Carroll’s dimensions and CSR disclosure: empirical evidence from Pakistan

DOIhttps://doi.org/10.1108/CG-10-2018-0317
Pages365-381
Date17 January 2020
Published date17 January 2020
AuthorSamreen Hamid,Zahid Riaz,Syed Muhammad Waqar Azeem
Subject MatterCorporate governance,Strategy
Carrolls dimensions and CSR disclosure:
empirical evidence from Pakistan
Samreen Hamid, Zahid Riaz and Syed Muhammad Waqar Azeem
Abstract
Purpose This study aims to ascertain the relevance of Carroll’s four dimensions of corporate social
responsibility (CSR),namely, economic, legal, ethical and discretionary in a dynamic regulatorycontext
of a developingeconomy Pakistan.
Design/methodology/approach This study has operationalizedthese dimensions as four categories
of CSR disclosureindex. This disclosure index measured the relevanceof CSR dimensions by examining
CSR disclosurepractices of Pakistan Stock Exchange-100index firms.
Findings The authors have found that the firms of Pakistan disclose more information pertaining to
discretionary dimensionof CSR than economic, legal and ethical dimensions. Interestingly,the authors
have observedthat after the enactment of state regulation, there is an increasingtrend of the overall CSR
disclosurelevel at a decreasing rate.
Practical implications For policymakers,these findings imply that firms tend to perceivelaw as a box-
ticking exercise and refrain to involve in those CSR activities that can have both strategic and societal
benefits over the long run. Thesefinding imply for business managers that if they will not undertake CSR
notion seriouslythen the policymakers will take statutory initiatives to curtail the greenwashingeffect and
these initiativescan lead to higher transaction costs.
Originality/value This study presents evidence about the relevance of Carroll’s four dimensions of
CSR in a developing economy. The evidence shows that the CSR disclosure in developing economy
continues to take a largelyphilanthropic form thereby dominating otherCSR dimensions namely ethical,
legal and economic. These findings also confirm that CSR practices are context-dependent and these
cannotbe isolated from their unique social context.
Keywords Pakistan, Corporate social responsibility, Developing country, CSR disclosure index,
Carroll’s four dimensions of CSR, Greenwashing effect
Paper type Research paper
Introduction
A number of studies have explored the notion of corporate social responsibility (CSR) in the
developed economies whereas the research regarding the relevance of CSR in the socio-
economic context of developing economies is emerging gradually (Blowfield and Frynas,
2005;Visser, 2006;Jamali, 2014;Aguinis and Ante, 2012;Jamali and Karam, 2018). Jamali
and Karam (2018) argue that recent calls for closer attention are being made to examine
context-dependence of CSR in the setting of developing economies. These investigations
can facilitate to understand the indigenous expressions of developing economies about
CSR (Jamali and Neville, 2011;Visser, 2008). As per this research gap, this study extends
the scope of CSR research in the context of a developing economy and examines the
context-dependence of CSR in Pakistan(Jamali and Carroll, 2017;Jamali and Karam, 2018;
Windsor, 2019).
In the market economies, disclosure of information has conventionally facilitated firms to
improve their legitimacy in their social settings (Qian and Schaltegger, 2017). Also, better
CSR information disclosure to stakeholders including investors has positively affected the
Samreen Hamid is based at
the Department of
Management Sciences,
Lahore Garrison University,
Lahore, Pakistan.
Zahid Riaz is based at the
Faculty of Business
Administration, Lahore
School of Economics,
Lahore, Pakistan.
Syed Muhammad Waqar
Azeem is based at the
Department of
Management Sciences,
Lahore Garrison University,
Lahore Pakistan.
