Corporate Governance Quality and CSR Disclosures

MuiChing Carina Chan

John Watson

David Woodliff
Received: 24 January 2013 / Accepted: 2 September 2013
Springer Science+Business Media Dordrecht 2013
Abstract Given the increasing importance attached to
both corporate social responsibility (CSR) and corporate
governance, this study investigates the association between
these two complimentary mechanisms used by companies
to enhance relations with stakeholders. Consistent with
both legitimacy and stakeholder theory and controlling for
industry prole, rm size, stockholder power/dispersion,
creditor power/leverage, and economic performance, our
analysis of the annual reports for a sample of 222 listed
companies suggests that rms providing more CSR infor-
mation: have better corporate governance ratings; are lar-
ger; belong to higher prole industries; and are more highly
leveraged. Our ndings support the limited prior research
suggesting a link between corporate governance quality
and CSR disclosure in company annual reports and suggest
that, rather than mandating specic disclosures, regulators
might be better served focussing on corporate governance
quality as a way of increasing CSR disclosures.
Keywords Corporate governance CSR disclosure
Stakeholder theory Legitimacy theory
Introduction
Corporate scandals such as Enron (Clarke 2005), various
stock market collapses, and the negative publicity around
senior executive remuneration have increased societys
expectations in relation to companies environmental,
social and ethical responsibilities (Money and Schepers
2007, p. 2). Further, Holder-Webb et al. (2009) point to the
signicant increase in funds invested in socially responsi-
ble investments and, undoubtedly, this has also caused
companies to pay more attention to their corporate social
responsibility (CSR) activities.
1
Such developments have,
in turn, led to a growing body of research in the related
areas of CSR and corporate governance. However, to date,
there has been limited research that attempts to merge these
two streams of inquiry (Michelon and Parbonetti 2012).
The increased focus on CSR appears to be driven by two
key factors, namely, a moral responsibility, and business
interests (Adams and Zutshi 2004). Apart from earning a
return for stockholders, it has been suggested that compa-
nies have a broader moral responsibility to their environ-
ment, workforce, and local communities. As companies
expand and become more international they are likely to
have a growing impact on the social and ecological envi-
ronment of both local and international communities and
there is a growing expectation that companies should be
accountable to various stakeholder groups for all such
impacts. In response to such expectations, a growing
number of regulators globally are reviewing the gover-
nance arrangements of corporations to ensure that corpo-
rate practices are aligned with broader societal interests
(Ioannou and Serafeim 2011, p. 2). This has led to a
broadening of the dimensions companies need to cover to
maintain their license to operate (Kolk and Pinkse 2010,
p. 17). For example, a survey conducted to identify the
desirability and feasibility of a CSR standard found that
consumers expect rms to meet high health and safety,
M. C. Chan J. Watson (&) D. Woodliff
Accounting & Finance, The University of Western Australia,
35 Stirling Highway, Crawley, WA 6009, Australia
e-mail: John.Watson@uwa.edu.au
1
It should be noted that in recent times the term sustainability is
used by some commentators instead of social responsibility.
However, to be consistent with the majority of the literature, and
because we feel the term social responsibility is wider in scope than
sustainability, we use the term CSR throughout this article.
1 3
J Bus Ethics
DOI 10.1007/s10551-013-1887-8
worker, human rights, consumer protection, and environ-
mental standards, regardless of where their operations are
located (Smith 2002, p. 42). Further, Gibson and
ODonovan (2007, p. 944) argue that, based on recom-
mendations by the Corporate Governance Council of the
Australian Stock Exchange (ASX), it is clear that good
governance is now closely linked to the concept of CSR
and accountability and that one way to demonstrate CSR is
to increase annual report disclosures.
It has also been suggested that paying attention to CSR
activities is good for business. For example, Adams and
Zutshi (2004) argue that being a good corporate citizen
(acting morally responsibly) can assist companies to attract
and retain the most talented people and this, inevitably, has
to be good for business. Further, the production of social
and environmental reports can help in the development of
better internal control systems and decision-making pro-
cesses; with resulting cost-savings from continuous
improvements. Similarly, de Villiers et al. (2011, p. 1639)
point to the link between a rms environmental and
nancial performance noting that, given this link, details
concerning a rms environmental performance will be of
interest to investors. This argument is supported by Ticor
Limited, a mining company, which stated (in its annual
report) that [e]nvironmental improvement programs con-
tinued to return benets to Ticor South Africas business
and reputation (Ticor Limited Annual Report 2004,
p. 22). Similarly, the growing demand from markets,
regulators and civil society is a key motivation behind the
development of an integrated reporting framework that
reects the commercial, social and environmental context
within which organizations operate (International Inte-
grated Reporting Committee 2011, p. 2).
In summary, demonstrating it acts in a socially and
environmentally responsible manner can provide a com-
pany with four major benets: improved corporate image
and relations with stakeholders; better recruitment and
retention of employees; improved internal decision-making
and cost-savings; and improved nancial returns (Adams
and Zutshi 2004). As a result, the past two decades have
seen a rapid increase in the amount of CSR disclosure in
company annual reports and this has been associated with
an increase in social and environmental disclosure research
(Mitchell and Hill 2009). A key assumption behind such
research is that the amount of CSR disclosure provided by
a company signies the importance the company attaches
to such matters (Krippendoff 1980; Gray et al. 1995; De-
egan and Rankin 1996; Neu et al. 1998). Further, Aerts and
Cormier (2009, p. 2) argue that environmental legitimacy
is signicantly and positively affected by the extent and
quality of annual report environmental disclosures.
Within the CSR literature, an area of consistent interest
in recent times has been the association between the
amount of disclosure and various corporate characteristics,
such as rm size; protability; and industry classication
(see, for example, Cowen et al. 1987; Patten 1991; Roberts
1992; Hackston and Milne 1996; Purushothaman et al.
2000). As noted by Adams et al. (1998), the rst step to
improving the quantity and quality of CSR disclosure is to
study the rm characteristics associated with CSR
disclosure.
One important rm characteristic where there has been
limited research to date, however, is the relationship
between CSR disclosure and corporate governance quality.
As noted by Money and Schepers (2007, p. 5) there is
little existing knowledge from a corporate perspective as to
the extent of alignment between corporate governance and
CSR. Further, studies that have sought to examine such a
relationship have typically used either: an indirect proxy
for corporate governance (for example, country of origin is
used as an indicator of likely corporate governance dif-
ferences by van der Laan Smith et al. 2005); a limited
number of corporate governance attributes (for example,
board composition, multiple directorships, and type of
shareholders/stockholders are used as corporate gover-
nance variables by Haniffa and Cooke 2005); or a single
corporate governance attribute (for example, the proportion
of independent non-executive directors is used by Faisal
et al. 2012, as a proxy for better corporate governance). A
notable exception is the recent study by de Villiers et al.
