Guest Columnist

GUEST COLUMNIST: WHAT DRIVES CORPORATE SOCIAL RESPONSIBILITY DISCLOSURES? (1)

By Nobert Osemeke PhD

In recent years, we have seen the devastating effects of global warming on our environment. For example, the increase in home destruction caused by flood resulting from heavy rain fall or water over flowing its bank as happened in the cases of Hurricane Harvey in Corpus Christi and Houston, Texas, U.S. as well as Benue, Nigeria.
As a result, there have been increased concerns over how to make our society better for human habitation. This is an objective that most developed and developing nations want to achieve – a healthy society. One way of achieving this objective is to ensure that ‘we’ do not pollute the environment. The ‘we’ in this regard could mean countries not going into war or avoiding the use of weapon of mass destruction (WMD). The ‘we’ could mean that people avoid killing creatures, stop different types of illegal animal hunting – be it fishing or elephant hunting, while avoiding deforestation by not cutting down trees.
The ‘we’ could also represent the government officers. A situation where some people at the helm of affairs in government establishments embezzle money meant for infrastructural and community development put in their care. Due to embezzlement and misappropriation of funds, usually called fraud or corruption, the community becomes poorly, or even under developed. A good example is where money meant for improving power supply of a particular community is channelled to personal or private accounts through the use of syndicates. The after-effect of not utilising the funds properly will lead to the presence of poor power supply, which creates a situation where most people living in that community begin to seek alternative sources of power supply, which most often is through the use of power generating sets. A good example of a country with the presence of poor power supply is Nigeria. Most people living in Nigeria have generating sets, including the very miniature two-stroke engine types derisively tagged: “I better pass my neighbour,” which is to say “this is better than nothing,” not minding the health and environmental hazards as can be seen from the number of lives lost yearly as people inhale ‘generator’ fumes (carbon monoxide) while sleeping at night. These carbon monoxide is very bad to our environment and when inhaled is dangerous to health and is a silent killer because when inhaled the person dies slowly but surely without being aware of it.
Another set of ‘we’ I would like to focus are corporate organisations or companies that engage in production of goods and services to meet the needs of the society and in the process pollute the environment. Most sustainability practitioners have called on companies to adopt environmental friendly practices, even as they ensure transparency in their businesses. Most companies today, as part of environmental sustainability practices now provide information in the annual reports on what they have done for the society or how much they have damaged the society and its environment.
As a result, there is now more attention and awareness about Corporate Social Responsibility (CSR).
Though, there are different definitions of CSR but within the context of this article and this column, I will define CSR as a process that enables management to assess the operations of the organisation and how such affect the society. The society, in this regard, refers to stakeholders within the environment where the organisation is situated. These include: employees, public, customers, suppliers, government (tax authorities, agencies) and regulators, etc.
It has been argued repeatedly that the purpose for setting up a company is to make profit, which is sometimes called maximization of shareholders wealth. When shareholders invest in a company they are interested in the return on investment. This could come by way of growth in share price, also called capital appreciation for those listed on a stock exchange; cash or scrip dividend distributed regularly by the directors; earnings and future growth rate. Anything contrary could make shareholders to direct their investment to another company that offers better returns.
Over the last two decades, there has been a paradigm shift in the debate on what constitutes the aim of an organisation. If the aim of an organisation is to make profit and satisfy shareholders, the question always is: what happens to other stakeholders, like depositors as in the case of a bank?
The accounting scandals and collapse of big companies like Enron, WorldCom, Parmalat, Adelphi, Waste Management, Tyco, Freddie Mac, HealthSouth, American Insurance Group (AIG), Lehman Brothers, Cadbury Nigeria Plc, Lever Brothers Nigeria Plc, Intercontinental Bank, Oceanic Bank, Bank PHB etc, have increased the intensity of the ongoing debate, besides challenging the idea that the objective of an organization is only profit making. Scholars and practitioners are beginning to accept that companies are not only successful because of their profitability or shareholders value, but the impact made by improving the society and ethical responsibilities, which has been the idea behind Corporate sustainability initiatives.
At the end of each accounting period (quarterly and then yearly as in the case of Nigeria), the public wants to see in the annual report what companies have done for the society. As a result, companies have witnessed increased scrutiny of their CSR practices. Companies, being aware that they are being watch by the public, are becoming careful on the information they disclose in their CSR reporting and practices.
One thing to note is that no two companies’ CSR disclosures are exactly the same because each is different in belief, values, mission and vision statement, and confront different challenges which affect the amount of information disclosed in the CSR. Among these challenges are the socio-cultural factors which affect most companies. Included in these socio-cultural factors are language, age, education, family background and family setting, place of birth and respect for elders.
The CEO and board of directors are responsible for defining a company’s CSR leaning and quantum of disclosure on how its operations affect the society are decided by top management. Therefore what management is willing to disclose as part of the company’s CSR activities is a function of its experience. If top management knows that CRS disclosure will help improve the company’s performance there would be an increased willingness to disclose much more information they are currently. The reverse is the case where a manager thinks otherwise. Part of what a manager knows is based on experience, and experience is affected by the socio-cultural factors of where the manager lives, his background or where the company is located.
A company cannot choose CSR from a set of ‘made-up’ organizational parameters but they are created by individuals based on the role they played during decision making by intentionally choosing what should be included in the CSR or not. The choice of choosing what should be included in the CSR is part of the socio-cultural factors which shape the opinion of some management staff.
The attitudes of management with regards to ethical issues are affected by nationality. This means that the amount of CRS disclosures will be the different between how it is viewed in two countries say the U.S and Germany; or UK and Austrian. Also differences in CSR disclosures exist among companies based in Hong Kong, Japan or South Korea. Therefore the location of a company or where one is born could influence his CSR beliefs. In a situation like Nigeria it can be argued that the CSR disclosures will be different from one company to another because of the presence of different ethnic groups. A company that is dominated by a particular ethnic group could decide to disclose more CSR issues than those with another ethnic group. This is why and how culture can equally be a determinant of CSR disclosures by corporate organisations.

Osemeke holds a PhD in Culture and Corporate Governance.
He is a Senior Lecturer in Financial Accounting at Liverpool Business School, UK.
nobertosmek@yahoo.com

Read my latest paper “The role of ethnic directors in corporate social responsibility: Does culture matter? The cultural trait theory perspectives” at https://link.springer.com/article/10.1057/s41310-017-0018-7

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