2008)
conducted a content analysis of 37 denitions authored
between 1980 and 2003, and found that the denitions are
congruent to a large extent on the scope of CSRincor-
porating economic, social, economic, stakeholder and
voluntariness dimensions. As Moon (2002) argued, CSR
like democracy and justice is an essentially contested
concept with its meaning always debateable.
As a framework we use Porter and Kramars (2006)
model of CSR with its four dimensions, namely: moral
obligation, sustainability, license to operate, and reputa-
tion. First, the moral argument is based on a corporation
being a good citizen and doing the right thing. The
second dimension, sustainability draws on concepts of
citizenship and the denition developed in the 1980s by
Norwegian Prime Minister Gro Harlem Brundtland and
used by the World Business Council for Sustainable
Development: Meeting the needs of the present without
compromising the ability of future generations to meet
their own needs (United Nations 1987). Third, license to
operate is based on the need for every company to have
tacit or explicit permission from governments, commu-
nities, and numerous other stakeholders to do business
(p. 5). The fourth dimension reputation is seen as
important in that CSR will improve a companys image
and brand, invigorate morale, and even improve the share
price. They further categorise these dimensions into
Responsive and Strategic CSR. Responsive CSR they
argue depends on being a good corporate citizen and
addressing social harm as it is created by the businesses
operations. Strategic CSR refers to companies selecting
those activities that represent opportunities to make a real
difference to society or to confer a competitive
advantage.
As has been discussed, a major conceptual difculty in
the extant literature is the treatment of the link between
CSR and corporate governance. Jamali et al. (2008) argue
that corporate governance and CSR are closely related as
they reect an organizations commitment to its stake-
holders as well as its interactions with the community at
large. Kolk and Pinkse (2010) observed that attempts to
strengthen corporate governance has seen an increased
focus on specic mechanisms such as board behaviour,
auditor independence, controls, risk management, and not
only ethical aspects of remuneration, managerial and
employee behaviour, including whistle-blower and com-
plaint provisions, but also voluntary aspects of environ-
mental, social and stakeholder responsibilities.
Sacconi (2010, p. 5) concurred and views CSR as
extended corporate governance wherein CSR extends the
concept of duciary duty from a mono-stakeholder setting
(where the sole stakeholder with duciary duties is the
owner of a rm), to a multi-stakeholder one in which the
rm owes all its stakeholders duciary duties (the owners
included) (p. 7). Here, we see relationships to Porter and
Kramar (2006) concept of licence to operate which
depends on stakeholders providing some degree of legiti-
macy to the corporation. In a similar vein, Robertson
(2009, p. 623) argued that CSR is unlikely to be achieved
without corporate transparency and disclosure and is
predicated on communication with and fair treatment of all
stakeholder groups.
In considering the nature of the relationship between
governance and CSR, Arora and Dharwadkar (2011) using
a sample of 518 rms from the S&P 500 and KLD Domini
400 universe, reported a strong evidence of governance
mechanisms impacting on CSR practices, with good gov-
ernance leading to a reduction of negative CSR such as
activities that deliberately out environmental standards
and local community concerns. In some contexts such as
India and South Africa, the practice of CSR has been
viewed as a natural part of good governance or as best
practice governance. Khanna and Gupta (2011) and Thyil
and Young (2010) observed that voluntary CSR and serv-
ing the community is not a new concept in India and has
been practiced by corporates such as the Tatas, Birlas and
Indian Oil Corporation ever since their inception in early
1900s.
Thus, the literature demonstrates that governance and
CSR whilst traditionally being viewed as separate concepts
have recently been conceptually linked. Therefore, the aim
of our study is to explore the nature of the linkage between
the two, and how institutional systems and other contexts
impact on this relationship.
Corporate Governance and CSR 3
1 3
Institutional Theory and the Importance of Context
As Corporate Governance and CSR are understood only
when located within the context of other macro-level
variables (Alvesson and Karreman 2000; Fairclough and
Wodak 1997) the institutional context is an important
consideration. Arguing that organizational action is inu-
enced by institutions at many different levels, institutional
theory accepts that managers exhibit strategic choice
through prioritizing and choosing between competing
institutional priorities (Jamali and Neville 2011).
In conducting this research across two governance sys-
tems we explore the inuence of such contexts on the
relationship between governance and CSR. Hence this
study presents the national context for each country to
uncover their impact on the negotiation of meanings of
governance and CSR at the corporate level. The countries
used as examples of these governance systems are Aus-
tralia, the UK and India. The Australian Anglo governance
system is market-based and focused on shareholder pri-
macy. Australia operates within common law traditions,
which puts legal constraints on pursuing the outcome of
shareholder value. Even so they are given almost free rein
in terms of the means of achieving this end with built-in
exibility so that the governance practices can be adapted
depending on size, activities and culture (Sarens and
Christopher 2010). In this vein a report by the Australian
Government (2006) found that the Corporations Act does
permit directors to take into account the interests of
stakeholders other than shareholders although the explicit
codication has not gone as far as in the UK. This comply-
or-explain approach provides exibility to explain the
reasons for non-compliance with governance principles and
codes. The governance system also includes regulatory and
professional controls from such bodies as professional
associations, the Australian Securities Exchange (ASX
2007) and legislation Corporate Law Reform Act 2004
(CLERP 9).
As an Anglo governance system UK also operates with a
shareholder primacy approach and on the basis of the
comply-or-explain principle. Flexibility is also evident as
even though the UK Corporate Governance Code identies
good governance practices, companies can choose to adopt
a different approach if that is more appropriate to their
circumstances (p. 3). The Financial Reporting Council
(FRC 2010, p. 2) states: there is a relative lack of pre-
scription as to how a companys board organises itself and
exercises its responsibilities. Directors Duties have been
codied in the Companies Act 2006 with new obligations
for company directors to consider the interests of stake-
holders including communities, employees and the envi-
ronment. One of the key drivers of change has been UKs
role in the European Union with the European Unions
2003 regulatory measures regarding disclosures, voting
rights and board responsibilities, through the Corporate
governance and company law action plan.
Traditionally Indian corporate governance is classied
as a relationship-based system due its reliance on family
structures (Clarke 2007) and a less rigid compliance
regime. But throughout the 1990s similar to Australia and
UK, India introduced a voluntary code of corporate gov-
ernance and in 1999 the Companies Act extended
requirements mandating that listed rms have the CEO and
CFO certify the nancial statements; enhancing disclosures
to shareholders and necessitating the audit committee take
on increased responsibilities. However in contrast to the
Australian and UK governance systems, the Indian context
spells out clearly that ethics and values, rather than rules,
form the bases of corporate governance, while adherence to
the legal framework is a minimum requirement (Sehgal
and Mulraj 2008, p. 207). Hence, the Indian corporate
governance system has evolved to be by and large a hybrid
of the outsider systems of the US and UK, and the
insider systems of continental Europe and Japan (Sarkar
and Sarkar 2000) related to the country-specic culture,
values, ideologies and religious faith and, due to the inux
of foreign capital, the adoption of more rules and codes
(Thyil and Young 2010). In this regard, Thyil and Young
(2010) found that the Indian governance system adopts
Anglo characteristics that stress the importance of the stock
exchange and relies on law to regulate disclosures, and
does not rely on bank membership of boards; but has
problematic enforcement of regulation, with low free oat
and a mixture of single and two tier boards. Furthermore,
they found a wider view of stakeholders than what is leg-
ally required or traditionally seen in a shareholder model
along with a community focus. As these are components of
the institutional context we could assume then that the
relationship between governance and CSR would differ
compared to companies operating in a shareholder model.
Hence, the paper through an exploratory analysis
attempts to answer the following questions:
(1) How are CSR and Corporate Governance related?
What is the nature of the link?
(2) How does context and institutional background
impact upon this relationship?
Method
Interpretivism is employed for this study. Interpretivism
attempts to understand a given social world from the
points of view of people being studied and the intentions
underlying their behaviour (Kuada 2009, p. 7). It claims
that social phenomena are not open to direct observation as
4 S. Young, V. Thyil
1 3
per the positivists, but are only accessible via the inter-
pretations of individuals and groups, with those involved
thus assigning meaning, signicance or value. Thus,
interpretive paradigm requires investigators to perceive
their actors as engaged in continuous interpretation,
meaning creation and sense-making of events and their
contexts (Kuada 2009).