(2011) which examined a broad range of attributes related
to the Boards monitoring role (for example, board inde-
pendence) and its resource provision role (for example,
board size). However, to the best of our knowledge (as
discussed in more detail later) this is the rst CSR study to
use an overall corporate governance quality measure pro-
vided by an external party independent of the researchers
(WHK Horwath 2005, Corporate governance report).
Therefore, our study makes two important contributions to
the literature. First, we add to the limited existing research
by examining the association between corporate gover-
nance quality (controlling for various other rm charac-
teristics) and the amount of CSR disclosure provided in
company annual reports. Second, we use an overall cor-
porate governance quality measure provided by an external
party independent of the researchers (WHK Horwath
2005).
Our ndings, consistent with Michelon and Parbonetti
(2012), suggest that corporate governance quality is an
important internal contextual factor (Adams 2002) that is
positively associated with CSR activities and disclosure.
The remainder of this article is organized as follows. In the
next section we review the literature that provides the
theoretical background to the hypothesis tested in this
study. This is followed by a research methods section
incorporating a description of the CSR disclosure model
M. C. Chan et al.
1 3
examined, how the dependent and independent/control
variables are measured, and the sample selection process.
We then provide, and discuss, the results of our analysis
and conclude with the studys limitations and some sug-
gestions for future research.
Theory Development
In examining various CSR issues, prior studies have drawn
on a number of theoretical frameworks, for example,
agency theory, institutional theory, legitimacy theory,
political economy of accounting theory, resource depen-
dence theory, and stakeholder theory (Hackston and Milne
1996). As such, there does not appear to be a universally
accepted theoretical framework of corporate social
accounting (Hackston and Milne 1996, p. 78). However,
there does seem to be a consensus in the literature that the
various theories referred to above, rather than being dis-
tinct, are better viewed as complimentary or overlapping
theories (Gray et al. 1995; Cormier and Magnan 1999;
Holder-Webb et al. 2009; Reverte 2009; Chen and Roberts
2010). Given that legitimacy theory and stakeholder theory
appear to have been the most widely used theories in
examining CSR disclosures, each of these theories will be
briey reviewed in the following sub-sections. It should be
noted that whilst legitimacy theory considers interactions
with society as a whole stakeholder theory focuses on
how an organization interacts with particular stakeholders
(Deegan and Blomquist 2006, p. 350).
Legitimacy Theory
A number of CSR disclosure studies have used legitimacy
theory as their conceptual framework (see, for example,
Cormier and Gordon 2001; Deegan 2002; ODonovan 2002;
Haniffa and Cooke 2005). Central to organizational legiti-
macy is the notion of a social contract. An organization
exists and can use community resources when society con-
siders that the organization is legitimate (Holder-Webb et al.
2009). If society deems that an organization is not operating
in a legitimate manner, then society will react by threatening
the organizations contract to continue its operations by, for
example, consumers boycotting the products of the business;
factor suppliers boycotting the supply of labor and reducing
nancial capital to the business; and stakeholders lobbying
government for increased taxes, nes or laws to prohibit
those activities of the business which do not conform to the
expectations of the community.
Legitimacy theory relies on the assumption that man-
agers will adopt strategies to demonstrate to society that the
organization is attempting to comply with societys
expectations. As societal values change over time,
organizations have to continuously demonstrate that their
operations are legitimate and that they are good corporate
citizens. Where managers perceive their organizations
operations are not commensurate with its social contract
then, according to legitimacy theory, remedial strategies
are predicted. Since the theory is based on perceptions, for
any remedial strategies implemented by management to
have an effect on external parties they must be accompa-
nied by disclosure. That is, information is necessary to
change perceptions (Hooghiemstra 2000; Deegan 2002;
Adams and Zutshi 2004). Remedial action that is not
publicized will not be effective in changing perceptions
(Hooghiemstra 2000; Cormier and Gordon 2001; Holder-
Webb et al. 2009). This highlights the strategic importance
and power of CSR disclosures made in company annual
reports (Deegan 2002). Hence, legitimacy theory provides
a potentially useful theoretical framework to evaluate the
relationship between various rm characteristics and CSR
disclosure. However, it should be noted that disclosures
prompted by an organizations desire to increase its legit-
imacy are likely to be limited to good news (Deegan and
Rankin 1996; Milne et al. 2009).
Stakeholder Theory
Ansoff (1965) used stakeholder theory to dene the
objectives of the organization, with one of the major
objectives being to balance the conicting demands of the
rms various stakeholders. Pfeffer and Salancik (1978)
argue that organizations must rely on external stakeholders
to provide resource support and, in turn, these stakeholders
might demand certain actions from organizations. Simi-
larly, Freeman (1984) and Ullmann (1985) discuss the
signicant role played by managers in assessing the
importance of balancing and meeting the conicting
demands of various stakeholder groups to achieve the
objectives of the rm. Clarkson (1995) notes that without
the continuing support of its primary stakeholders an
organization would have difculty in surviving as a going
concern. More generally, it has been argued that the long-
term survival and success of an organization requires the
support of all its stakeholders (van der Laan Smith et al.
2005, p. 126). Therefore, it is the dependence of the
organization on external stakeholders for resources that
gives these stakeholders power over the organization and
the organizations behavior.
Freeman (1999) argues that strategic stakeholder man-
agement suggests that effective organizations will pay
attention to all stakeholder relationships that can affect, or
can be affected by, the achievement of the rms objec-
tives. Stakeholder management is basically pragmatic in its
concept and application. Therefore, the effective rm will
manage all the stakeholder relationships that are important
Corporate Governance Quality and CSR Disclosures
1 3
to it. This suggests that stakeholder demands will be
addressed if the resources they control are critical to a
rms continued operation and success. A strategic plan for
managing stakeholder relationships might involve devel-
oping a rms reputation as socially responsible through
performing and disclosing CSR activities; particularly if, as
suggested by de Villiers et al. (2011, p. 1639), there is a
positive relationship between strong environmental per-
formance and shareholder wealth. If CSR activities are
viewed as part of a rms strategic management plan for
meeting stakeholder demands, it is reasonable to expect a
positive relationship between stakeholder power and CSR
performance/disclosure (Roberts 1992). Hence, stakeholder
theory also provides a potentially useful theoretical
framework for examining the relationship between various
rm characteristics and CSR disclosure.
