J Bus Ethics (2014) 125:5973

DOI 10.1007/s10551-013-1887-8

Corporate Governance Quality and CSR Disclosures

MuiChing Carina Chan John Watson
David Woodliff

Received: 24 January 2013 / Accepted: 2 September 2013 / Published online: 28 September 2013
Springer Science+Business Media Dordrecht 2013

collapses,
and
the
negative
publicity
Abstract
Given
the
increasingaround senior executive
importance attached to both corporateremuneration
have
social
responsibility
(CSR)
andincreased
societys
corporate governance, this studyexpectations in relation
investigates the association betweento
companies
these two complimentary mechanismsenvironmental, social
used by companies to enhance relationsand
ethical
with stakeholders. Consistent with bothresponsibilities
legitimacy and stakeholder theory and(Money and Schepers
controlling for industry profile, firm
size, stockholder power/dispersion,
M. C. Chan J. Watson (&)
creditor power/leverage, and economic
D. Woodliff
performance, our analysis of the annual
Accounting &
reports for a sample of 222 listed Finance, The
of
companies suggests that firms providingUniversity
Western Australia,
more CSR infor-mation: have better35 Stirling Highway,
Crawley, WA 6009,
corporate governance ratings; are lar-Australia
ger; belong to higher profile industries;e-mail:
John.Watson@uwa.edu.au
and are more highly leveraged. Our
findings 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
specific 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

2007, p. 2). Further,

Holder-Webb et al. (
2009) point to the
significant 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)
1

activities.
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 companies have a broader
moral responsibility to
their
environ-ment,
workforce, and local

communities. As companies expand andSerafeim 2011, p. 2).

become more international they areThis has led to a
likely to have a growing impact on the broadening
of
the
social and ecological envi-ronment ofdimensions companies
both
local
and
internationalneed to cover to
communities and there is a growingmaintain their license
expectation that companies should beto operate (Kolk and
accountable to various stakeholder
Pinkse 2010, p. 17). For
groups for all such impacts. In response
example,
a
survey
to such expectations, a growing
conducted to identify the
number of regulators globally are
desirability
and
reviewing the gover-nance arrangements
feasibility of a CSR
of corporations to ensure that corpo-rate
standard found that
practices are aligned with broader
consumers expect firms
societal interests (Ioannou and

123

to meet high health and

safety,

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.