This interpretive paradigm is appropriate in situations
where the researcher is attempting to study real-life expe-
riences by participation to better understand and express its
values, details and features (Healy and Perry 2000). It is the
preferred paradigm when dealing with complex social
phenomena involving reective people who make choices
in the real world, with the choices themselves being con-
tingent upon the environment (Healy and Perry 2000).
Discourse Analysis
Discourse analysis is used to analyse and report the data.
Discourse aims to study the shaping of social reality
through language as discursively constructed and main-
tained (Alvesson and Karreman 2000). How participants
dene and talk about Governance and CSR provides us
with an important understanding of dominant ideologies
used by them to make sense of corporate purpose and
practices. As others have done (Robertson 2009), in our
research we leave it up to the interviewees to contextualise
CSR as part of governance by exploring their own per-
ceptions of the relationship, what it means to them and how
they apply it in their organizations. For instance, the con-
trast between shareholder and stakeholder perspectives, a
discussion of business drivers versus moral drivers, the use
of terms such as community, ethics, social and envi-
ronmental practice, compared to shareholder and risk
when speaking of governance all provide the researcher
with different interpretations of the dominant ideology of
each institutional setting.
The use of discourse analysis is well supported (Hab-
ermas 1996; Grant and Hardy 2004; Alvesson and Karr-
eman 2000) and contributes to the development of
alternative ways of describing, analysing, and theorizing
the processes and practises that constitute the organiza-
tion (Grant and Hardy 2004).
Data Collection
Sample
The sample for this study consists of twenty-nine semi-
structured key informant interviews in twenty-one Aus-
tralian, Indian and UK institutions between 2007 and 2009.
The choice of countries was deliberate as UK and Australia
are both situated in an Anglo model that prioritizes
shareholder needs but appear to achieve different
responsibility outcomes. For instance, the FTSE4 Good
ESG ratings in 2011 classied both countries in the
developed market category although the UK is consid-
ered to be a leader in CSR and governance (FTSE4 Good
2011b). India was included as it is situated conversely with
a more relationship-based system. The FTSE4 Good ESG
Index (2011a) classies India as a secondary emerging
market and according to the Corporate Governance Watch
list 2010 (ACGA 2010) its corporate governance has been
slowly improving but held back due to corporate gover-
nance culture (ACGA 2010).
Round one interviews were conducted in 2007 and
comprised of seven interviews across six Australian orga-
nizations in public, private and government sectors, oper-
ating in the brewing, mining, accounting and
superannuation industries. Round two consisted of ve
interviews conducted in November 2009 across ve Aus-
tralian organizations, in the private sector, and institutional
investors operating in banking, nancial services and
superannuation industries. In both of these rounds the
interviews were conducted by author one. In India twelve
interviews were conducted in July 2008 by author two
across ve businesses operating in the oil, steel, aluminium
and textile industries. The UK interviews conducted in
October 2008 by author one consisted of ve interviews
across ve organizations in the private sector, trade bodies
and institutional investors, operating in the mining, insur-
ance, nance, and superannuation industries. In total, 29
interviews across sixteen diverse organisations were con-
ducted. Table 1 below summarizes these interviews and
sectors. The time horizons of this study contributed to
uncovering the key contextual variables.
The choice of the companies was broad and represents
major listed companies on the respective stock exchanges
in both the public and private sectors in industries includ-
ing mining, energy, brewing, nance, metals and textiles.
Senior key executives such as company secretaries, direc-
tors of operations, directors of corporate governance,
Table 1 Sample interviews by country
Interviews Australia
Round
12007
Australia
Round
22009
India
2008
UK
2008
Total
Public
organizations
1 3 4
Listed companies 4 2 9 1 16
Analysts and
consultants
1 1 1 3
Investors 1 2 3 6
Total 7 5 12 5 29
Corporate Governance and CSR 5
1 3
directors of communications, vice-president of nance, and
vice president of marketing were interviewed. Interviews
were also carried out with key actors in governance such as
trade bodies, institutional investors, pension funds and
accounting rms (see Appendix 1 for sample details). All
interviewees were experts in governance and were selected
from internet searches of listed companies, governance
commentators and analysts as well as inclusion in media
commentary such as newspaper or television interviews.
This method of using company listings and non-random
samples has been supported by previous studies (see Mu-
thuri and Gilbert 2010, p. 471). Selecting a range of expert
people from different backgrounds provides us with diverse
identities who each constructed their own meaning of
governance. This may potentially bias the results in that as
experts they have a particular way of speaking about
governance in terms of what may be common across their
level of the organizations. Hence we may expect them to
speak about corporate governance in terms of structure,
legislation, risk and shareholders. In this regard, we would
expect CSR to typically not be a concern of governance
practitioners. What then interests us here is how, when
talking about governance they do indeed link CSR into
their discursive techniques to create different interpreta-
tions of organizational purpose and practices; resulting in a
dominant meaning emerging as alternative discourses are
subverted or marginalized (Grant and Hardy 2004).
Interviewees were rst phoned to explain the research,
and a plain language statement and consent form, as
approved by the Ethics Committee were forwarded to
them. All interviewees accepted the invitation to partici-
pate. The interviews were conducted in their ofces, in an
informal setting over tea and coffee.
Data Source
A semi-structured interview schedule was used for this
study (See Appendix 2). The questions were exploratory in
nature and related to Governance and the same questions
were asked by each interviewer to all interviewees. It is
worth emphasizing that the questions asked of interviewees
were in regard to Governance, not CSR, and were framed
around drivers of Governance; changes in Governance
frameworks, structures and practices; ineffective gover-
nance; and the inuence of public, shareholders and reg-
ulation. As Orr and Scott (2008, p. 6) noted, although we
had institutional theory in mind as a conceptual guide for
eldwork, and a strong sense from reviewing the literature
that institutional differences would lead to conicts and
costs, we did not know how these situations would actually
unfold. Thus we made every attempt to begin our inter-
views with a tabula rasaan open mind. Each interview
lasted for approximately 1 hour and was audio-taped. The
interviews were transcribed by the interviewer who con-
ducted the interview. The transcriptions were sent to the
interviewees for verication of accuracy to ensure that the
information was reective of the participants meanings
and to eliminate interviewer bias.
Data Analysis
The interviews were coded using NVIVO, a structured
software program, by author one after an initial discussion
between the authors. NVIVO is a useful tool to organize,
manage and quantify the explicit and implicit themes and
accompanying data (Patton 1990). Similar qualitative
methodology, coding and presentation of ndings have
been used by CSR researchers (Richter 2011). Even though
the complete data set is presented in the tables this paper
reports only on the themes that emerged from the data in
relation to the links between Governance and CSR.
Results
Table 2 below shows the coding details of the total inter-
view data base by theme and sub theme, as well as sources
(number of interviews), number of interviews where this
sub theme was spoken of as a percentage of total inter-
views, and references (number of quotes).
Of the 29 interviews, the coding used categories from
Porter and Kramar (2006) model. Moreover, additional
themes emerged from the data. In order of importance
Adopting CSR Practices as a reactive practice was
spoken of by 21 interviewees (comprised of 88 quotes)
whilst adopting it as a strategic practice was only spoken
of by 15 interviewees. External stakeholders as CSR
drivers were referred to by 20 of the 29 interviews whilst
reputation as a driver was referred to in 10 interviews.
Regulation to improve behaviours and in particular
Lessening of it was spoken of by 19 interviewees (with
66 quotes). Integration and communication was also a
key theme with 19 interviewees speaking of Stakeholder
communication (with 63 quotes) and 10 in relation to the
Integration of communities. Environmental Social and
Governance (ESG) risk was spoken of by 18 interviewees
(with 73 references) with it specically being included as
part of poor governance by 14 interviewees. Ethical
behaviour was referred to by 16 interviewees (with 77
quotes). Executive remuneration was referred to by 15
interviewees and Remuneration control by 10. Share-
holder power and activism referred to by 13 interviewees
(with 55 quotes).
Table 3 then breaks up the sources (number of inter-
views) where each theme and sub theme was referred to by
country of interviewee.
6 S. Young, V. Thyil
1 3
Appendixes 3, 4 and 5 displays the themes and provides
examples of the interview data for each theme by country.