Corporate Governance Quality
To maximize stockholder value, a companys Board of
Directors has to gain an understanding of the environ-
mental and social consequences of the companys actions
and ensure the company is responsive to the views of those
with whom it comes into contact (Association of Chartered
Certied Accountants 2005). As noted earlier, companies
can be viewed as operating under a social contract whereby
they are permitted to draw on community resources to
produce goods and services but have no inherent rights to
those resources. Further, there is an expectation that the
benets to society from companies using these resources
should exceed their cost (Mathews 1993). As noted by
Kolk and Pinkse (2010, p. 17), companies need to be both
protable and ethical, and that the dimensions to be cov-
ered for a license to operate have broadened such that
there is a growing overlap between corporate governance
and CSR. The Board sets the operating objectives and
strategies for the company within its social contract and,
thereby, ensures the companys continuing ability to draw
on community resources to produce goods and services.
It follows, therefore, that companies with good corpo-
rate governance should be better corporate citizens and
more socially and environmentally responsible than com-
panies with poor corporate governance. This, in turn,
suggests there should be a strong positive association
between corporate governance quality and the voluntary
provision of CSR information. This proposition was sup-
ported by Eng and Mak (2003) in terms of total voluntary
disclosures and by van der Laan Smith et al. (2005) and
Haniffa and Cooke (2005) with respect to CSR voluntary
disclosures. Further, as noted by de Villiers et al. (2011,
p. 1639): Given the positive relationship between strong
environmental performance and shareholder wealth, as
well as other nonnancial advantages, adherence to sound
environmental practices should constitute an important
objective for boards of directors. Therefore, based on both
legitimacy and stakeholder theory (and the limited prior
evidence) this study will examine the following hypothesis:
Hypothesis 1 There is a positive association between
corporate governance quality and the voluntary provision
of CSR information in company annual reports.
In testing this hypothesis, we control for the following
variables that prior research indicates are also likely to be
associated with CSR disclosures.
Firm Size
Aerts and Cormier (2009, p. 10) note that rm size has
been shown to be an antecedent of legitimacy and there
have been several studies suggesting that company size is
positively associated with CSR activities (see, for example,
Cowen et al. 1987; Patten 1991; Hackston and Milne 1996;
Purushothaman et al. 2000; Haniffa and Cooke 2005).
These studies note that larger companies tend to receive
more attention from the general public and, therefore, are
under greater pressure to provide CSR information. As the
general public becomes more aware of the potential
adverse impacts associated with corporate development,
legitimacy pressures will force businesses to respond to
various social and environmental issues considered to be
the consequences of their activities (Tinker and Niemark
1987). Preston and Post (1975) note that these social and
environmental issues of concern to society can, after due
consideration, become the subject of new laws. Given
business can be constrained by impending legislative
pressure, rms have an incentive to get involved in the
policy process, and this particularly applies to larger
companies because, as noted by Watts and Zimmerman
(1986), larger companies are more visible to the public and
are, therefore, more likely to attract the attention of gov-
ernment regulatory bodies.
Similarly, Branco and Rodrigues (2008, p. 688) suggest
that larger companies, on average, are more diversied
across geographical and product markets and, because of
their greater visibility, will consider social responsibility
activities and disclosure as a way of enhancing corporate
reputation. Further, larger companies are likely to have
more (current and potential) stockholders interested in CSR
activities (than smaller companies), and the management of
larger companies are more likely to use formal communi-
cation channels, such as annual reports, to relate the results
of their CSR activities to interested parties (Cowen et al.
1987). Hence, to avoid regulation and reduce political
costs, larger companies are more likely (than smaller
companies) to provide voluntary CSR disclosures in their
annual reports (Adams et al. 1998).
M. C. Chan et al.
1 3
Industry Prole
Prior research suggests that the extent of public pressure
companies face with respect to their legitimacy in operat-
ing within the boundaries and values of society varies
across different types of industries. Legitimacy theory
predicts that, because they have greater incentives to pro-
ject a good corporate image, rms operating in high prole
(sensitive) industries are likely to disclose more extensive
CSR information than rms operating in low prole (less
sensitive) industries. For example, Dierkes and Preston
(1977) suggest that companies whose economic activities
modify the environment, such as the extractive industries,
are more likely to disclose information about their envi-
ronmental impact than companies in other industries. In
support of this proposition, Deegan and Gordon (1996)
found that companies operating in industries of concern to
environmental groups (for example, uranium mining,
chemicals, coal, and timber products) use environmental
disclosures to legitimize their operations. Parker (1986)
also notes that CSR disclosure can act to pre-empt
impending legislative pressure and as a counter to possible
government intervention. Given rms in high prole
industries are under greater pressure to demonstrate their
legitimacy they can be expected to provide more extensive
CSR information as a way of projecting a responsible
social image and maintaining their competitive advantage
(Itami 1987; Hall 1993).
Stockholder Power/Dispersion
Due to information asymmetry, as ownership dispersion in
a corporation increases conicts of interest between man-
agement and stockholders are more likely to arise. Vol-
untary reporting and disclosure can act to reduce the
information asymmetry that exists between management
and stockholders and can, therefore, assist in reducing
agency conicts (Jensen and Meckling 1976). Further,
Keim (1978) argues that as the distribution of ownership of
a corporation becomes more dispersed, the demands placed
on the corporation by stockholders become broader. Dis-
perse corporate ownership, especially by investors con-
cerned with corporate social activities (for example,
socially responsible mutual funds, church and civic pension
plans, and ethical investors), heightens pressure for man-
agement to disclose socially responsible activities (Ull-
mann 1985). As noted by Cormier and Magnan (1999,
p. 430), it is more efcient for management of widely
held rms to disclose environmental information directly
than for individual investors to collect it themselves.
Therefore, it is reasonable to expect that the more disperse
a rms ownership structure the more CSR information will
be disclosed.
Creditor Power/Leverage
Companies require nancial resources for their continuing
operations and creditors are an important source of such
resources (Pfeffer and Salancik 1978; Roberts 1992). Fur-
ther, stakeholder analysis used in prior research to explain
corporate decisions concerning nancial policies has con-
cluded that capital structure decisions are part of an overall
corporate stakeholder strategy and that creditors are
important stakeholders whose inuence should be managed
(Cornell and Shapiro 1987; Barton et al. 1989). Given that
signicant creditors are important stakeholders it is rea-
sonable to expect that their expectations concerning a
rms CSR activities will receive attention from corporate
managers (Mitchell et al. 1997). For example, in its annual
report, the Commonwealth Bank of Australia stated that
[t]he Bank and its controlled entities are not subject to any
particular or signicant environmental regulation under a
law of the Commonwealth or of a State or Territory, but
can incur environmental liabilities as a lender. The Bank
has developed credit policies to ensure this is managed
appropriately (Commonwealth Bank of Australia 2004,
p. 44). Similar statements can be found in the annual
reports of other major banks. It seems, therefore, that when
a bank re-possesses land (because a borrower has defaulted
on a loan) the bank becomes responsible for any environ-
mental problems (liabilities) associated with that land.