60

M. C. Chan et al.

amount of disclosure and

various
corporate
worker, human rights, consumer protection, and environcharacteristics, such as firm
mental standards, regardless of where their operations are
size;
profitability;
and
located (Smith
2002, p. 42). Further, Gibson and industry classification (see,
ODonovan ( 2007, p. 944) argue that, based on recom- for example, Cowen et al.
mendations by the Corporate Governance Council of the1987; Patten 1991; Roberts
Australian Stock Exchange (ASX), it is clear that good 1992; Hackston and Milne
governance is now closely linked to the concept of CSR and 1996; Purushothaman et al.
accountability and that one way to demonstrate CSR is to 2000). As noted by Adams
increase annual report disclosures.
et al. ( 1998), the first step
It has also been suggested that paying attention to CSR to improving the quantity
activities is good for business. For example, Adams and Zutshi ( and
quality of
CSR
2004) argue that being a good corporate citizen (acting morally disclosure is to study the
responsibly) can assist companies to attract and retain the most firm
characteristics
talented people and this, inevitably, has to be good for business. associated
with
CSR
Further, the production of social and environmental reports can disclosure.
help in the development of better internal control systems and One
important
firm
decision-making pro-cesses; with resulting cost-savings from characteristic where there
continuous improvements. Similarly, de Villiers et al. ( 2011, p.has been limited research to
1639) point to the link between a firms environmental and date, however, is the
financial performance noting that, given this link, details relationship between CSR
concerning a firms environmental performance will be of disclosure and corporate
quality. As
interest to investors. This argument is supported by Ticor governance
Limited, a mining company, which stated (in its annual report) noted by Money and
that [e]nvironmental improvement programs con-tinued to Schepers ( 2007, p. 5)
return benefits to Ticor South Africas business and reputationthere is little existing
(Ticor Limited Annual Report 2004, p. 22). Similarly, the knowledge from a corporate
growing demand from markets, regulators and civil societyperspective as to the extent
alignment
between
is a key motivation behind the development of an integrated of
reporting framework that reflects the commercial, social and corporate governance and
environmental context within which organizations operate CSR. Further, studies that
have sought to examine
(International Inte-grated Reporting Committee 2011, p. 2).
such a relationship have
In summary, demonstrating it acts in a socially and
typically used either: an
environmentally responsible manner can provide a com-pany
indirect proxy for corporate
with four major benefits: improved corporate image and
governance (for example,
relations with stakeholders; better recruitment and retention of
country of origin is used as
employees; improved internal decision-making and costan indicator of likely
savings; and improved financial returns (Adams and Zutshi
corporate governance dif2004). As a result, the past two decades have seen a rapid
ferences by van der Laan
increase in the amount of CSR disclosure in company annual
2005); a
reports and this has been associated with an increase in social Smith et al.
limited
number
of
corporate
and environmental disclosure research (Mitchell and Hill
2009). A key assumption behind such research is that the governance attributes (for
board
amount of CSR disclosure provided by a company signifies the example,
composition,
multiple
importance the company attaches to such matters (Krippendoff
directorships, and type of
1980; Gray et al. 1995; De-egan and Rankin 1996; Neu et al.
shareholders/stockholders
1998). Further, Aerts and Cormier ( 2009, p. 2) argue thatare used as corporate goverenvironmental legitimacy is significantly and positively nance variables by Haniffa
affected by the extent and quality of annual report and Cooke
2005); or a
environmental disclosures.
single corporate governance
Within the CSR literature, an area of consistent interest in attribute (for example, the
recent times has been the association between 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
independence) 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 first 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 firm characteristics) 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 findings, 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

123

Corporate Governance Quality and CSR Disclosures

organizations
have
to
examined, how the dependent and independent/control continuously demonstrate
variables are measured, and the sample selection process. Wethat their operations are
then provide, and discuss, the results of our analysis and legitimate and that they are
conclude with the studys limitations and some sug-gestions good corporate citizens.
for future research.
Where managers perceive
their
organizations
operations
are
not
Theory Development
commensurate with its
social
contract
then,
In examining various CSR issues, prior studies have drawn on a according to legitimacy
number of theoretical frameworks, for example, agency theory,theory, remedial strategies
institutional theory, legitimacy theory, political economy of are predicted. Since the
is
based
on
accounting theory, resource depen-dence theory, and stakeholder theory
perceptions,
for
any
theory (Hackston and Milne 1996). As such, there does not
strategies
appear to be a universally accepted theoretical framework ofremedial
implemented
by
corporate social accounting (Hackston and Milne 1996, p. 78).
management to have an
However, there does seem to be a consensus in the literature that
effect on external parties
the various theories referred to above, rather than being disthey must be accompa-nied
tinct, are better viewed as complimentary or overlapping
by disclosure. That is,
theories (Gray et al. 1995; Cormier and Magnan 1999; Holder-information is necessary to
perceptions
Webb et al. 2009; Reverte 2009; Chen and Roberts 2010).change
Given that legitimacy theory and stakeholder theory appear to(Hooghiemstra
2000;
have been the most widely used theories in examining CSR Deegan 2002; Adams and
disclosures, each of these theories will be briefly reviewed in the
Zutshi
2004). Remedial
following sub-sections. It should be noted that whilst
action that is not publicized
legitimacy theory considers interactions with society as a
will not be effective in
whole stakeholder theory focuses on how an organization
changing
perceptions
interacts with particular stakeholders (Deegan and Blomquist
(Hooghiemstra
2000;
2006, p. 350).
Cormier and Gordon 2001;
Legitimacy Theory
Holder-Webb et al. 2009).
This highlights the strategic
A number of CSR disclosure studies have used legitimacy importance and power of
theory as their conceptual framework (see, for example, Cormier CSR disclosures made in
and Gordon 2001; Deegan 2002; ODonovan 2002; Haniffacompany annual reports
2002). Hence,
and Cooke 2005). Central to organizational legiti-macy is the (Deegan
legitimacy
theory
provides a
notion of a social contract. An organization exists and can use
potentially
useful
theoretical
community resources when society con-siders that the
framework to evaluate the
organization is legitimate (Holder-Webb et al. 2009). If society
relationship
between
deems that an organization is not operating in a legitimatevarious firm characteristics
manner, then society will react by threatening the organizationsand
CSR
disclosure.
contract to continue its operations by, for example, consumers However, it should be noted
boycotting the products of the business; factor suppliers that disclosures prompted
boycotting the supply of labor and reducing financial capital to
by an organizations desire
the business; and stakeholders lobbying government for
to increase its legit-imacy
increased taxes, fines or laws to prohibit those activities of the
are likely to be limited to
business which do not conform to the expectations of the
good news (Deegan and
community.
Rankin 1996; Milne et al.
Legitimacy theory relies on the assumption that man-agers
2009).
will adopt strategies to demonstrate to society that the
organization is attempting to comply with societys
Stakeholder Theory
expectations. As societal values change over time,
Ansoff ( 1965) used
stakeholder theory to define
the objectives of the