The results are presented below according to country
beginning with Australia, then UK, and nally India. A
short paragraph for each country segment concludes each
section.
Australia
Strategic Versus Reactive Practice
In the rst round of interviews the interviewees when dis-
cussing CSR as part of Governance seemed to equally refer
to CSR as a strategic and reactive practice used by corpo-
rations to adjust to the global environment. Drivers such as
corporate collapses (for instance, Enron and HIH Insurance
Ltd), shareholders, fund managers, unions and governments
were all recognised as contributing to corporations now
acting more responsible strategically. Companies are:
aware of the environment and being able to predict rather
than being directed by governments (Mining Company 2
round 1). Within governance, interviewees here spoke of
strategically adopting climate change policies, sustainable
development, responsible investing and responsible leader-
ship. Some of these could be regarded as providing com-
petitive advantage whilst others may be to take up
opportunities as the environment changes.
In relation to reactive practices, Superannuation Fund A
in round 1 typies the response: It is actually about risk
litigation not some moral or ethical view The environ-
ment has put attention on corporations social licence to
operate and the effect of not meeting stakeholder expec-
tations. Hence being a good corporate citizen is linked to
minimising risk rather than doing the right thing.
In the subsequent round of interviews held in the context
of the GFC, the focus was on CSR as a reactive risk
Table 2 Sources and
references by coding themes
Themes and sub-themes Sources: number
of interviewees
who spoke of theme
% of
total (29)
References: the number
of different times the
theme was spoken of
Adopting CSR practices
Strategic 15 52 30
Reactive 21 72 88
Best practice governance
Board structures 16 55 48
Good governance 7 24 11
Governance failures 10 34 15
CSR drivers
External stakeholders 20 69 77
Reputation 10 34 33
Disclosure and transparency
Institutional investors 11 38 18
Market-based systems 19 66 71
ESG risk
ESG focus 18 62 73
Poor governance 14 48 30
Remuneration
Executive remuneration 15 52 37
Remuneration control 10 34 15
Ethical behaviour 16 55 77
Integration and communication
Communication with stakeholders 19 66 63
Integrate communities 10 34 27
Regulation
Increase capital ow 7 24 13
Lessening of regulation 19 66 66
Shareholder participation
Increased activism 13 45 55
Low shareholder power 10 34 17
Corporate Governance and CSR 7
1 3
minimization practice with a key driver being the need to
comply with ASX (Australian Securities Exchange) prin-
ciples. Hence, the GFC has added to institutional pressures.
The GFC has focused attention on CSRs inclusion in
governance as a reaction to the environment and linked to
regulation with one interviewee (Accounting rm round 2)
commenting that
Whenever anything goes wrong everyone goes hys-
terical, the regulators clamber over one another in
their attempts to over-regulate to x something that
has already happened And thats when the gover-
nance models seem to predominantly change. Things
do not change when everythings going OK.
It seems here that a focus on risk minimization had led
companies to incorporate CSR as a component of gover-
nance, through board committee structures, and changes to
strategy and corporations practices. Even though the
reactive governance practices may have been at the fore-
front of interviewees thinking due to the GFC, strategic
CSR and its incorporation in governance was seen to be a
way of minimizing risks emerging from the environment
including the potential of more externally imposed regu-
lation. In order to retain their licence to operate self-reg-
ulation, rather than imposed regulation, was seen to be a
better option.
CSR Drivers: External Stakeholders and Reputation
Links between risk and reputation was apparent with in-
terviewees speaking of non-market risks impacting on
customers and the overall perception of the organisation.
Interviewees in discussing risk also spoke of sector or
industry differences and generally of the mining sector
Table 3 Sources by coding
themes by country
Themes and sub-themes Source: number of
interviewees who
spoke of theme
(29)
Australia 1
(7)
Australia 2
(5)
UK
(5)
India
(12)
Adopting CSR practices
Strategic 15 6 1 2 6
Reactive 21 7 5 4 5
Best practice governance
Board structures 16 6 4 4 2
Good governance 7 1 3 1 2
Governance failures 10 4 2 2 2
CSR drivers
External stakeholders 20 7 5 3 5
Reputation 10 5 2 1 2
Disclosure and transparency
Institutional investors 11 3 2 4 2
Market-based systems 19 7 3 4 5
ESG risk
ESG focus 18 7 2 3 6
Poor governance 14 5 1 3 5
Remuneration
Executive remuneration 15 5 4 2 4
Remuneration control 10 4 3 2 1
Ethical behaviour 16 6 4 2 4
Integration and communication
Communication with
stakeholders
19 6 4 3 6
Integrate communities 10 2 0 2 6
Regulation
Increase capital ow 7 0 1 2 4
Lessening of regulation 19 6 4 3 6
Shareholder participation
Increased activism 13 4 4 3 2
Low shareholder power 10 2 2 3 3
8 S. Young, V. Thyil
1 3
being further progressed than other sectors especially in its
appreciation of the natural environment and indigenous
community. In this vein it seems that they understand the
importance of CSR on risk and reputation. Becoming an
employer of choice was also linked to this reputation
driver especially important with Australias burgeoning
resource sector and the need for highly qualied personnel.
It will give us access to land to people who may want
to work for us who understand environmental degra-
dation and want to do something about it, how to miti-
gate against climate change and understand water
usageYoung people want to work for companies who
are actually doing what they say and contributing to
societal transformation (Mining Company 1 round 1).
The link was made between reputation and access to
natural resources and hence long-term sustainability: If we
are recognised as a responsible water manager there is
benet to the environment but the actual real purpose is to
access water (Mining Company 1 round 1). Hence, we
see here the links between the three concepts of Porter and
Kramar (2006) CSR model: licence to operate, sustain-
ability and reputation. Stakeholders provide legitimisation
through their interpretation of how the companies are
meeting the needs of future generations and therefore act-
ing sustainably which in turn improves reputation. Then,
these drive increased integration of CSR into governance.
All interviewees spoke of external stakeholders driving
the integration of CSRinto governance, including regulators,
government, shareholders, institutional investors, accoun-
tants, trade associations, media, workforce, NGOs, and the
public. The importance of good governance, responsible
behaviours and sustainable development are of increasing
importance to external stakeholders resulting in changing
governance standards and legislation, all aimed to improve
corporate behaviours. An example of this was spoken of by
the brewery interviewee (round 1): The media generates
issues and they crystallize and even sometimes invent con-
cerns, and they then become a political issue that feeds into
regulatory contents.
Communication with Stakeholders
In talking about poor governance in round one the inter-
viewees spoke of corporate disclosures as being too
legalistic and unreadable and governance disclosures not
being in a format that would grab the publics attention.
Whilst in the second round the interviewees more detailed
statements were made as to how they communicate with
stakeholders. A typical response: We have regular
engagement and are conscious of the governance guide-
lines we just keep pushing ourselves to maintain dia-
logue and keep communication opening (Bank 2 round 2).
Hence, we can see that a component of CSR in governance
is transparency.
Lessening of Regulation
The principles-based approach to governance in Australia
was spoken of favourably with nearly all interviewees
claiming that more regulation would not improve corpora-
tions behaviour. A typical response (Mining Company 2
round 1) illustrates this: the whole thing about governance is
that you cannot regulate peoples behaviour. You can only
put in structures and people have to buy into it froma cultural
point of view. And after the GFC a typical response of
companies to the GFC is captured here: although there is a
lot of regulation and supervision where improvements
could be made is in enforcement (Accounting Firmround 2).
Whether enforcement could be regarded as CSR is ques-
tionable but if regulation is problematic, then to improve
corporate behaviours a focus on culture, norms and behav-
iours is seen to be key by the interviewees.
Investor Activism
Linked to both transparency and behaviours, in general
investor pressure was spoken of as improving disclosure and
transparency as well as driving improved behavioural stan-
dards both at the individual and institutional level. However,
the fashionable use of CSRwas alluded to (Brewery round 1),
pointing to the lack of consensus on what is socially desirable
between companies and retail investorsin response com-
panies focus on assessing risk rather than what is right or
wrong (Superannuation Fund A round 1). In regard to
transparency a driver has been the Principles of Responsible
Investing (PRI) with superannuation fund signatories
increasingly pressured to divulge their voting patterns.
