CSR committee attributes and CSR performance: UK evidence

• DOI: https://doi.org/10.1108/CG-01-2020-0036
• Published date: 17 May 2021
• Date: 17 May 2021
• Pages: 892-919
• Subject Matter: Strategy,Corporate governance
• Author: Mohamed Esmail Elmaghrabi

CSR committee attributes and CSR

performance: UK evidence

Mohamed Esmail Elmaghrabi

Abstract

Purpose –This study aims to explore the set of corporate social responsibility (CSR) committee

attributes that may enhance CSR performance and CSR strategy formation and reduce CSR

controversies.[AQ1]Towards this end, the study also explores thedifferences between companies with

and withoutCSR committees in terms of these threeCSR performance facets.

Design/methodology/approach –The study uses a sample of financialtimes stock exchange (FTSE)

100 non-financial companies in 2015–2017. Kruskal-Wallis test is conducted to test the differences in

CSR performance in firms with CSR board-level committee, CSR management committee and no

committees. Additionally, a regression model is used to explore the attributes of CSR committees that

lead to better/less CSR performance and CSR strategy/CSR controversies. A two-stage least squares

regressionmodel was used as a robustness check.

Findings –Firms with boardCSR committee have better CSR performanceand CSR strategy and lower

CSR controversies than both firms with no CSR committees and firms with a CSR management

committee. Regression results show that CSR committees that are predominantly consisting of

independent boardmembers, chaired by a female director and setting moremeetings have better CSR

performance. Additionally,CSR committees were found to have lower CSR controversies when having

more independent directors and a chair with CSR expertise. CSR strategy was better with the CSR

committeerepresented by a larger group of members.

Originality/value –This study makes several contributions to the sustainability governance literature

and regulatory/guidance interfaces. There is extant literature examiningaudit committee attributes and

their effects on variousfirm outcomes. The same can be said on the regulations of theaudit committee.

CSR committees’ composition and benefits are, by far, less regulated and largely under-researched.

Hence, this paper is consideredan early attempt to explore the CSR performance improvementsa CSR

committeemay bring and the composition that would bring betterCSR performance.

Keywords Sustainability governance, CSR performance, CSR strategy, CSR committee, FTSE100,

CSR controversies

Paper type Research paper

1. Introduction

There is growing attention in the literature to the improvements stakeholder-oriented boards

may bring to corporate environmental social and governance performance (Shaukat et al.,

2016). The corporate board of directors may manage their social and environmental

responsibilities by the inception of a specific corporate social responsibility (CSR)

(sustainability or environmental) committee to oversight such aspects (Rodrigue et al.,

2013;Spitzeck, 2009). CSR committees were introduced as a more pluralistic sustainability

governance mechanism to replace the commitment of the chief executive officer/Chairman

to CSR issues as a single corporate sustainability governance form (Spitzeck, 2009). In the

UK, Mackenzie (2007) showed that half of the largest 20 UK companies established a CSR

committee, with none having a CSR committee two decades ago. Prior research

concentrated on the effect of CSR committee existence on CSR disclosures and

performance. However, intentions of forming CSR committees in firms is questionable. As

Mohamed Esmail

Elmaghrabi is based at the

College of Business, Al Ain

University, Al Ain, United

Arab Emirates, and

Accounting Department,

Faculty of Commerce,

Damietta University,

Damietta, Egypt.

Received 27 January 2020

Revised 21 June 2020

24 January 2021

3 February 2021

Accepted 4 February 2021

The author would like to thank

Professor Rene

´Schmidpeter

(the Associate Editor) and the

anonymous reviewers for their

insightful and constructive

comments.

PAGE 892 jCORPORATE GOVERNANCE jVOL. 21 NO. 5 2021, pp. 892-919, ©EmeraldPublishing Limited, ISSN 1472-0701 DOI 10.1108/CG-01-2020-0036

Hart (1995) posits, corporations may engage in proactive approaches resulting in building

substantial capabilities or reactive approach by simply aligning their compliance to the

legislative stance without changing much of their behaviours. Based on Hart’s latter

argument, companies may form CSR committees to portray positive CSR performance,

without any substantial changes undertaken (i.e. symbolic). In contrast, Shaukat et al.

(2016, p. 575) assert that CSR committees can also constitute a real commitment of board-

level human resources and organizational structures, that enable effective planning and

oversight in this area, thus contributing to better CSR performance. Additionally, Homroy

and Slechten (2019) emphasize that the board of directors are very likely to engage in the

firm’s sustainability-related policies as such issues are becoming more strategic today.

Thereby, assisting management in the formulation of the CSR strategy and ensuring proper

implementation of CSR practices to achieve better performance (Mackenzie, 2007;Shaukat

et al.,2016

). Similarly, Ricart et al. (2005) posit that a key responsibility of CSR committees

is to advise the board of directorson the appropriate sustainable development policies and

reviewing such policies. In fact, Mackenzie (2007) found that all but one of the CSR

committees in the largest UK companiesexplicitly mentioned that establishing CSR policies

and standards is a key role in their inception. Nevertheless, the conflicting views on the

firm’s intentions from the CSR committee establishment and their role as sustainability

governance mechanisms is due to the dearthof empirical research in this field. Additionally,

Ricart et al. (2005) show that CSR committees can be created at the board level or

management level. Board-level CSR committees represent a gathering of board directors,

which like other board-level committees (audit, nomination and remuneration) reports

directly to the board of directors. The management CSR committee, however, is mainly

composed of a number of executive managers and employees and would report its

suggestions to the board level[1]. Yet, the differences in these committees in terms of how

they affect CSR performance is not empiricallyinvestigated.

Although CSR committees were created as a sustainability governance mechanism, the

roles and effectiveness of such committees in relation to CSR performance is still an area

requiring considerable attention. In fact, only a few studied the effect of the CSR

committee’s composition on corporate CSR disclosures and, to a lesser extent, on

CSR performance. Additionally, the regulations/guidance on the composition and duties of

CSR committees is in its embryonic stage in the UK and elsewhere in the world. For

instance, the 2018 UK Companies Governance Code assert that the board of directorsmust

ensure the stakeholder interestsand views are included in the annual report[2]while leaving

the boards to govern the sustainability concerns in their own manner. Hence, CSR

committees’ constitution is set free to differ between firms. This may help explain that CSR

committees might be effective in certain firms while less effective in others. In fact, Liao et

al. (2015, p. 410) found that for UK environmental committees to exert sufficientinfluence on

greenhouse gases (GHG) disclosures, such committees should be large, independent and

meeting more frequently. The work of audit committees to monitor company financial

reporting transparency practices is analogous to the functioning of CSR committees with

respect to CSR transparency practices(Liao et al.,2015). Hence, similar to Liao et al., 2015,

this study makes use of the attributes for audit committee effectiveness used in monitoring

the financial reporting practices. Specifically, the study explores the attributes of CSR

committees, including independence, size, gender, expertise and meetings on three

important corporate CSR performance dimensions. Towards this end, the study contributes

to the literature by investigating the effect of CSR committee attributes and each of CSR

overall performance, CSR controversies management and CSR strategy. This area is of

great importance as Ricart et al. (2005, p.32) points out that “The structure of the board is a

decisive factor for embedding sustainability into the firm’s strategy”. Hence, it is vital to

explore the sustainability governance roles that lead to substantive corporate sustainability

performance (Homroy and Slechten,2019). In general terms, it is widely acknowledged that

the area of sustainability governance is under-researched (Brennan and Solomon, 2008).

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