organization, with one 61

of
the major objectives being
to balance the conflicting
demands of the firms
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
significant role played by
managers in assessing the
importance of balancing and
meeting the conflicting
demands
of
various
stakeholder
groups
to
achieve the objectives of the
firm. Clarkson ( 1995) notes
that without the continuing
support of its primary
stakeholders an organization
would have difficulty 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 firms objec-tives.
Stakeholder management is
basically pragmatic in its
concept and application.
Therefore, the effective firm
will
manage
all
the
stakeholder
relationships

that are important

123

62

M. C. Chan et al.

environmental
practices
should
constitute
an
to it. This suggests that stakeholder demands will be addressed if
important
objective
for
the resources they control are critical to a firms continued
boards
of
directors.
operation and success. A strategic plan for managing stakeholder
Therefore, based on both
relationships might involve devel-oping a firms reputation as
legitimacy and stakeholder
socially responsible through performing and disclosing CSR theory (and the limited prior
activities; particularly if, as suggested by de Villiers et al. ( evidence) this study will
2011, p. 1639), there is a positive relationship between strong examine
the
following
environmental per-formance and shareholder wealth. If CSRhypothesis:
activities are viewed as part of a firms strategic management
plan for meeting stakeholder demands, it is reasonable to expect Hypothesis 1 There is a
positive association between
a positive relationship between stakeholder power and CSR

corporate

governance

performance/disclosure (Roberts 1992). Hence, stakeholderquality and the voluntary

theory also provides a potentially useful theoretical framework provision
of
CSR
for examining the relationship between various firm information in company
characteristics and CSR disclosure.
annual reports.

In testing this hypothesis,

we control for the following
variables that prior research
To maximize stockholder value, a companys Board of Directors indicates are also likely to
has to gain an understanding of the environ-mental and social be associated with CSR
consequences of the companys actions and ensure the company disclosures.
Corporate Governance Quality

is responsive to the views of those with whom it comes into

contact (Association of Chartered Certified Accountants 2005).Firm Size
As noted earlier, companies can be viewed as operating under a
social contract whereby they are permitted to draw on Aerts and Cormier ( 2009,
community resources to produce goods and services but have no p. 10) note that firm size has
inherent rights to those resources. Further, there is an been shown to be an
expectation that the benefits to society from companies using antecedent of legitimacy
these resources should exceed their cost (Mathews 1993). Asand there have been several