The interviewee companies generally recognise though
that increased shareholder activism has brought about
changed behaviours in corporations People and institu-
tions are prepared to ask questions and stand up if they do
not like what is happening (Accounting Firm round 2).
ESG Risk
Poor governance was seen as a key risk with interviewees
speaking of the importance of board structures to manage
these risks with formal rules in place to ensure account-
ability. Even so the superannuation fund interviewee cau-
tioned (Superannuation Fund A round 1):
We are aiming to communicate with companies that if
they actually undertake activities which endanger
that social licence to operate then that creates real
risks to the business.
Corporate Governance and CSR 9
1 3
Whilst the mining company spoke of their evaluation
process:
When we open a mine in a developing country, we ask
what are we leaving behind? In terms of community
skills, business, tourism opportunities, not just envi-
ronmental rehabilitation we use regulation to
begin with to set the standards but if that is not high
enough we use our own standards such as in safety,
health, the environment and community (Mining
Company 1 round 1).
In addition interviews at the time of the GFC displayed
an understanding of the rapid movement in this area:
The notion of ESG, in particular environmental and
social risk and reporting and governance is moving
quite rapidly and if I look back over the past 5 years
it was not seen as particularly relevant, but now seen
as a legitimate issue for boards to consider (Super-
annuation Fund C round 2).
Again here the identication and management of ESG
Risk was viewed as impacting on sustainability, licence to
operate and reputation.
Remuneration
Executive remuneration was spoken of as the key risk that
resonates with the public and the major focus of the media.
The companies responses have been to increase reporting
and a focus on linking remuneration with performance.
They are earning in a year what somebody is earning in a
lifetime. People cannot relate to that and it is not seen as
particularly equitable (Australian Government Enterprise
round 1).
And in particular the GFC has highlighted this as
People want to make sure that if the company is struggling
that failure is not rewarded (Accounting Firm round 2).
Moreover, the GFC has demonstrated conicts of interest
between the remuneration of executives and business
strategy, which interviewees in general spoke of as being
the responsibility of the boards of directors.
Ethical Behaviour
In addressing Porter and Kramars (2006) moral obligation
in general all spoke of ethics and culture being linked to
decision-making and leadership coming from the top. As
the Australian Government Enterprise (round 1) rm
observed: It all goes back to ethical behaviour, people
know what is right and wrong. But how you achieve that is
a challenge. The ASX principles that go to the heart of
creating and monitoring an ethical decision-making envi-
ronment. And another (Brewery company round 1): It is
all about behaviour, behave in accordance with norms of
society in which you operate then that leads you to behave
in a certain way.
In conclusion the Australian interviews highlight that
CSR is entwined in governance through both a strategic
and reactive approach, and that it is impacted upon by the
national institutional, and economic contexts as well as
societal norms. In evaluating risk there were calls for
increased transparency whilst recognising shareholder and
other stakeholder pressure driving changes to behaviours.
And in discussing risk the interplay of governance, with
culture, ethics and leadership was highlighted. The GFC
has heightened public awareness, raised the acceptance of
shareholder activism, focused companies on regulatory
approaches such as the importance of abiding with the
ASX Principles, raised the prole of ESG Risk as a con-
struct, and heightened disquiet about the level of executive
remuneration.
United Kingdom
Strategic Versus Reactive Practice
As these interviews were conducted at the beginning of the
nancial crisis in late 2008, the interviewees in speaking of
governance tended to focus on corporate responsibility
behaviour. The interviewees noted the reactive nature of
governance changes stemming from scandals especially
those originating in the US. They perceived it to be a US
problem and in comparison the governance structures
imposed by the UK Combined Governance Code, were
perceived as best practice.
Governance structures are important in showing that
companies are operating correctly, that fraud will be
detected, that decision-making is transparent, that
decisions made with best intentions demonstrate
integrity (Trade Body 2).
Another spin-off of the scandals was that the governance
issue had raised its prole, with discussion focusing on
licence to operate arising in the media and amongst the
public:
People have started to wonder about whether the
system that we have, the capital markets that we have
and the way they work, really is the most efcient way
of delivering long-term value [but] incompe-
tence is not a crime. Fraud is. (Trade Body 1).
And linked to sustainability, the banks were making a
lot of money but decisions were of poor quality and prots
were not sustainable. We are interested in sustainability,
not from a moralistic viewpoint but from a sustainable
view (Trade Body 1).
10 S. Young, V. Thyil
1 3
External Stakeholders and Institutional Investors
In bringing about responsible behaviour, better dialogue
with stakeholders was called for especially in explaining
deviations to governance principles, recognising the prob-
lematic nature of short-termism and decisions that have led
to destruction of value. Need pension funds and other
underlying benecial owners to change their actions and
demand a longer-term focus from their agents the fund
manager (Superannuation Fund B). Linked to risk and the
effect of the GFC the inuence of the concentrated share-
holder base of large insurance companies and pension
funds, and their power to bring about good governance was
acknowledged (even though earlier all spoke of UK gov-
ernance structures being best practice).
Increased Activism
Many spoke of enhanced shareholder empowerment and
engagement for institutional investors to become more
involved and proactive in actually challenging decisions
and strategies, especially at times of crisis. Typical of the
responses, Trade Body 1 spoke of the need for pension
schemes to act as investors and calling fund managers to
account. What is required is for the pension funds and the
other underlying benecial owners to change the way they
go about things and demand more of the long-term focus
from their agents, I mean technically the fund manager.
Hence, they are looking for a more strategic focus on CSR
as part of governance.
Remuneration
All spoke of impending changes in executive remuneration
that they believe were necessary as a result of public anger.
Trade body 1 enunciated the widely-held view that total
executive pay should decline as prots as a percentage of
GDP declines. And in setting pay levels and components,
alignment with costs of capital and risk should be taken
into account.
ESG Risk
Again the theme of institutional investors using their power
to bring about responsible behaviour was evident with
many speaking of the inuence of Social Responsible
Investing (SRI). Institutional investors tended not to use a
risk management evaluation of company behaviour but to
opt out of certain industries, such as tobacco or liquor,
thereby giving up any inuence they have over the com-
panys adoption of CSR in favour of industry-wide
sanctions.
In discussing risk management many spoke of poor
practices on the part of UK companies, such as the ten-
dency to use a quantitative rather than a qualitative
approach to disclosure, seeing more as better.
Risk management is rarely done well at board level,
remuneration is left in hands of independent remu-
neration consultants, lawyers have ownership of risk
reporting and reads like a prospectus rather than
strategic evaluation of risk (Trade Body 2).
And similar to Trade body 1 who spoke of sustainability
from a business case:
I wouldnt call it CSR, I would call it Environmental
and Social Governance. CSR is in disrepute because
it is not that companies should do something because
its good as it puts a moral valueDo it because it is
right for the business The right thing to do has
good outcomes but the right thing is not a moral
judgement. (Trade Body 2).
Terms used in the Australian context such as behav-
iours, environment, ethics, leadership and culture
were hardly referred to and in its place terms such as
structures, good governance, Companies Act, and
principles were more common.
In conclusion the focus of the discussion was on good
governance being based on structures, and CSR seen in
terms of responsible behaviours that can be brought about
by regulatory institutions using the Codes and Principles.
Even so the interviewees in terms of sustainability believed
that investors and companies should use the exibility
inherent in the comply-or-explain governance system to
bring increased accountability and transparency. Second,
the institutional shareholders should use their power to
bring about changes to corporate behaviour and in doing so
take more responsibility themselves or in other words use
their power to legitimise companies license to operate.
Third, linked to reputation they called for that risk man-
agement to be improved. And nally when summarizing
key drivers of change in the future, the EU was spoken of
consistently with many arguing that in governance struc-
tures the community looks to the UK as exemplary but in
relation to behaviours and inuence of shareholders, that
there is learning that could come from the EU and rela-
tionship approaches to governance.
India
Stakeholders, Communities and Communication
A key theme that emerged from the Indian interviews was
that CSR and community is seen as an integral part of
business and that the traditional governance systems and
Corporate Governance and CSR 11
1 3
practices in India are based on a stakeholder approach to
governance.
The stakeholders are not only just your employees or
the vendors but also the public who are residing
around the factory or premises. Corporate gover-
nance as we understand it is total satisfaction of all
the stakeholders, that is, the shareholders, the pro-
moters, the suppliers, the customers, workers, that is,
our employees, all these people, those who are con-
nected with and working with the organization.