Since banks can incur environmental liabilities as lenders,
it follows that banks will want to ensure the companies
they lend to manage their social and environmental
responsibilities appropriately. This supports the view that
signicant creditors are likely to be interested in the CSR
activities (and particularly the environmental performance)
of the companies to whom they provide credit. Therefore,
according to stakeholder theory, the more a company relies
on external funding the more its management would be
expected to respond to creditor expectations concerning the
rms CSR activities (Roberts 1992).
Economic Performance
According to stakeholder theory, the economic perfor-
mance of a company affects managements decision to
disclose CSR information. Theorists who accept this per-
spective cite protability as a factor that allows (or perhaps
compels) management to undertake, and to reveal to
stockholders, more extensive CSR programs (Cowen et al.
1987). Alternatively, Orlitzky et al. (2003) argue that CSR
activities give rise to improved corporate nancial perfor-
mance rather than good performance allowing (or com-
pelling) CSR activities. Further, it has been suggested that
in periods of low protability economic demands are likely
to take priority over discretionary CSR expenditures and,
Corporate Governance Quality and CSR Disclosures
1 3
therefore, low levels of protability are likely to be asso-
ciated with reduced CSR activities (Ullmann 1985; Roberts
1992). Cormier and Magnan (1999, p. 430) also note that
for rms in poor nancial condition, the disclosure of
additional information about their environmental obliga-
tions or commitments is unlikely to enhance their reputa-
tion among creditors and suppliers. Thus, stakeholder
theory predicts a positive association between economic
performance and CSR disclosure.
Research Method
We employ the following CSR disclosure model to
examine our hypothesis that there is a positive association
between corporate governance quality and the voluntary
provision of CSR information.
DISC
k
b
0
b
1
CG
k
b
2
SIZE
k
b
3
IND
k
b
4
SHP
k
b
5
CP
k
b
6
EP
k
e
k
1
where DISC is the amount of CSR information disclosed
for rm k, CG is corporate governance quality, SIZE is
company size, IND is industry prole, SHP is stockholder
power/dispersion, CP is creditors power/leverage, EP is
economic performance, and e is a normally distributed
random error term
The proxies used to represent the dependent, independent,
and control variables in Eq. (1) are discussed in the following
sub-sections. The companies selected to test this model were
taken from the top 300 companies traded on the ASX in the
year 2004, as obtained from the December 2004 issue of the
personal investor magazine. A copy of the 2004 annual
report for these companies was obtained by either down-
loading it from the companys website, or by phoning or
writing to the company. Sixty-ve of these companies did
not have a Horwath corporate governance ranking (Horwath
2005) and were, therefore, excluded from the sample.
2
A
further 13 companies were excluded for a variety of reasons,
such as the accounts were in a foreign currency; or the
company had been taken over. This left a nal sample of 222
company annual reports for analysis.
Measurement of the Dependent Variable
CSR disclosure has been dened in a number of different
ways (Mathews 1997). In this study, CSR disclosure is
dened as the information provided in a companys annual
report relating to its activities, programs and application of
resources deemed to affect both the public in general and
particular stakeholder groups. These disclosures extend
beyond traditional nancial accounting information and
typically include details pertaining to the environment,
energy usage, employees, products, community services,
and fair business practices (Ernst and Ernst 1978).
This study used company annual reports as the sole source
of CSR disclosure information for several reasons. First,
there have been a number of prior CSR studies that have
adopted this approach and we wanted to be consistent with
those studies. Second, company annual reports are the only
form of corporate disclosure that is provided on a regular
basis (Buhr 1998) and easily accessible to researchers (Un-
erman 2000). Third, the information in company annual
reports is widely recognized as having a high degree of
credibility (Tilt 1994; Neu et al. 1998; Unerman 2000).
Fourth, annual reports are considered by various user groups
to be a major source of information about a companys CSR
performance (see studies by Harte and Owen 1991; Epstein
and Freedman 1994; Tilt 1994; Deegan and Rankin 1997;
ODonovan 2002). Fifth, as noted by van der Laan Smith
et al. (2005, p. 136), the use of the annual report as a method
of communication with stakeholders is also consistent with
the principles of stakeholder theory. Sixth, Gibson and
ODonovan (2007, p. 944) note that, in 2003, the Corporate
Governance Council of the ASX recommended that one
way to demonstrate good governance was to use the annual
report to disclose information to all legitimate stakeholders.
Seventh, based on in-depth interviews with UK corporate
managers, Spence (2009) reports that the most cited target
audience for social and environmental reporting was inves-
tors and given that the annual report is typically the primary,
if not the sole, source of information for most investors this
provides further justication for basing our study on the
information provided in company annual reports. Finally, in
terms of the extent and quality of CSR disclosures, Hooks
and van Staden (2011) found a high degree of correlation
across a range of reporting media, including annual reports;
standalone reports; and the internet.
A review of the literature reveals three primary methods
that might be considered for assessing the amount of CSR
disclosure, namely, measurement in terms of words (Zeg-
hal and Ahmed 1990; Deegan and Gordon 1996; Neu et al.
1998), measurement in terms of sentences (Ingram and
Frazier 1980; Hackston and Milne 1996; Tsang 1998;
Milne and Adler 1999), and measurement in terms of
proportions of a page (Cowen et al. 1987; Patten 1991).
Hackston and Milne (1996) are critical of adopting a
measure based on the number of words, describing it as an
ambiguous measure. The number of words can also be
problematic as individual words do not convey any
2
The Horwath corporate governance report (Horwath 2005) only
ranks the top 250 companies listed on the ASX and there was not an
exact match between the Horwath (2005) corporate governance
rankings and the top 250 companies as listed in the December 2004
issue of the personal investor magazine.
M. C. Chan et al.
1 3
meaning without a sentence to provide the context
(Hackston and Milne 1996; Milne and Adler 1999). Ingram
and Frazier (1980, p. 617) used sentences as their unit of
analysis since a sentence is easily identied, is less sub-
ject to interjudge variations than phrases, classes and
themes, and has been evaluated as an appropriate unit in
previous research.
Using the proportion of a page devoted to CSR disclo-
sure has also been criticized because of the subjectivity
involved in the measurement process and because print
sizes, column sizes and page sizes can differ from one
annual report to another. Some authors also question how
one would treat blank parts of a page (Gray et al. 1995).