suggesting that
noted by Kolk and Pinkse ( 2010, p. 17), companies need to be studies
company
size
is positively
both profitable and ethical, and that the dimensions to be covassociated
with
CSR
ered for a license to operate have broadened such that there is
activities
(see,
for
example,
a growing overlap between corporate governance and CSR. The
Board sets the operating objectives and strategies for the Cowen et al. 1987; Patten
company within its social contract and, thereby, ensures the 1991; Hackston and Milne
companys continuing ability to draw on community resources 1996; Purushothaman et al.
2000; Haniffa and Cooke
to produce goods and services.
It follows, therefore, that companies with good corpo-rate 2005). These studies note
governance should be better corporate citizens and more that larger companies tend
socially and environmentally responsible than com-panies to receive more attention
with poor corporate governance. This, in turn, suggests there from the general public and,
should be a strong positive association between corporatetherefore, are under greater
governance quality and the voluntary provision of CSR pressure to provide CSR
information. This proposition was sup-ported by Eng and information. As the general
Mak ( 2003) in terms of total voluntary disclosures and by public becomes more aware
of the potential adverse
van der Laan Smith et al. ( 2005) and Haniffa and Cooke (impacts associated with
2005) with respect to CSR voluntary disclosures. Further, as corporate
development,
noted by de Villiers et al. ( 2011, p. 1639): Given thelegitimacy pressures will
positive relationship between strong environmental force businesses to respond
performance and shareholder wealth, as well as otherto various social and
nonfinancial advantages, adherence to sound
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, firms
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 government regulatory bodies.
Similarly, Branco and
Rodrigues ( 2008, p. 688)
suggest
that
larger
companies, on average, are
more diversified 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 communication 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).

123

Corporate Governance Quality and CSR Disclosures

Industry Profile

63

Creditor Power/Leverage
Companies require financial

Prior research suggests that the extent of public pressureresources for their continuing
companies face with respect to their legitimacy in operat-ingoperations and creditors are
within the boundaries and values of society varies across an important source of such
different types of industries. Legitimacy theory predicts that, resources
(Pfeffer
and
because they have greater incentives to pro-ject a good Salancik
1978; Roberts
corporate image, firms operating in high profile (sensitive)
1992). Fur-ther, stakeholder
industries are likely to disclose more extensive CSR
analysis used in prior
information than firms operating in low profile (less
research to explain corporate
sensitive) industries. For example, Dierkes and Preston (decisions
concerning
1977) suggest that companies whose economic activitiesfinancial policies has conmodify the environment, such as the extractive industries, are cluded that capital structure
more likely to disclose information about their envi- decisions are part of an
ronmental impact than companies in other industries. In overall corporate stakeholder
support of this proposition, Deegan and Gordon ( 1996)strategy and that creditors are
found that companies operating in industries of concern to important stakeholders whose
environmental groups (for example, uranium mining, influence should be managed
chemicals, coal, and timber products) use environmental (Cornell and Shapiro 1987;
disclosures to legitimize their operations. Parker ( 1986) alsoBarton et al. 1989). Given
notes that CSR disclosure can act to pre-empt impending that significant creditors are
legislative pressure and as a counter to possible government important stakeholders it is
intervention. Given firms in high profile industries are under rea-sonable to expect that
greater pressure to demonstrate their legitimacy they can be their expectations concerning
expected to provide more extensive CSR information as a a firms CSR activities will
way of projecting a responsible social image and maintaining
receive
attention
from
their competitive advantage (Itami 1987; Hall 1993).
corporate managers (Mitchell
et al. 1997). For example, in
Stockholder Power/Dispersion
its
annual
report,
the
Commonwealth Bank of
Due to information asymmetry, as ownership dispersion in a Australia stated that [t]he
corporation increases conflicts of interest between man- Bank and its controlled
agement and stockholders are more likely to arise. Vol-untary entities are not subject to any
reporting and disclosure can act to reduce the informationparticular
or
significant
asymmetry that exists between management and stockholders environmental
regulation
and can, therefore, assist in reducing agency conflicts (Jensen under a law of the
and Meckling 1976). Further, Keim ( 1978) argues that as Commonwealth or of a State
the distribution of ownership of a corporation becomes more or Territory, but can incur
dispersed, the demands placed on the corporation by environmental liabilities as a
stockholders become broader. Dis-perse corporatelender. The Bank has
ownership, especially by investors con-cerned with corporate developed credit policies to
social activities (for example, socially responsible mutual ensure this is managed
funds, church and civic pension plans, and ethical investors), appropriately
heightens pressure for man-agement to disclose socially(Commonwealth Bank of