Besides that we also include into the stakeholder
(category), the general public [Textile Machinery
Co.].
The businesses regarded the inclusion of stakeholders as
a duciary and moral obligation even though there was no
regulation to that effect. The rms believed that it was not
possible for the Indian government to take care of the local
communities and hence it was the corporations duty to ll
that gap. It is like marriage, you know, this factory and the
surrounding, we are married to each other [Steelco 2].
As Steelco 2 observed, good relationships with stake-
holders, and in particular the surrounding community,
bestows a mutual benet by creating a safety net. And in
developing and maintaining the relationship, communica-
tion and dialogue was seen as integral. Converse to the UK
and Australian interviews, the discussion was in terms of
moral obligation and sustainability rather than licence to
operate and reputation.
Strategic Versus Reactive Practice
The strategic focus views CSR as integral to giving back
to the society, alongside a broad view of stakeholders, and
a community focus.
The Tata Group, who started 100 years ago have
built excellent institutes like Tata Institute of Social
Sciences There was no law which says that you
have to spend on corporate social responsibility.
Social responsibility of a business entity was always
in the minds of the old business houses. [Oilco].
ESG
Hence many respondents referred to ESG factors when
speaking of governance, although not in terms of risk but
from a moral and community focus. Interviewees spoke
of carbon control and pollution; taking care of local people,
especially after taking their land for company operations;
training and educating the local people; laying roads for
villages; donating to temples; providing sanitary facilities;
empowering women; water resource management;
negotiating with local banks for the provision of micro-
nance; building schools and providing teaching materials,
school books and midday meals; providing sporting facili-
ties, health facilities, and computer training; enhanced
employee welfare benets; sub-contract work to those in
community; and to be in harmony with the surroundings.
Regulation
However despite embedding CSR as part of governance
there is weak enforcement of rules, although more regu-
lation was not called for.
There is no sufcient monitoring backing it (the
legislation). If you legislate but you dont monitor,
then that legislation becomes a piece of paper
SEBI (Securities and Exchange Board of India) is the
watchdog. But it lacks teeth. [Steelco1].
Interestingly in this regard interviewees talked about the
hearts of the people and tolerance rather than the strict
letter of the law and compliance, which was referred to as a
problem even with the enforcers and other monitoring
bodies. Hence, in terms of institutional drivers we can see
here that normative and cultural institutions are more
important than regulatory institutions.
In conclusion the Indian interviews highlighted the
implicit and voluntary approach of a principles-centred
relationship approach to governance rather than as a
response to laws and regulations. The stakeholder,
community and communication focus of these busi-
nesses is noteworthy with the use of these terms demon-
strating how CSR is integrated into business practice and
governance.
Table 4 summarises the key ndings arising from each
of the preceding country sections.
Discussion
Back in 1998, Reich (1998, p. 9) when writing of the New
Meaning of Corporate Social Responsibility spoke of the
issue not being whether companies should be responsible
in some way to society, but rather how they should be
responsible as they balanced the greater needs of
employees and community with the greater demands from
investors for performance. Now over ten years later we can
ask the same question, and look to how governance
frameworks integrate CSR into corporate behaviours.
The dominant governance discourse is often one that
calls for stronger institutional approaches with legislation
proposed as one course of action (Reich 1998, pp. 1314)
to bring about a consistent approach to operationalizing
CSR. The passing of the SarbanesOxley Act in the US,
12 S. Young, V. Thyil
1 3
the CLERP 9 and ASX Principles in Australia, and the
Combined Code in the UK are all evidence of legislation
being a key driver of change of corporations practices.
The regulatory institutional context was also the dominant
discourse in this research as drivers of Governance and
CSR in the Australian and UK interviews. Whilst recog-
nizing regulation as a driver of change in behaviours the
interviewees cautioned against more of it. And from evi-
dence of this data as well as recent director and managers
actions, frauds, bankruptcies, and excessive remuneration
levels, in the Anglo model it is generally unlikely corpo-
rations will act in societys interests from a moral or
altruistic sense of purpose without there being a legislative
supposition or business case for action. In addition the UK
and Australian interviewees reiterated the business case
linking licence to operate, sustainability and reputation for
incorporating CSR into Governance rather than the moral
case.
These interviewees also highlight that in relationship-
based governance systems reliance on regulation can be
problematic. As noted by the World Banks (2004, p. 1)
Corporate Governance: Report on Observance of Standards
and Codes (ROSC) for India, despite improvements found
in three areasin levels of transparency, responsibility and
accountability of insiders, in board practices, and in treat-
ment of minority stakeholdersthe enforcement of the
reforms and regulations remain to be tackled.
Many have argued (Freeman 1984; Pralahad and Hamel
1990; Reich 1998; Galbraeth 2006; Porter and Kramar
2006) that in order to full duties to shareholders, focusing
on the needs of other stakeholders such as employees,
community and customers over the long-term ensures that
necessary resources are obtained and optimally used,
public image is enhanced, which in turn ensures long-term
prot maximisation. Such propositions are based on
resource dependency (Barney 1991) and stakeholder theory
(Freeman 1984) which similarly propose that rms will
maximise protability and hence shareholder returns by
managing their strategic relationships with stakeholders.
The data from the Australian interviews in particular
demonstrates this resource dependency approach in arguing
for a CSR strategy that provides access to resources such as
land and water, and employees. As has been pointed out in
this research and in others, large companies and large
investors are viewing reputational issues as increasingly
important (Du et al. 2010; Pendleton 2009) especially in
areas of employer branding with it being used to attract
and retain good quality employees (Martin 2009). The
linking of social licence to operate with reputation and
strategic CSR was evident in these Australian interviews.
As Porter and Kramar (2006) argue strategic CSR moves
beyond good corporate citizenship and mitigating harmful
value chain impacts to mount a small number of initiatives
whose social and business benets are large and distinc-
tive. Conversely, the responsive or reactive approach
Porter and Kramar (2006) claims uses effective corporate
citizenship initiatives to create goodwill and improve
relations with local governments and other important
constituencies. Even though the Australian interviewees
may have claimed their CSR was strategic using this
Table 4 Summary of key ndings
Australia UK India
Strategic versus reactive Move from strategic to reactive focus due to
GFC
Reactive focus maybe due to GFC
Structural focus
Strategic focus link with
community
ESG Governance and environmental focus
Industry differences
Business case
Governance focus
Negative ltering (SRI)
Business case
Broad view of ESG
Moral case
Sustainable communities
External stakeholders Linked to reputation and access to resources Fund managers and pension schemes
to use power
Community focus
Remuneration Key risk response to increase reporting Key risk public anger Increases linked to inux of
MNC
Communication with
stakeholders
PRI important driver
Calls for increased transparency, more quality
and less quantity
GFC impact
Use exibility to improve
transparency
Legislative requirement
Maintains reputation and
trust
Integrate communities Companies integrated with
communities
Increased activism ASA driver Calls for institutional investors to
use power
Regulation No need for strengthening Focused on regulation and codes Lack of enforcement
Ethical behaviour Intersection of ethics, culture and leadership Look to EU to bring about change in
behaviours
Tolerance and hearts of
people
Corporate Governance and CSR 13
1 3
denition this could be questioned with the activities
maybe more seen as responsive to changing institutional
pressures.
In relation to ESG risk the Australian interviews dem-
onstrated their focus on environment and governance risk
whilst the UK interviews focused more so on governance
risk which may be due to the context of the GFC. In
contrast the Indian interviews broadly talked about CSR in
terms of community sustainability and rather than focus on
risk, referred to moral obligations and sustainability con-
siderations. Another key risk spoken of in the Australian
and UK interviews and linked to social licence to operate
was executive remuneration, seen to be arising from public
anger. Increased reporting was seen as an antecedent of
rising remuneration with remuneration being ratcheted up
due to continual international benchmarking. The concern
about remuneration was also evident in India although not
referred to in terms of risk, but on a more positive note with
increases argued to be due to the inux of multi-national
corporations.
