Abstract
Corporate governance and, more broadly, the performance of corporate boards have traditionally been measured using financial metrics. These financial metrics such as Return on Investment (ROI), Return on Assets (ROA), Return on Equity (ROE), Earnings and Profitability Ratio (E and P) are ex post measure of organizations performance arising from corporate board activities. These financial metrics are largely one-dimensional measure of corporate performance and do not fully account for the other dimensions of organization responsibilities. The COVID-19 and the changing organizational dynamics have made the case for corporate board’s performance to be assessed beyond the usual financial metrics. In this study, we provide a framework that accounts for the various dimensions of organization activities: finance, social and environmental, the Triple-Bottom (TBL) approach. A TBL-compliance metric was constructed, which tracked the performance of selected manufacturing firms in Nigeria using a content analytical technique. The result showed that the majority of the firms performed remarkably well in areas of profitability and economic value creation but less satisfactorily in areas of social and environmental sustainability. On aggregate, the sampled firms committed less than 1% of their profit after tax on corporate social responsibility, while less than 5% of the sampled firms scored above average on the TBL-adoption matrix.
Highlights
This year, news broke out that a novel coronavirus has hit the city of Wuhan, China
We provide the rationale for assessing corporate governance performance beyond the usual financial metrics
It is widely accepted based on a fairly large body of scholarly works that board effectiveness could play a vital role in determining corporate financial performance. This belief may have accounted for the preponderance in the usage of financial indicators in measuring the performance of boards. It has been the practice in extant literature to measure the effectiveness of boards in terms of financial performance of the organization using for instance indicators like profitability, return on investment (ROI), return on assets (ROA), return on equity (ROE), firm’s value (Tobin’s Q), earnings per share (EPS), etc
Summary
News broke out that a novel coronavirus has hit the city of Wuhan, China. There is likely to be greater convergence of expectations by citizens of various countries with regard to minimum standards corporations should achieve in relation to social, health, and environmental issues regardless of the jurisdiction in which the corporations operate and there will be increased demand on organizations to go beyond current regulations and legislations regarding corporate social responsibilities to something much more encompassing. We demonstrate, using data from selected manufacturing firms in Nigeria, how the general methodological approach can be usefully applied and tailored to various sectors and contexts to yield policy-relevant insights about how corporate governance performance should be assessed beyond the financial metrics. Following this introduction, the rest of the paper is organized as follows. We provide the policy implication of using the triple-bottom approach in assessing corporate boards and suggest ways organizations and governments could integrate triple-bottom reporting post-COVID-19
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