responsible activities (Ull-mann 1985). As noted by CormierAustralia

2004, p. 44).
Similar
statements
can be
and Magnan ( 1999, p. 430), it is more efficient for
found
in
the
annual
reports
of
management of widely held firms to disclose environmental
information directly than for individual investors to collect it other major banks. It seems,
themselves. Therefore, it is reasonable to expect that the therefore, that when a bank
more disperse a firms ownership structure the more CSR re-possesses land (because a
borrower has defaulted on a
information will be disclosed.
loan) the bank becomes
responsible for any environmental 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 significant
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 firms CSR
activities (Roberts 1992).

Economic Performance
According to stakeholder
theory, the economic performance of a company affects
managements decision to
disclose CSR information.
Theorists who accept this
per-spective
cite
profitability 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
financial
perfor-mance
rather
than
good
performance allowing (or
com-pelling) CSR activities.
Further, it
has
been
suggested that in periods of
low profitability economic
demands are likely to take
priority over discretionary
CSR expenditures and,

123

64

M. C. Chan et al.

defined as the information

provided in a companys
therefore, low levels of profitability are likely to be assoannual report relating to its
ciated with reduced CSR activities (Ullmann 1985; Robertsactivities, programs and
1992). Cormier and Magnan ( 1999, p. 430) also note that application of resources
for firms in poor financial condition, the disclosure of deemed to affect both the
additional information about their environmental obliga-tions public in general and
or commitments is unlikely to enhance their reputa-tion particular
stakeholder
among creditors and suppliers. Thus, stakeholder theory groups. These disclosures
predicts a positive association between economic extend beyond traditional
performance and CSR disclosure.
financial
accounting
information and typically
include details pertaining to
Research Method
the environment, energy
usage, employees, products,
We employ the following CSR disclosure model to examinecommunity services, and
business
practices
our hypothesis that there is a positive association between fair
corporate governance quality and the voluntary provision of (Ernst and Ernst 1978).
CSR information.
This study used company
annual reports as the sole
source of CSR disclosure
b5CPk b6EPk ek
information
for
several
1
reasons. First, there have
where DISC is the amount of CSR information disclosed for been a number of prior CSR
firm k, CG is corporate governance quality, SIZE is companystudies that have adopted this
size, IND is industry profile, SHP is stockholder approach and we wanted to
power/dispersion, CP is creditors power/leverage, EP is be consistent with those
economic performance, and e is a normally distributed studies. Second, company
random error term
annual reports are the only
The proxies used to represent the dependent, independent, form of corporate disclosure
and control variables in Eq. ( 1) are discussed in the following that is provided on a regular

DISCk b0 b1CGk b2SIZEk b3INDk b4SHPk

sub-sections. The companies selected to test this model were basis (Buhr 1998) and easily
taken from the top 300 companies traded on the ASX in the year accessible to researchers (Un2004, as obtained from the December 2004 issue of the personal erman
2000). Third, the
investor magazine. A copy of the 2004 annual report for these information in company
companies was obtained by either down-loading it from the annual reports is widely
companys website, or by phoning or writing to the company. recognized as having a high
Sixty-five of these companies did not have a Horwath corporate
degree of credibility (Tilt
governance ranking (Horwath 2005) and were, therefore,
1994; Neu et al.
1998;
2
excluded from the sample. A further 13 companies were
Unerman
2000). Fourth,
excluded for a variety of reasons, such as the accounts were in a
annual reports are considered
foreign currency; or the company had been taken over. This left
by various user groups to be a
a final sample of 222 company annual reports for analysis.
major source of information
about a companys CSR
Measurement of the Dependent Variable
performance (see studies by
Harte and Owen

1991;

CSR disclosure has been defined in a number of different

Epstein and Freedman 1994;
ways (Mathews 1997). In this study, CSR disclosure is
Tilt