The approach the Anglo companies are using can be
classied as one drawing in particular on the social licence
to operate which Porter and Kramar (2006) argue is prag-
matic offering a concrete way for a business to identify
social issues that matter to its stakeholders and make
decisions about them. This approach also fosters con-
structive dialogue with regulators, the local citizenry, and
activistsone reason, perhaps, that it is especially pre-
valent amongst companies that depend on government
consent, such as those in mining and other highly regulated
and extractive industries. It may be that CSR was not seen
as an opportunity or that governance was viewed in terms
of compliance and risk and thereby any reference to CSR
within this taking thereby taking on the same meaning.
Corporations which alter their behaviours as a response
to advocacy, potential litigation and legislation could be
classied as reactionary. Many interviewees especially in
Australia consistently spoke of CSR as part of governance
from a risk minimisation perspective. The interpretation of
CSR as a risk driven strategy rather than a strategic
opportunity was the dominant discourse. Other researchers
argue for CSR from a moral case (see Maon et al. 2010), of
particular relevance for multi-national corporations oper-
ating in a global community where they are expected to
contribute nancial and human resources and to give
back so that quality of life is enhanced and sustained
(Carroll 2004). This perspective was evident predomi-
nantly in the Indian interviews with statements that incor-
porated governance, and responsibility to community and
society along moral lines. Windsor (2006, p. 96) argues
that ethical CSR looks to expansive public policy and
moral duties. Idealized citizenship emphasizes voluntary
self-restraint and altruism concerning realization of uni-
versal human rights. Moreover Carroll (2004) pointed to
the link between ethical responsibilities and cultural norms
and discussed the problematic nature of moral relativism
for global companies as they adapt to local norms that may
not reect global or home country standards. In linking
morals and strategy corporations may choose to invest in
what Carroll (2004, p. 118) called philanthropy which is
often than not strategic in nature, based on the view that
businesses are expected to play an active role in global
corporate citizenship.
Taking an institutional lens, and situating the interviews
within the national context, relationship-based or insider
governance systems integrate a wider stakeholder focus
and moral duties as part of the corporate purpose. Such
relationships provide structural and cultural control on
behaviour and resource sharing and are particularly
important for countries with weak market control (North
1990; Khanna and Palepu 2000). Recognising that cultural
norms act as a guide to corporate behaviour and impact on
what is seen as responsible, boards and managers (often
with family ties) commonly view responsibilities to
employees and community as inherently linked to organi-
sational purposeand often the primary focus (Bertrand
et al. 2002). Similar statements and views were also evi-
dent in the Indian interviews with company purpose as a
component of governance being inherently linked to
responsibilities towards community and employees.
Another key theme arising from the interviews was
stakeholder communication which in the Anglo system was
seen as being driven by the Principles of Responsible
Investment (PRI) and pressure from fund managers. Even
so there were calls for increased transparency, more quality
and less quantity in reporting; with companies especially in
the UK utilising the exibility that is evident in the CSR
reporting and governance frameworks. In the Australian
interviews the GFC was seen as a driver of calls for better
and more transparent reporting. Conversely in the Indian
interviews legislation was seen as a driver of improved
reporting whilst being linked to reputation and trust.
Reporting is used to guard a companys reputation and
identity (Balmer and Greyser 2007; Hooghiemstra 2000;
Vanhamme and Grobben 2009) as well as provide partic-
ular stakeholders with important information (Tschopp
2005).
Conclusion
Two broad research questions were proposed as framing
the exploration of links between Governance and CSR in
this study.
14 S. Young, V. Thyil
1 3
(1) How are CSR and Corporate Governance related?
What is the nature of the link?
It is evident that CSR is a component of governance. The
answers to questions about governance and its drivers have
provided a variety of ways of viewing CSR and its rela-
tionship to corporate governance depending on the different
institutional settings, including national contexts, and envi-
ronmental conditions. In alignment with Porter and Kramar
(2006) on one hand the CSR practice could be classied as
strategic or responsive, based on whether CSR is an all-
encompassing strategic action adding to the corporations
competitive positioning, or whether it is more a reaction to
the environment and seen as responsive; on the other hand,
the rationale for CSR could be classied as a business case
linked to improved reputation or being granted a social
licence to operate. Or the actions could be regarded as a
moral obligation where responsibilities to the broader
community are strategically embedded in their mission.
(2) How does context and institutional background
impact upon the relationship between CSR and
Governance?
The Anglo interviewees continually referred to institu-
tions such as codes and regulation, institutional share-
holders, the European Union and securities exchanges as
being determinates of how CSR is integrated into Gover-
nance as well as drivers of change. In the Indian context
interviewees did not refer to the regulatory context as
drivers of CSR, and actually saw the enforcement of leg-
islation as being problematic.
An hypotheses that arise from this:
H1 In Anglo governance systems, governance legislation
and codes (regulatory institutional pressures) lead to the
introduction of corporate responsibility activities by
companies.
A number of contexts are highlighted as important in
this research. Indian companies interviewed were situated
in the old industrial sector where the values of founders
have been inuential. And the Australian interviews
pointed to industry impacts. As the UK interviews were
conducted at the time of the unfurling of the GFC it is
evident that the interviewees focused on responsive
behaviours, rather than strategic considerations. This is
also evident with the second round of Australian interviews
which were carried out as the GFC continued to unfold. In
addition differences between the countries demonstrate
different conceptualisations. Governance and its interrela-
tionship with CSR across different countries reect his-
torical antecedents and other characteristics. When
questioned about governance, Indian rms spoke of CSR,
the position of the company in community, company
responsibilities and expectations of stakeholders, in con-
trast to Australian and UK rms. The implicit nature of
responsibility and citizenship to business behaviour was
clearly evident in the interviews. As such it is evident that
morals, values and culture inuence the position of CSR in
Governance with the Indian interviewees highlighting the
integration of CSR at the altruistic and moral levels. The
Anglo system tended to see CSR as a business level
approach moving from strategic to reactive depending on
the context such as the GFC, and the role of shareholders
and public.
Hence we can propose that the relationship between
governance and CSR differs depending on the institutional
contexts, the culture, values and norms of society, and the
changing environment.
Hypothesises that arise from this are:
H2a Companies operating in countries in a relationship
governance system are more likely to adopt moral CSR
actions.
H2b Companies operating in an Anglo governance sys-
tem are more likely to adopt sustainability, licence to
operate and reputation CSR actions.
H2c In implementing CSR actions, companies operating
in relationship governance systems are more likely to be
impacted by cultural-cognitive and normative institutional
pressures than regulatory institutional pressures.
H2d Companies operating in an Anglo governance sys-
tem are more likely to adopt responsive CSR actions than
strategic CSR actions.
H2e Companies operating in an Anglo governance sys-
tem in industries with a high impact are more likely to
adopt strategic CSR actions than responsive CSR actions.
H2f Companies operating in an Anglo governance sys-
tem and in economically stressful times are more likely to
adopt responsive CSR actions than strategic CSR actions.
The data highlights that Australian companies tended to
focus on the CSR-Governance intersection in terms of risk
mitigation in support of Cruz and Wakolbinger (2008)
arguments that heightened CSR reduces risk. Findings
reveal the reasons for this approach to be driven by a
combination of legislation and strategic and political
pressures, alongside a dose of isomorphism which did not
include moral or ethical justications. DiMaggio and
Powell (1983) talk of institutional isomorphism, a tendency
for countries and organizations to adopt similar institutions,
which has been reected in recent work in regard to CSR
and CSR reporting (Young and Marais 2012). Organiza-
tions embrace the norms or values of others so they are not
signalled out for criticism and to enhance their moral
Corporate Governance and CSR 15
1 3
legitimacy (Suchman 1995; Scott 2000). This highlights
the importance of normative and cultural-cognitive insti-
tutional pressures in addition to regulation in times of
uncertainty. Even though these pressures seem to lead to
more strategic CSR activities for companies operating in
high-impact industries, in times of economic uncertainty
they may lead to responsive CSR activities.
Linked to Hypotheses 1, an additional hypothesis that
arises from this is:
H3 In implementing CSR activities, companies operating
an Anglo governance system in economically stressful
times and in industries with a high impact are more likely
to be impacted by cultural-cognitive and normative insti-
tutional pressures than regulatory pressures.
Table 5 below summarises the types of CSR actions in
Anglo governance and relationship governance systems.
Table 5 highlights that CSR is a exible concept that is
determined by a countrys governance and institutional
context and is moderated by its economic context as well as
industry risk characteristic.