Using sentences overcomes the problems associated with
having to allocate portions of a page and removes the need
to account for, or to standardize, the number of words
(Hackston and Milne 1996). As noted by Milne and Adler
(1999, p. 243) [c]oding words or areas of a page (e.g.,
tenths or 100ths) as a basis to derive measures of social and
environmental disclosures adds unnecessary unreliability.
An argument against measuring CSR disclosure in terms
of the number of sentences is that this will result in any
non-narrative CSR disclosures (such as photographs or
charts) being ignored. Any unit of measurement that cannot
take account of graphs, charts, or photographs will omit
from the CSR study these potentially powerful and highly
effective methods of communication (Beattie and Jones
1997). It could even be argued that photographs are
sometimes a more powerful tool in providing CSR dis-
closures than narrative disclosures, particularly for stake-
holders who just ick through the annual report, looking at
the pictures and possibly reading the chairmans report. As
one of the main assumptions behind the use of quantitative
content analysis as an empirical research tool is that vol-
ume of disclosure signies importance (Krippendoff 1980;
Gray et al. 1995; Deegan and Rankin 1996; Neu et al.
1998), it seems inconsistent to omit counting the volume of
disclosure allocated to photographs, tables, graphs, or
charts. While this contention is no doubt true, photographs,
tables, graphs, or charts are highly subjective (Wilms-
hurst and Frost 2000, p. 17) making it difcult to mean-
ingfully combine them with sentences and, consequently,
we elected not to include them. This is acknowledged as a
potential weakness of the study. Therefore, for the purposes
of this study, CSR disclosure sentences are used as the unit
of measurement; with disclosure being measured as a
continuous variable represented by the number of CSR
sentences in a companys annual report.
3
It should also be noted that some authors have distin-
guished between voluntary and mandatory disclosures (see,
for example, Gray et al. 1995) while others have chosen not
to make this distinction (see, for example, Patten 1991).
Hackston and Milne (1996) argue that such a distinction is
not helpful when the amount of mandatory disclosure is
very low. In Australia, so little CSR disclosure is mandated
by legislation that no distinction is made between voluntary
and mandated CSR disclosure for the purposes of this
article.
4
Finally, it is important to acknowledge that our focus
was on the quantity, and not the quality, of CSR disclosures
contained in company annual reports. As noted by Hooks
and van Staden (2011), to evaluate the quality of disclo-
sures would add a further dimension to the assessment of
CSR disclosures and would add further subjectivity to the
content analysis. Hooks and van Staden (2011, p. 210) also
report that companies that had better quality environ-
mental reporting also had more environmental reporting
and this lends credibility to determining levels of envi-
ronmental reporting by means of extent measures.
CSR Measuring Instrument and Content Analysis
Content analysis was dened by Abbot and Monsen (1979,
p. 504) as a technique for gathering data that consists of
codifying qualitative information in anecdotal and literary
form, into categories in order to derive quantitative scales
of varying levels of complexity. Krippendoff (1980,
p. 21) further stated that content analysis is a research
technique for making replicable and valid inferences from
data according to their context. To enable content analysis
to be performed in a replicable manner on the company
annual report data collected for this study, a CSR mea-
suring instrument was developed (from pilot tests on a
sample of company annual reports) to record CSR disclo-
sures across seven themes (the six identied by Ernst and
Ernst (1978) and a general theme). A number of rounds of
pilot testing were performed by one author and checked by
another. Based on the pilot tests, modications were made
to the CSR measuring instrument. These pilot-testing
rounds produced increasingly convergent views as to the
number of sub-themes that should be recorded for each
major disclosure theme and facilitated a consistent count-
ing of the number of sentences under each of the seven
disclosure themes/sub-themes. Having reached an
3
Note that Patten (1991) employed a dichotomous measure for his CSR
disclosure variable, while Roberts (1992) employed three levels to
measure disclosure, namely 0 = poor; 1 = good; and 2 = excellent.
4
The only mandatory CSR disclosure required by Australian
Corporations Law relates to the directors report where the directors
must state if the entitys operations are subject to any particular and
signicant environmental regulation under a law of the Common-
wealth or of a State or Territory and, if so, details of the entitys
performance in relation to those environmental regulations must be
provided.
Corporate Governance Quality and CSR Disclosures
1 3
acceptable level of agreement based on the pilot tests, one
of the authors then completed the content analysis for the
full sample of annual reports. The nal CSR measuring
instrument used to collect the data for this study is pre-
sented in Appendix A.
Measurement of Corporate Governance Quality
and the Five Control Variables
Corporate Governance Quality
As summarized in Table 1, corporate governance quality is
assessed using the WHK Horwath (2005) Corporate gov-
ernance report which ranks Australian companies from best
to worst on the basis of their performance in six key cor-
porate governance areas: board of directors; audit com-
mittee; remuneration committee; nomination committee;
external auditor independence; and code of conduct and
other policy disclosures. Although the weighting attached
to these various characteristics is not known, a major
advantage of using this corporate governance quality
measure (as noted earlier) is the fact that it is independently
determined.
Based on the WHK Horwath (2005) Corporate gover-
nance report our sample companies were ranked from 1
(having the lowest corporate governance ranking) to 222
(having the highest corporate governance ranking). As a
robustness test, a dichotomous measure of corporate gov-
ernance quality was also examined by dividing the total
sample into two categories: those with a corporate gover-
nance ranking above/below the median.
The Five Control Variables
The ve control variables included in the analysis (as
summarized in Table 1) are rm size, industry prole,
stockholder power/dispersion, creditor power/leverage, and
economic performance. Firm size (from personal investor,
Aegis Equities Research 2004) is measured in terms of the
rms market capitalization ranking from 1 (being the
smallest) to 222 (being the biggest). Industry prole is
measured using a scale from 1 to 3; where 1 = low prole,
2 = medium prole, and 3 = high prole. Consistent with
Brammer and Pavelin (2006), low prole rms were those
classied by the ASX as being in the nancials sector (and
included: banks; diversied nancial resources; insurance;
real estate investment trusts; and real estate management
and development). Consistent with Brammer and Pavelin
(2006) and Patten (1991), high prole rms were those
classied as being in the materials sector (and included:
chemicals; construction materials; containers and packag-
ing; metals and mining; and paper and forest products). All
other rms were classied as medium prole and included
rms in the following sectors: energy; industrials; con-
sumer discretionary; consumer staple; health care; infor-
mation technology; telecommunication services; and
utilities. Stockholder power/dispersion is measured as the
percentage of ordinary shares not owned by the 20 largest
stockholders. Creditor power/leverage is measured by total
liabilities as a percentage of the book value of equity.
Finally, economic performance is measured by return on
the book value of equity (ROE).
For the purposes of robustness testing, we also used a
variety of alternative measures for the control variables.