1994; Deegan and

Rankin
1997; ODonovan
2002). Fifth, as noted by van

The Horwath corporate governance report (Horwath 2005) only ranks

the top 250 companies listed on the ASX and there was not an exact der Laan Smith et al. ( 2005,
match between the Horwath ( 2005) corporate governance rankings and p. 136), the use of the
the top 250 companies as listed in the December 2004 issue of the annual report as a method of
personal investor magazine.
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
justification 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 individual words do not

measure. The number of words can also be problematic as convey any

123

Corporate Governance Quality and CSR Disclosures

It should also be noted

meaning without a sentence to provide the context (Hackston that some authors have
between
and Milne 1996; Milne and Adler 1999). Ingram anddistin-guished
voluntary and mandatory
Frazier ( 1980, p. 617) used sentences as their unit of
disclosures
(see,
for
analysis since a sentence is easily identified, is less sub-ject
example,
Gray
et
al.
1995)
to interjudge variations than phrases, classes and themes, and
has been evaluated as an appropriate unit in previous while others have chosen
not to make this distinction
research.
(see, for example, Patten
Using the proportion of a page devoted to CSR disclo-sure
1991). Hackston and Milne
has also been criticized because of the subjectivity involved in
the measurement process and because print sizes, column sizes ( 1996) argue that such a
and page sizes can differ from one annual report to another. distinction is not helpful
amount of
Some authors also question how one would treat blank parts of a when the
mandatory disclosure is
page (Gray et al. 1995). Using sentences overcomes thevery low. In Australia, so
problems associated with having to allocate portions of a page little CSR disclosure is
and removes the need to account for, or to standardize, the mandated by legislation that
number of words (Hackston and Milne 1996). As noted byno distinction is made
voluntary and
Milne and Adler ( 1999, p. 243) [c]oding words or areas of a between
mandated
CSR
disclosure
page (e.g., tenths or 100ths) as a basis to derive measures of
for
the
purposes
of this
social and environmental disclosures adds unnecessary
4
article.
unreliability.
An argument against measuring CSR disclosure in terms Finally, it is important to
of the number of sentences is that this will result in any non- acknowledge that our focus
narrative CSR disclosures (such as photographs or charts) was on the quantity, and not
quality,
of
CSR
being ignored. Any unit of measurement that cannot take the
disclosures
contained
in
account of graphs, charts, or photographs will omit from the
company
annual
reports.
As
CSR study these potentially powerful and highly effective
methods of communication (Beattie and Jones 1997). Itnoted by Hooks and van
could even be argued that photographs are sometimes a moreStaden ( 2011), to evaluate
powerful tool in providing CSR dis-closures than narrative the quality of disclo-sures
add
a
further
disclosures, particularly for stake-holders who just flick would
dimension
to
the
assessment
through the annual report, looking at the pictures and
possibly reading the chairmans report. As one of the main of CSR disclosures and
assumptions behind the use of quantitative content analysis would add further subjectivity
as an empirical research tool is that vol-ume of disclosure to the content analysis. Hooks
signifies importance (Krippendoff 1980; Gray et al. 1995;and van Staden ( 2011, p.
Deegan and Rankin 1996; Neu et al. 1998), it seems210) also report that
inconsistent to omit counting the volume of disclosurecompanies that had better
environ-mental
allocated to photographs, tables, graphs, or charts. While this quality
contention is no doubt true, photographs, tables, graphs, or reporting also had more
charts are highly subjective (Wilms-hurst and Frost 2000,environmental reporting and
p. 17) making it difficult to mean-ingfully combine them this lends credibility to
with sentences and, consequently, we elected not to include determining levels of envithem. This is acknowledged as a potential weakness of theronmental reporting by means
study. Therefore, for the purposes of this study, CSR of extent measures.
disclosure sentences are used as the unit of measurement;
with disclosure being measured as a continuous variable CSR Measuring Instrument
represented by the number of CSR sentences in a companysand Content Analysis
annual report.