Implications for Practice
The ndings are important for policy makers and corpo-
rations as they draw attention to the context-specic nature
of CSR, implying that generalized or copy-cat approaches
to CSR are not optimum. Even though the research
hypothesizes on the impact of different types of institu-
tional forces, it highlights that stronger enforcement of
regulation could lead to a minimum level of CSR activities;
and also that even the basic regulation-enforced CSR
should reect the specic contexts.
Key Contributions of the Paper
This paper attempted to explore the links between gover-
nance and CSR based on the views of various actors in
public, private and government enterprises. The study did
not aim to generalize across contexts rather the goal was to
build theory by uncovering key variables that link gover-
nance and CSR. As Corley and Gioia (2011, p. 23) observed,
our aim was to conduct a more intimate dialogue between
practice (actions of practitioners) and meanings (theoretical
contributions that both derive from and inform practice).
Based on the literature and data, the paper presents a
view of the range of conceptualisations of Governance and
CSR. The differences across the three countries highlight
the need to view CSR in the context of the countrys
institutional and national frameworks. It is evident that
CSR is an integral component of governance with CSR
linked to behaviours, reputation, risk, and transparency.
Contextual factors that this research highlights to be
important to the incorporation of CSR into governance
include the economic environment, national governance
system, regulation and soft law, shareholders, national
culture and industry impact. This is important for leaders,
board members, governance and CSR practitioners and
policy makers and is one of the key contributions of this
paper. For governance policy makers soft law should
continue to be used as a method to codify corporate
responsibilities in areas of transparency and communica-
tion, ESG risk, and shareholder and stakeholder dialogue.
Whether this should include more strategic type CSR
actions is problematic as these seem to be dependent on
other contextual factors related to behaviours rather than
regulation.
Table 5 Summary of
hypotheses
Hypothesis
numbers
Governance
approach
Choice of CSR agenda
Relationship
governance
H2a Moral CSR actions
H2c Impacted by cultural-cognitive and
normative institutional pressures
Anglo
governance
H1 Impacted by regulatory institutional pressures
H2b Sustainability, licence to operate and reputation CSR actions
H2d Responsive CSR
H2e High-impact industries more likely to adopt responsive CSR
H2f High-impact industries faced with economic stress more
likely to adopt responsive CSR
H3 High-impact industries faced with economic stress are more
likely to be impacted by cultural-cognitive and normative
institutional pressures than regulatory pressures
16 S. Young, V. Thyil
1 3
Limitations of the Study and Future Research
Directions
One limitation of this study is that the ndings are not
necessarily applicable across the whole business sector of
each country. The research being exploratory in nature
intends to uncover explanations and reasoning, and hence
is rich in context-specic data of the business sectors which
they come from. Hence further research using a large-scale
quantitative survey across a representative sample of
industry sectors in the three countries would be useful to
build generalizations. Another limitation is the small
sample size of countries as well as interviewees. A wider
selection of countries including emerging economies will
provide a better understanding of how different contexts
impact on the CSR approaches. Although extant literature
has ample evidence of expert interviewee selection as used
in this study, there exists a possibility of bias arising from
the expertise itself in the form of common communication
and articulation prevalent amongst experts. Future research
should focus not only on how institutional factors enable
CSR activities, but also how pressures such as shareholder
activism could restrain or alter organizations actions.
There is also a need for more in-depth qualitative research
such as this study, to explain the why of CSR and gov-
ernance activities that are routinely reported by rms, as
well to uncover those activities not routinely reported.
Conclusions
Despite these limitations, this study demonstrates the wide
variety of CSR approaches that companies employ to meet
their unique institutional environments and stakeholder
priorities in what Donaldson and Dunfee (1994) calls their
moral free space. Hence we see that communities are
entitled to free space to determine what is appropriate for
their time and place, and, provided that members of such
communities have the capacity to consent to the norms, the
communitys rules are authentic (Fort 2000, p. 384). We
call this adaptive governance where governance can be
dened as a exible system of action incorporating stra-
tegic and monitoring activities that determines the way a
company enacts its responsibilities to its shareholders and
stakeholders and which is determined at any given time by
the interrelationship of institutional drivers and behavioural
norms. Corporate governance needs to draw on behavioural
frameworks rather than what is often seen in practice as
structural approaches. Marnet (2004) cautioned, the mon-
itoring model of corporate governance may be placing
undue reliance on the independence and impartiality of the
gatekeepers. Marnet (2004) hence argued that at the min-
imum, existing models [of corporate governance] need to
be adjusted to incorporate the effects of behaviour and
emotion on choice making. We argue that not only should
the future corporate governance frameworks and models
integrate behaviour, but they need to ensure the imple-
mentation and practice of this behavioural approach by
making the behavioural processes explicit in the Codes of
Corporate Governance.
Appendix 1
See Table 6.
Table 6 Sample background
Name of the rm Category of
organization
Respondent Selected details
Australia Round 1 [6 rms, 7 interviews, 2007]
Mining Company 1 Mining Company Principle Advisor on
Environment
Revenues of US$58,065 million
20,346 employees in Australia and New Zealand
(2008)
Mining Company 2 Mining Company Company Secretary Revenues of US$51,918 million
41,000 employees (2008)
Superannuation Fund A Superannuation Fund Executive Manager
Investments and Governance
National industry superannuation fund
Manages over AUD 13 billion
Over 650,000 members and 60,000 employers
Australian Government
Enterprise
Australian Government
Enterprise
Corporate Secretary Revenues of AUD 4,959.2 million
25,042 employees (2008)
Brewery Brewery Director of Communications Revenues of AUD 4372.7 million
Brewery Company Secretary 7,000 employees (2008)
Corporate Governance and CSR 17
1 3
Table 6 continued
Name of the rm Category of
organization
Respondent Selected details
Consultancy 1 Accounting and
Consulting Firm
Executive Director AABS
RCIP
Global consulting company. Offers services in
Assurance, Tax, Transactions and Advisory
services
Revenues of US$24.5 billion (2008)
135,730 employees (2008)
Australia Round 2 [5 rms, 5 interviews, 2009]
Bank 1 Bank Company Secretary Banking and nancial services
Revenues of AUD 22.2
32,000 employees (2008)
Superannuation Fund C Superannuation Fund Chief Governance Ofcer Superannuation services
Manages over AUD 7 billion
Over 208,000 members and over 2,400 employees
Bank 2 Bank Corporate Secretary and Head
of Corporate Affairs
Financial products and services
Revenues of AUD 212.2 million
800 employees (2008)
Accounting Firm Research and Advisory
Council
Chief Executive Ofcer Research and advisory services
Over 40 members who represent more than AUD
250 billion in superannuation funds under
management
Super Trade Body Financial Services General Counsel and Managing
Director
Financial services
Revenues of AUD 472.9 million
1,250 employees (2008)
India [5 rms, 12 interviews, 2008]
Oilco Indian Government
Undertaking
Chairman and Managing
Director
Integrated Oil Rening and Marketing Company
Oilco Executive Assistant to
Chairman and MD
Revenue of US$25,000 million (2009)
11,245 employees (2008)
Oilco Manager Marketing Research,
Planning and Analysis
Steelco 1 Private Sector Steel
Manufacturing
Company
Vice-President, Corporate
Affairs
Global conglomerate
Steelco 1 Assistant Company Secretary Manufactures and markets steel, steel building and
construction applications
Steelco 1 Financial Controller of a
Division
Revenues of INR 147,329 crores (US$30 billion)
(2009) 84,000 employees (20082009)
Steelco 2 Steel Manufacturing Joint Managing Director Diversied family-based group
Steelco 2 Assistant Vice-President
Finance
Manufactures and markets steel, energy,
infrastructure and logistics
Steelco 2 General Manager Human
Resources
Revenues of INR 17,064 crores(2009)
(approximately US$3.6 billion
7,669 employees (2009)
Aluminiumco Aluminium
Manufacturing
Company Secretary and
HeadLegal
Diversied, non-ferrous metals and mining group
Aluminiumco Associate CSR Manager Revenues INR 508 crores (approximately US$106
million) (2009)
Textile Machinery Co. Textile Machinery
Manufacturing
Company Secretary Designs, develops and exports a range of textile
machinery
Revenues of INR 1,338 crores (approximately
US$280 million) (2009)
18 S. Young, V. Thyil
1 3
Appendix 2
(1) How would you describe the Australian/UK/Indian
corporate governance system?