For example, total asset was used as an alternative size
measure and long-term liabilities as a percentage of equity
was used as an alternative measure of creditor power/
leverage. As these alternative measures did not improve the
studys ndings the results from using them are not
reported.
Results
Table 2 provides the descriptive statistics for the depen-
dent, independent, and control variables (except for the
Table 1 Description of independent and control variables
Variable name (expected sign) Measurement Data source
Corporate governance ranking (?) WHK Horwath corporate governance ranking from
1 (worst) to 222 (best)
WHK Horwath 2005 corporate governance report
(Horwath 2005)
Firm size (?) Market capitalization ranking from 1
(smallest) to 222 (biggest)
ASX top 300 companies from personal
investor (Aegis Equities Research 2004)
Industry prole (?) Industry prole: 1 = low prole,
2 = medium prole, 3 = high prole
ASX industry sector classications
Stockholder power/dispersion (?) % of ordinary shares not owned by the 20
largest stockholders
2004 Annual reports
Creditor power/leverage (?) Total liabilities as a percentage of the book
value of equity
2004 Annual reports
Economic performance (?) Return on the book value of equity 2004 Annual reports
M. C. Chan et al.
1 3
categorical and rank variables). Note that CSR disclosure
and creditor power have been transformed by their natural
logarithm due to non-normality in the data (based on the
KolmogorovSmirnov Z test). However, economic per-
formance (which was also not normally distributed) was
not transformed because taking the natural logarithm of
this variable did not improve the model as it resulted in
many cases with negative values having to be removed. It
should also be noted that multi-collinearity between the
variables did not appear to be a problem for the following
reasons. First, as can be seen from Table 3, the highest
correlation (Pearson or Spearman rank) between any of the
independent/control variables was only 0.445. Second, the
standardized residuals from the OLS regression analysis
appeared to be normally distributed (KolmogorovSmirnov
Z = 0.539; p = 0.934). Third, the highest VIF value was
only 1.41 (Wu and Tu 2007). Finally, the highest condition
index value was only 17.5.
5
As can be seen from Table 2, the mean number of CSR
disclosure sentences was 39, with a minimum of zero and a
maximum of 322. Of the 222 companies in the study, only
three had no CSR disclosure sentences, with the remaining
219 companies providing from 1 to 322 disclosure sen-
tences. In terms of the individual disclosure themes (not
reported) the environment and human resources disclosure
themes had the highest percentage of disclosing companies
at 89 and 77 %, respectively; while only 1 % of companies
disclosed information concerning fair business practices.
Table 4 reports the SPSS results for the multivariate
analysis of our CSR model using linear regression. In
support of our hypothesis, the results indicate that total
CSR disclosure is signicantly positively associated with
corporate governance quality and this nding also applies
(at p \0.10) to four of the seven disclosure themes
(environment, energy, human resources, and products). In
terms of the control variables, as expected, total CSR dis-
closure is signicantly positively associated with rm size,
industry prole, and creditor power/leverage (with rm
size and industry prole also being signicant for the
majority of the disclosure themes). However, the results
show no signicant association between the level of total
CSR disclosure and either stockholder power/dispersion or
economic performance (and, again, this nding is largely
consistent across the various disclosure themes). Using
various alternative proxies for the independent and control
variables did not improve our results and, therefore, the
ndings for these alternative proxies are not presented.
Table 2 Descriptive statistics for continuous variables
Mean SD Min Max Skewness Kurtosis
Total CSR disclosure 39.08 44.76 0.00 322 2.51 9.42
Ln total CSR disclosure 3.07 1.23 0.00 5.78 -0.39 -0.56
Stockholder power 37.18 19.82 0.79 92.51 0.52 -0.07
Creditor power 163.34 301.66 0.30 1980.27 3.81 14.68
Ln creditor power 4.36 1.17 0.26 7.59 -0.15 1.86
Economic performance 13.21 17.12 -57.20 88.19 -0.19 5.13
Table 3 Pearson and Spearman
rank correlation coefcients for
the continuous independent
variables
*** p \0.01, two tailed;
** p \0.05, two tailed; and
* p \0.10, two tailed
Variables CG SIZE IND SHP LnCP EP
Pearson correlation coefcients
CG 1.000
SIZE 0.445*** 1.000
IND 0.000 -0.100 1.000
SHP 0.223*** 0.074 -0.231*** 1.000
LnCP 0.015 0.076 0.297*** -0.204*** 1.000
EP 0.027 0.113* -0.015 -0.128* -0.002 1.000
Spearman rank correlation coefcients
CG 1.000
SIZE 0.445*** 1.000
IND 0.000 -0.099 1.000
SHP 0.246*** 0.081 -0.196*** 1.000
LnCP 0.047 0.114* 0.263*** -0.118* 1.000
EP 0.058 0.119* 0.042 -0.106 -0.101 1.000
5
As a rule of thumb, a condition index exceeding 30 indicates strong
multicollinearity (Gujarati 2003).
Corporate Governance Quality and CSR Disclosures
1 3
Discussion
Our ndings are consistent with the view that companies
with good corporate governance are likely to be more
socially and environmentally responsible than those with
poor corporate governance. This result is in keeping with
van der Laan Smith et al. (2005, p. 130) who found that
stakeholders in countries with a communitarian (stake-
holder) orientated corporate governance system (Denmark
and Norway) have more power and legitimacy than in
countries with a contractarian (shareholder) inuenced
corporate governance system (US). Our results also sup-
port Haniffa and Cooke (2005), who found a positive
relationship between the level of CSR disclosure provided
in a companys annual report and the number of director-
ships held by the Chair of its Board. At a more general
level, our results are consistent with Eng and Mak (2003)
who found that corporate governance variables associated
with ownership structure and board composition affect the
disclosure of non-mandatory strategic, non-nancial and
nancial information. Our results also suggest that the
reason a number of prior studies have failed to nd a sig-
nicant association between corporate governance quality
and CSR disclosures might be due to the limited measures
of corporate governance quality used by those previous
studies (see, for example, Faisal et al. 2012). In summary,
our ndings suggest that promoting high quality corporate
governance practices is likely to impact positively on the
provision of voluntary CSR disclosures, thereby reducing
the imperative to mandate such disclosures.
In terms of our control variables, the signicant positive
association between CSR disclosure and rm size supports
earlier studies by Cormier and Magnan (1999) in Canada,
Haniffa and Cooke (2005) in Malaysia, Hackston and
Milne (1996) in New Zealand, Purushothaman et al. (2000)
in Singapore, and Cowen et al. (1987) and Patten (1991) in
the US. However, Roberts (1992) found rm size was not
signicantly associated with CSR disclosure in the US after
including a number of other variables (such as leverage;
return on equity; and industry classication).