Content analysis was defined

by Abbot and Monsen ( 1979,

p. 504) as a technique for
gathering data that consists of
3
qualitative
Note that Patten ( 1991) employed a dichotomous measure for his codifying
CSR disclosure variable, while Roberts ( 1992) employed three levelsinformation in anecdotal and
to measure disclosure, namely 0 = poor; 1 = good; and 2 = excellent.
literary form, into categories

65
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 measuring
instrument
was
developed (from pilot tests on
a sample of company annual
reports) to record CSR disclosures across seven themes
(the six identified 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, modifications
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 counting of the number of
sentences under each of the
seven disclosure themes/subthemes. Having reached an

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
significant
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.

123

66

M. C. Chan et al.

Aegis Equities Research

2004) is measured in terms
acceptable level of agreement based on the pilot tests, one of
the authors then completed the content analysis for the full of the firms market
sample of annual reports. The final CSR measuringcapitalization ranking from
instrument used to collect the data for this study is pre-sented 1 (being the smallest) to 222
(being the biggest). Industry
in Appendix A.
profile is measured using a
scale from 1 to 3; where 1 =
Measurement of Corporate Governance Quality
low profile, 2 = medium
and the Five Control Variables
profile, and 3 = high profile.
Consistent with Brammer
Corporate Governance Quality
and Pavelin ( 2006), low
profile firms were those
As summarized in Table 1, corporate governance quality isclassified by the ASX as
assessed using the WHK Horwath ( 2005) Corporate gov-being in the financials
ernance report which ranks Australian companies from best sector (and included: banks;
to worst on the basis of their performance in six key cor- diversified
financial
porate governance areas: board of directors; audit com- resources; insurance; real
mittee; remuneration committee; nomination committee; estate investment trusts; and
external auditor independence; and code of conduct and otherreal estate management and
policy disclosures. Although the weighting attached to these development).
Consistent
various characteristics is not known, a major advantage of with Brammer and Pavelin (
using this corporate governance quality measure (as noted
2006) and Patten ( 1991),
earlier) is the fact that it is independently determined.
high profile firms were
Based on the WHK Horwath ( 2005) Corporate gover-those classified as being in
nance report our sample companies were ranked from 1 the materials sector (and
(having the lowest corporate governance ranking) to 222 included:
chemicals;
(having the highest corporate governance ranking). As a construction
materials;
robustness test, a dichotomous measure of corporate gov- containers and packag-ing;
ernance quality was also examined by dividing the total metals and mining; and
sample into two categories: those with a corporate gover- paper and forest products).
nance ranking above/below the median.
All other firms were
classified as medium profile
The Five Control Variables
and included firms in the
following sectors: energy;
The five control variables included in the analysis (as industrials;
con-sumer
summarized in Table 1) are firm size, industry profile, discretionary;
consumer
stockholder power/dispersion, creditor power/leverage, and staple; health care; inforeconomic performance. Firm size (from personal investor, mation
technology;
telecommunication services;

Table 1 Description of independent and control

variables

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 findings
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

Variable name (expected sign)

Measurement

Data source

Corporate governance ranking (?)

WHK Horwath corporate governance ranking from

WHK Horwath 2005 corporate governance report

Firm size (?)

1 (worst) to 222 (best)

Market capitalization ranking from 1
(smallest) to 222 (biggest)

Industry profile (?)

Stockholder power/dispersion (?)
Creditor power/leverage (?)

(Horwath 2005)
ASX top 300 companies from personal
investor (Aegis Equities Research 2004)

Industry profile: 1 = low profile,

ASX industry sector classifications
2 = medium profile, 3 = high profile
% of ordinary Annual reports
Return on the
value
shares not
book value of
of
largest stockholders
Economic
owned by the 20Total liabilities as a percentage of the equit
equity
2004
performance (?)
y
2004 book
Annual reports
2004 Annual reports

123

Corporate Governance Quality and CSR Disclosures

67

Table 3 Pearson and Spearman rank correlation coefficients for the

Table
2 Descriptive
statistics
for continuous variables
continuous
independent
variables
Mean