Received 5 October 2018
Revised 17 April 2019
16 September 2019
29 November 2019
6 December 2019
Accepted 23 December 2019
DOI 10.1108/CG-10-2018-0317 VOL. 20 NO. 3 2020, pp. 365-381, ©Emerald Publishing Limited, ISSN 1472-0701 jCORPORATE GOVERNANCE jPAGE 365
long-term value and performance of firms (Liu and Zhang, 2017). With respect to CSR
disclosure, this study examines the extent to which the information about CSR activities is
being disclosed in a developing economy and ascertains the context-dependence of CSR
disclosure in a developing economy (Jain et al., 2017;Jamali and Karam, 2018). For this
purpose, we borrow the CSR conceptualization of Carroll and measure the level to which
CSR disclosure level can be explained through these four dimensions of CSR in a dynamic
regulatory context of a developing economy. We have used the CSR disclosure index to
examine the relevance of Carroll’sfour dimensions of CSR in Pakistan.
We have found that the leading firms of Pakistan disclose more information pertaining to
discretionary dimension of CSR than legal, ethical and economic dimensions, respectively.
This finding accentuated that the philanthropic dimension of CSR and its communique
´in
Pakistan are more important and relevant than other dimensions. Interestingly, we also
observed that after the enactment of state regulation, there was an increasing trend but at
the decreasing rate for the overall CSR disclosure level. This finding emphasizes the
limitations of state regulation for mandating CSR disclosure thereby, illustrating the
greenwashing tendencies in the context of a developing economy. For policymakers, it
implies the limits of mandating CSR disclosure. It underlines the fact that firms tend to
perceive such laws as box-ticking exercise and refrain to involve in those CSR activities
which can have both strategic and societal benefits. For business firms, it implies that if
firms will not undertake the notion of CSR seriously then the policymakers can take stern
regulatory measures to combat the greenwashing and consequently, it will increase the
transactions costs for firms.
Theoretical and empirical underpinnings
The idea of ethics in business isalmost 2,000 years old and main religions namely Judaism,
Christianity and Islam prohibited unethical business (Blowfield and Frynas, 2005;Hou and
Li, 2014). In the context of UK, historyof CSR activities dates back to over 200 years (Idowu,
2011). Conversely, the contemporary CSR literature has emerged 60 years ago (Blowfield
and Frynas, 2005). In the mid of the twentieth century, CSR was widely discussed in the
context of developed economies and usually referred to certain virtuous endeavors of
corporations toward society (Marens, 2013;Aras et al., 2010;Garriga and Mele
´,2013;
Donaldson and Dunfee, 1999;Aguinisand Ante, 2012;Lockett et al.,2006).
In 1970s, literature of the Western economies suggested that the notion of CSR had been
re-conceptualized (Carroll, 1999). One of the most notable contributionduring this time has
been the four-fold conceptualization of CSR by Archie B. Carroll (Matten and Crane, 2005;
Visser, 2006;Jamali and Mirshak, 2007;Jamali, 2014;Pinkston and Carroll, 1996). This
conceptualization explicates CSR as a set of four dimensions: economic, legal, ethical and
discretionary. Carroll (1979) provided a synthesis of divergent schools of thought and
proposed a four-dimensional conceptualization of CSR. Carroll (1979, p. 500) argued, “the
social responsibility of business encompasses the economic, legal, ethical, and
discretionary expectationsthat society has of organizations at a given point in time.”
Later, Carroll (1991) has extended these four dimensions of CSR as a pyramid of CSR to
demonstrate elements of this four-part framework while putting economic (required)
component at the base of the pyramid because of its innate role in the business (Carroll,
2016,p.4;Carroll, 2015,p.90;Carroll and Brown, 2018, p. 45). It has been further argued
that society have other requirements from businesses mainly the regulatory (required)
compliance in the presence of legal infrastructure (Carroll, 2016,p.4;Carroll, 2015,p.90;
Carroll and Brown, 2018, p. 45). In addition to these requirements, the society expects
ethical (expectation) conduct of businesses (Carroll, 2016,p.4;Carroll, 2015,p.90;Carroll
and Brown, 2018, p. 45). Finally, the society desires from the businesses that these entities
will act as good corporate citizens by making contributions toward the physical,
financial and human resources of the society (Carroll, 2016,p.4;Carroll, 2015,p.90;
PAGE 366 jCORPORATE GOVERNANCE jVOL. 20 NO. 3 2020

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