Similarly, a signicant positive association between
CSR disclosure and industry prole was also recorded by
Patten (1991) and Roberts (1992) in the US, Cormier and
Magnan (1999) in Canada, and Hackston and Milne (1996)
in New Zealand. However, Cowen et al. (1987) found that
(from 10 industries) only the chemical industry was posi-
tively related to CSR disclosure in the US, and Purush-
othaman et al. (2000) reported that industry classication
was not signicant in Singapore. Our nding of a signi-
cant positive association between CSR disclosure and
leverage (creditor power) supports the earlier ndings of
Roberts (1992), who reported a positive association
between creditor inuences and CSR disclosure in the US,
and Purushothaman et al. (2000), who reported a positive
association between leverage and CSR disclosure in
Singapore.
Our ndings with respect to the two control variables
that appeared not to be associated with CSR disclosure
(stockholder power/dispersion and economic performance)
are also largely consistent with the results of previous
Table 4 Regression results for total CSR disclosure and the seven disclosure themes
Independent/control
variables
Total Seven disclosure themes
CSR
disclosure
General Environment Energy Human
resources
Products Community Fair business
practice
t t t t t t t t
Corporate governance 3.44*** 1.17 2.07** 1.59* 3.37*** 1.95** 1.17 0.40
Firm size 2.56*** 3.83*** 4.04*** 2.45** 2.73*** -0.66 4.54*** 0.34
Industry prole 8.04*** 5.52*** 9.46*** 1.94** 5.20*** 1.38* 2.41** 0.64
Stockholder power 0.14 0.14 0.56 0.17 -0.03 1.01 -0.87 -1.68**
Ln creditor power 3.19*** 0.46 2.76*** 1.20 0.81 -1.07 -0.68 -0.51
Economic performance 0.94 0.94 1.23 -0.23 2.41** -2.44** 0.53 1.26
Constant -1.26 -3.08*** -4.50*** -2.41** -1.91** 0.60 -0.61 0.31
F 20.98 10.01 26.70 3.77 12.55 2.64 6.51 1.05
Prob. (F) 0.00 0.00 0.00 0.00 0.00 0.02 0.00 0.39
Adjusted R
2
0.35 0.20 0.41 0.07 0.24 0.04 0.13 0.00
N 222 222 222 222 222 222 222 222
In all regressions, the natural logarithm of CSR disclosure has been used to minimize the effects of non-normality in the data
*** p \0.01, two tailed; ** p \0.05, two tailed; and * p \0.10, two tailed
M. C. Chan et al.
1 3
studies. For example, Roberts (1992) also failed to nd an
association between CSR disclosure and stockholder
power/dispersion. Similarly, there was no association
between CSR disclosure and economic performance found
in the studies by Cowen et al. (1987) and Patten (1991) for
the US, Hackston and Milne (1996) for New Zealand, and
Purushothaman et al. (2000) for Singapore. However,
Roberts (1992) did report a positive association between
economic performance and CSR disclosure in his US study
and the same applies to the Canadian study by Cormier and
Magnan (1999) and the Malaysian study by Haniffa and
Cooke (2005).
Conclusions, Limitations, and Suggestions for Further
Research
The purpose of this article was to examine the association
between corporate governance quality and CSR disclosure,
controlling for rm size, industry prole, stockholder
power/dispersion, creditor power/leverage, and economic
performance. A major strength of this study is its use of an
independent ranking of the overall corporate governance
quality of Australian-listed companies provided by WHK
Horwath (2005). Prior studies have typically only exam-
ined a limited number of corporate governance attributes.
Consistent with our hypothesis, the analysis of 2004 annual
report data for 222 listed Australian companies indicates
CSR disclosure is signicantly positively associated with
good corporate governance. This nding supports earlier
research by van der Laan Smith et al. (2005) who com-
pared the CSR disclosure practices of a sample of US and
Norwegian/Danish companies and Haniffa and Cooke
(2005) who investigated the relationship between CSR
disclosure and several corporate governance variables for a
sample of Malaysian corporations. Consistent with much of
the previous literature, three of the control variables
included in this study were also found to be positively
associated with CSR disclosure, namely, rm size, industry
prole, and creditor power/leverage. However, for the two
remaining control variables (stockholder power/dispersion
and economic performance) no signicant association with
CSR disclosure was found; a nding that is also consistent
with much of the previous literature.
It is hoped that the ndings from this study will con-
tribute to both the CSR and corporate governance literature
and will be of interest to researchers, investors, politicians,
and regulators. For example, Australian politicians are
currently paying a great deal of attention to global
warming and climate change and are in the process of
developing a carbon emissions trading scheme. The nd-
ings from this study should provide some useful insights to
regulators/policy makers who may be considering the
introduction of legislation to mandate annual report dis-
closures in this area. In particular, our ndings suggests
that (rather than mandating specic disclosures) regulators
would be better served focussing on corporate governance
quality as a way of increasing both CSR activities and their
disclosure in company annual reports. Similarly, the
International Integrated Reporting Committee (2011, p. 2)
is in the process of trying to develop an integrated reporting
framework to guide organizations on communicating the
broad set of information needed by investors and other
stakeholders to assess the organizations long-term pros-
pects. The discussion paper prepared by the International
Integrated Reporting Committee (2011, p. 3) proposes that
the initial focus of an integrated reporting framework
should be on reporting by larger companies and on the
needs of their investors. Our results indicating a positive
association between rm size and voluntary CSR disclo-
sures would support such an approach.
In terms of limitations, it should be noted that our study
only examined 2004 annual report disclosures of Austra-
lian-listed companies and, as such, may not be generaliz-
able across other periods and countries. For this reason,
further analysis of CSR disclosures in later years and other
countries would be a useful extension to this study to
determine if our ndings are consistent over time and
across geographical boundaries. Similarly, we only exam-
ine CSR disclosures contained in company annual reports
and, therefore, future research could usefully examine
other sources of CSR information (such as company
websites). As acknowledged earlier, our study also ignored
CSR disclosures in the form of photographs, tables, graphs,
or charts because they are highly subjective (Wilmshurst
and Frost 2000, p. 17) making it difcult to meaningfully
combine them with sentences. We also note that our cor-
porate governance variable simply ranks the companies in
our sample from best to worst; that is, we do not have any
absolute measure of a companys corporate governance
quality.