(2) What are the factors driving the evolution of
corporate governance in Australia/UK/India?
(3) What corporate governance models have been
useful for you in your organization?
(4) In what ways is our/your governance system exem-
plary? What would you regard as best practice
governance?
(5) To what extent have existing corporate governance
structures concerning listed companies in Australia/
UK/India been found to be ineffective? On what
grounds?
(6) What types of regulation have been used to regulate
the governance system?
(7) How has the Australian/UK/Indian governance system
been inuenced by the international environment?
(8) What is the level of public awareness over the
importance of effective corporate governance?
(9) What are the major concerns amongst the public
regarding corporate governance issues?
(10) Can you describe the factors that have impacted on
your (if applicable) organizational corporate gover-
nance system?
(11) Can you describe the evolution of governance in
your (if applicable) organization?
(12) Howis shareholder input obtained on your organization?
Appendix 3
See Table 7.
Table 6 continued
Name of the rm Category of
organization
Respondent Selected details
UK [5 rms, 5 interviews, 2008]
Mining Company C Mining Company Corporate Governance
Manager
Prot $US32,352 m (2007)
Trade Body 1 Trade Body of Financial
Services Insurance
Sector (Institutional
Investors)
Assistant Director of
Investment Affairs
400 Membership companies covering 94 % of UK
sector and member companies account for almost
20 % of investments in the London stock market
Superannuation Fund B Superannuation Fund Director of Operations UK25.7bn funds under management (2009)
Consultancy 2 Accounting and
Consulting Firm
Senior Manager in Corporate
Governance Department
Revenue of UK2,010 m (2008)
Trade Body 2 Trade Body for
Occupational Pension
Schemes
Director of Corporate
Governance
Covers 1,200 pension schemes with some 15 million
members and assets of around 800 billion
Source Annual reports and web sites
Table 7 Coding themes and Australian sample of interview data (Rounds 1 and 2)
Coding themes Coding sub themes Australia 1 and 2
Adopting CSR
practices
Strategic The companies that do well are the ones that can predict those things that are going to happen, that they do not
have to be directed by government, climate change is a great one, you dont want to end up with the
government telling you how to run your business
We are currently going through a process of what we need to do as part of the transparency aspiration under the
Principles of Responsible Investing
We led the groups world-wide initiative in what sustainable development was in the mining industry, where we
should head and included it as a key policy
Reactive It goes back to the major company failures in the late 1990s, that provided the impetus to changes in ASX and
legislation
The regulators are trying to stop these events happening again. So governance and the recommendations are an
attempt to minimize the chances of this happening
Governance only becomes an issue when something goes wrong but you cant stop the crooks
The nancial crisis has produced much more awareness of boards role and the information management should
be providing, how to pay management to produce long-term value
Corporate Governance and CSR 19
1 3
Appendix 4
See Table 8.
Table 7 continued
Coding themes Coding sub themes Australia 1 and 2
CSR drivers External stakeholders Governance is all aboutnot just doing the right thing- but is in everybodys intereststo be sustainable you
need a proper governance framework
There is a great deal of public pressure which is being interpreted by the regulators and government and
securities exchangethe root is public pressure
Verbally they have indicated that they are mindful and acknowledge they have responsibilities to parties other
than shareholders
Reputation If the investment is viewed as bad we dont hold itthere is a huge reputational driver in terms of whether the
policies are actually implemented
The end game is not to improve outcomes now the game is to ratchet down the cost of impact and be a squeaky
wheel to protect the company
We build our governance structures around the environment in which we livearound what is perceived to be
excessive consumption in different countries
ESG risk ESG focus People are interested and dont want companies pumping out garbage into the ocean. Companies want to be good
corporate citizens
Our Enterprise Risk Management Framework has in the past been ad hoc and included maybe regulatory risks or
community outrage but now we have moved to a formal appraisal of all non- market risks
We have just released our rst guidelines on ESG for investor voting which will ow through into expectations
of how companies should operate
Ethical behaviour Clearly it all goes back to ethical behaviour. Within the ASX Principles there are those that go to the whole issue
of creating and monitoring an ethical decision making environment
You can only put in place structures and people have to buy into it from a cultural point of view which comes
down to the companies and the board
Codes of conduct, structures, policies are great but if people dont want to buy into them they are not going to
keep you out of trouble
Integration and
communication
Communication with
stakeholders
Youre just going to look stupid if people get more information from other sources that they do from the
company
Board reporting is a joke and annual reports are unreadable
Remuneration One area that resonates with the public is executive remuneration. Earning millions of dollars is not something
people can relate to and this is the main issue of concern
Shareholder
participation
Increased activism Shareholder activism has grown. The Australian Shareholders Association has done a lot. People understand they
can have a signicant inuence
There is a more active share market in terms of individual investors, self managed super funds, people being
prepared to ask questions when they dont like what is happening
There are two drivers, the Principles of Responsible Investing and Superannuation funds activism
Regulation Lessening of regulation The ASX promulgated some revisions around social responsibility, behaviours and enhanced disclosure but we
submitted that we actually need to maintain more exibility and not move to a tick box mentality
It is actually about living by rules not needing more rules
Table 8 Coding themes and UK sample of interview data
Coding themes Coding sub themes UK responses
Adopting CSR
practices
Strategic We do not just track companies, we get involved and try to change them, improve things
Reactive The major changes have been driven by scandals and crisis
Where were the non-executives when this bank was falling apart, who were the none executives
who approved this ridiculous sum of money, so change is always driven by the latest negative
story rather than informed judgement
Why were so many companies in trouble and why didnt the governance model work to help
them we need a trafc light system that says look we are coming up against these issues
earlier rather than waiting until it is too late and the company is beyond saving
20 S. Young, V. Thyil
1 3
Appendix 5
See Table 9.
Table 8 continued
Coding themes Coding sub themes UK responses
CSR drivers External stakeholders There are some shareholders who take these issues seriously, proactively seeking out meetings
and discussions with companies and try to change company behaviour but not as many as
there might be
Fund managers are frankly inactive, they do not put enough resources to do the job properly
ESG risk ESG focus Banks were making a lot of money but were not sustainable so we are interested in
sustainability in that sense
When directors make decisions according to the Companys Act (2006) they have to take into
account the impact on employees and communities
Boards should be brave enough to take account of ESG risks, risk reporting is typically poor
because lawyers have too much ownership of it
Ethical behaviour The Governance codes and Company Act directors duties drives board room behaviour
Its partly culture and if we obsess about quarterly returns this will drive the wrong behaviour in
companies
Integration and
communication
Communication with
stakeholders
Our web site is dedicated to corporate governance and we make sure all relevant developments
are reected there
Remuneration People are aware about pay and then populist newspapers write about it
People all understand the fat cat concept and they know they are receiving this huge pay and
they do realise thats an issue
Shareholder
participation
Increased activism One of the retorts we used to hear from companies was if you dont like what we are doing you
can sell your shares but that is not really helpfulwe try (as an investment company) active
engagement process before selling
Regulation Lessening of
regulation
There is no one size ts all solution and it is best to use a comply or explain approach to achieve
good governance
It relies on shareholder debates rather than self regulation or external regulation
Government regulation over complicates it
Table 9 Coding themes and Indian sample of interview data
Coding themes Coding sub themes Indian responses
Adopting CSR
practices
Strategic We do not wait for legislation but voluntary disclosures are made in regard to shareholder
concerns, whistle blower policies, becoming more transparent and accountable, not just
making tall claims but substantiating
It is like a marriage the factory and its surrounding
Reactive We have been doing CSR for donkeys years but after Enron people became sensitised to the
seriousness of it and it was no longer voluntary, it became that you had to do it
We are reacting also to globalisation and moving from this as a domestic philosophy to
benchmark against global practices
This is due to the requirements of the investment industry
ESG risk ESG focus We are reducing carbon and pollution. We are very conscious of pollution control, to serve the
nation and the world
We are taking care of local people, the community. The Government cannot give to everyone
There is a lot of pressure on the land, so when we take the land from these people our rst
responsibility is what happens to these people
We are training these people so that they can earn and climb up the social ladder
Corporate Governance and CSR 21
1 3
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