Corporate Social Responsibility, Board Structure, and Gender Diversity: Evidence from Australia

Abstract

Purpose: Corporate governance in Australia is currently undergoing a transitional and contentious period regarding whether and how to integrate corporate social responsibility (CSR). This paper aims to understand how corporate governance relates to CSR performance in Australia by examining two areas of corporate governance: board and gender diversity. Design/methodology/approach: Data covering the period 2002 to 2016 are analysed by three methods, including OLS, panel regression and dynamic GMM. Corporate governance is operationalized with five variables: board size, board independency, chairperson independency, existence of risk management committee, and special committee devoted to corporate sustainability/CSR. Gender diversity is operationalized with four variables: percentage of female directors, percentage of female managers, gender of CEO, and gender of chairperson. In addition to individual variables, this study also develops overall indices of board structure and gender diversity, respectively. Four aspects of CSR performance, namely corporate social performance, corporate environmental performance, controversies over CSR, and greenhouse-gas emissions from corporate activities are included. Synthesizing data from SIRCA, Thomson Reuters Asset4 and Morningstar, we have a sample of 2,250 firm-year observations. Findings: This study identifies factors that positively relate to CSR performance, including a board that consists of more directors, more independent directors, more women, a risk management committee and a special committee devoted to CSR. Moreover, board structure and gender diversity also negatively relate to controversies over CSR, yet no relation between corporate governance and greenhouse-gas emissions is identified. These findings are robust to different analysis methods. Originality/value: Findings indicate that even if directors’ duties have been not explicitly extended to the interests of other stakeholders, the extant requirement of duties also to some extent encourages CSR performance. But corporate governance in Australia does not appear to adequately consider issues of greenhouse-gas emissions and climate change. Regarding board subordinates, findings in this study reveal that two voluntarily formed board committees, namely the risk management committee and CSR committee, positively relate to CSR performance. Extending prior studies in Australia, this study provides a more comprehensive picture of how board structure and gender diversity relate to CSR performance.