Finally, it is important to acknowledge that our adjusted
R
2
indicates that only 35 % of the variation in the level of
CSR disclosure between the companies in our sample can
be explained by the independent and control variables we
examined. Clearly content analysis can only take us so far
in our search to better understand the key drivers of CSR
disclosure in company annual reports. Therefore, although
the level of explained variance in our study compares
favorably with prior studies (for example, Branco and
Rodrigues 2008, were only able to explain 33.5 % of the
variance in their study of social responsibility disclosure
for a sample of Portuguese rms), future qualitative
research (for example, detailed case study analysis) is
likely to be needed to shed further light on the factors that
motivate the disclosure of CSR information in company
Corporate Governance Quality and CSR Disclosures
1 3
annual reports. However, prior to (or as part of) under-
taking such research, it might be time to consider devel-
oping a more holistic/over-arching theoretical framework
within which CSR activities/disclosures could be situated
and the drivers of CSR disclosures better understood. As
noted in the theory development section, there does not
appear to be a universally accepted framework when it
comes to investigating CSR reporting practices; rather,
researchers have adopted a variety of different theoretical
perspectives (such as legitimacy theory and stakeholder
theory). However, there appears to be a growing consensus
that, rather than being distinct, these various theories might
be better seen as overlapping/complimentary theories when
investigating CSR activities/disclosures; and certainly our
results appear to support this view.
There are a number of other specic areas that future
research could also usefully explore. First, future research
might consider distinguishing between positive and nega-
tive CSR disclosures. Similarly, future research could look
at the extent to which CSR disclosures are merely pro-
viding factual information as opposed to presenting infor-
mation designed to help in managing public relations
(corporate image). Third, this was a cross-sectional study
and, therefore, future research could examine whether CSR
disclosure is increasing over time; as CSR activities
potentially become more important. Fourth, this study
examined overall corporate governance quality based on a
companys ranking from best to worst. Future studies could
investigate which aspects of corporate governance are most
closely tied to (or associated with) CSR disclosure. For
example, is the existence of independent directors on the
board associated with greater CSR disclosure and does the
quantity and quality of CSR disclosure increase with an
increase in board members having expertise in green
issues. Finally, it would be interesting to see whether the
ASXs focus in recent years on promoting high quality
corporate governance (Gibson and ODonovan 2007) has
positively impacted the CSR activities of Australian-listed
companies and their disclosure in company annual reports.
Appendix A
CSR Measuring Instrument
Company Name: ________________________________
1.0 General
1.1 Acknowledgment or management of corporate social
responsibility
1.2 Disclosure of corporate objectives or policies with regard
to corporate social responsibility
Appendix continued
2.0 Environment
2.1 Undertaking environmental impact studies & monitoring
programs/Environmental research
2.2 Disclosure of (reportable) environmental incidents or non-
compliance/infringements or nes
2.2.1 - Conducting environmental (compliance) audits
2.3 Protecting/Improving the environment/climate change
strategies/Environmental performance
2.3.1 - Using facilities harmonious with the environment/Water
management & consumption
2.3.2 - Pollution control in the manufacturing process/
Greenhouse gas emissions abatement
2.3.3 - Efciently using material resources in the manufacturing
or business process
2.3.4 - Environmental regulations (e.g., compliance or
breaches)/Rehabilitation Bonds
2.3.5 - Environmental managementsystem/training/plan/
project/audit/impact/performance/compliance
2.3.6 - Environmental awards/commendation/certication/
performance
2.3.7 - Renewable Energy Certicates/Carbon Credits/Carbon
Trading/Environmental Credits/Green house Gas
Abatement Certicates
2.4 Conserving resources by using waste materials/Setting up
a recycling facility/plant
2.4.1 - Recycling waste materials (e.g., chemicals, paper, and
water)/Use of recycled products
2.5 Waste Management/Re-use of by-products/Taking part in
or sponsoring anti-litter
2.6 Land reclamation, remediation, rehabilitation or
revegetation/reforestation, habitat conservation/Planting
trees
2.7 SustainabilityUsing renewable energy/renewable
resources/recycled materials/Sustainable management
or technology or development/Conservation and
research
3.0 Energy
3.1 Disclosing the companys efforts to reduce energy
consumption/Energy management/Awards
3.2 Using or marketing or producing renewable energy/Green
energy
3.3 Disclosing increased energy efciency of products/
Research in reducing energy consumption
3.4 Energy Management System/Using energy more
efciently in the manufacturing process
3.5 Utilizing waste materials for energy production/
Disclosing Energy Use
4.0 Human Resources
4.1 Promotion of employee well-being/health & safety
(including accident statistics disclosure)
4.2 Health & SafetyManagement System/Plan/Training/
Audits/Compliance/Awards/Certication
4.2.1 - Health & SafetyRegulations/Breaches or nes/Injury
prevention
4.3 Improvement of physical/tangible working conditions
M. C. Chan et al.
1 3
Appendix continued
4.3.1 - Employee share plan/Bonuses/Remuneration & Benets
program/Rewards/Incentives
4.3.2 - Redundancy program
4.4 Improvement of mental/intangible working conditions/
environments
4.4.1 - Importance placed on good workplace relations/
Recognition of employees contribution
4.4.2 - Importance of work, family or lifestyle balance/Well-
being/Parental or Maternity Leave
4.4.3 - Improved communication and staff participation in
decision making/Employee satisfaction
4.5 Training & DevelopmentEmployees and providing
career opportunities/Contractors
4.5.1 - Training & DevelopmentAchievement & Awards
4.6 Promoting equity and diversity (equal opportunity)
4.6.1 - Programs for retraining and placing displaced workers/
Helping migrants
4.6.2 - Employment/advancement of women & minorities
4.6.3 - Employment of other special interest groups (including
those with disabilities)
5.0 Products
5.1 Making products safer (Quality Control)/Product
improvement or development/Awards
5.2 Manufacturing systems improvement (e.g., to comply
with international standards)
5.3 Research to reduce pollution effects of products/Improved
recycling of products
5.4 Environmentally responsible products
6.0 Community
6.1 Community relationships, consultation, development, or
partnerships; Community complaints
6.1.1 - Community services (e.g., employee volunteering or
fundraising program)
6.2 Donations and Sponsorships/Contributions
6.2.1 - Donations & community support (e.g., charities, arts,
sporting bodies, schools, hospitals)
6.2.2 - Sponsoring community projects, public health projects,
medical research, or scholarships/Community
development fund and projects
6.2.3 - Award for Excellence in Community Partnerships/Job
creation/Community Award programs
6.3 Opening companys roads, parks and forests to the public
6.4 Providing for Aboriginal training, employment, royalties
or welfare/Aiding disaster victims
6.5 Work experience programs for teenagers/Supporting
education & coaching & traineeship/Youth issues
6.6 Using local suppliers (support Australian made goods)
7.0 Fair Business Practices
7.1 Socially responsible practices abroad/Support for
minority businesses
7.2 Other statements on fair business practices
Total number of sentences
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