SD

Min

Max

Total CSR disclosure

39.08

44.76

0.00

322

Ln total CSR disclosure

Stockholder power

3.07
37.18

1.23
19.82

0.00
0.79

163.34
4.36

301.66
1.17

0.30
0.26

13.21

17.12

-57.20

Creditor power
Ln creditor power
Economic performance

1**
1*
1*

p \ 0.01, two tailed;

p \ 0.05, two tailed; and
p \ 0.10, two tailed

Skewness

Kurtosis

2.51

9.42

5.78
92.51

-0.39
0.52

-0.56
-0.07

1980.27
7.59

3.81
-0.15

14.68
1.86

88.19

-0.19

5.13

Variables

CG

SIZE

IND

SHP

LnCP

EP

Pearson correlation coefficients

CG
1.000
SIZE
IND

0.445***
0.000

SHP
LnCP
EP

0.223***
0.015
0.027

1.000
-0.100

1.000

0.074
0.076
0.113*

-0.231***
0.297***
-0.015

1.000
-0.204***
-0.128*

1.000
-0.002

1.000

Spearman rank correlation coefficients

CG
1.000
SIZE
IND

0.445***
0.000

1.000
-0.099

SHP
LnCP

0.246***
0.047

0.081
0.114*

EP

0.058

0.119*

1.000
-0.196***
0.263***
0.042

zero
categorical and rank variables). Noteand a
that CSR disclosure and creditor power maxim
have been transformed by their naturalum of
logarithm due to non-normality in the322. Of
data (based on the Kolmogorovthe 222
Smirnov Z test). However, economiccompa
per-formance (which was also notnies in
normally
distributed)
was
notthe
transformed because taking the naturalstudy,
logarithm of this variable did notonly
improve the model as it resulted in manythree
cases with negative values having to behad no
removed. It should also be noted that CSR
multi-collinearity between the variablesdisclos
ure
did not appear to be a problem for the
sentenc
following reasons. First, as can be seen
es, with
from Table 3, the highest correlationthe
(Pearson or Spearman rank) betweenremaini
any of the independent/control variablesng
was
only
0.445.
Second,
the
standardized residuals from the OLS
regression analysis appeared to be
5
normally distributed (Kolmogorov As a
rule of
Smirnov Z = 0.539; p = 0.934). Third,thumb, a
the highest VIF value was only 1.41conditio
n index
(Wu and Tu 2007). Finally, the highestexceedin
g
30
5

indicates
strong
multicoll
As can be seen from Table 2, theinearity
mean number of CSR disclosure(Gujarati
2003).

condition index value was only 17.5.

sentences was 39, with a minimum of

123

1.000
-0.118*

1.000

-0.106

-0.101

1.000

219 companies providingexpected,

total
from 1 to 322 disclosureCSR dis-closure
sen-tences. In terms of theis
significantly
individual disclosure themespositively
(not
reported)
theassociated with
environment and humanfirm size, industry
resources disclosure themesprofile,
and
had the highest percentagecreditor
of disclosing companies atpower/leverage
89 and 77 %, respectively;(with firm size
while only 1 % ofand
industry
companies
disclosedprofile also being
information concerning fairsignificant for the
business practices.
majority of the
Table 4 reports the SPSSdisclosure
results for the multivariatethemes).
the
analysis of our CSR modelHowever,
using linear regression. Inresults show no
support of our hypothesis,significant
the results indicate that total association
CSR
disclosure
isbetween the level
significantly
positivelyof total CSR
and
associated with corporatedisclosure
governance quality and thiseither stockholder
finding also applies (at p \ power/dispersion
economic
0.10) to four of the sevenor
performance
(and,
disclosure
themes
(environment,
energy,again, this finding
largely
human
resources,
andis
products). In terms of theconsistent across
various
control
variables,
asthe

disclosure
themes).
Using
various
alternative
proxies for the
independent and
control variables
did not improve
our results and,
therefore,
the
findings for these
alternative
proxies are not
presented.

68

M. C. Chan et al.

Table 4 Regression results for total CSR disclosure and the seven disclosure themes
Independent/control
variables

Total

Seven disclosure themes

CSR
disclosure
t

General

Environment

Energy

Corporate governance

3.44***

1.17

Firm size
Industry profile

2.56***
8.04***

Stockholder power
Ln creditor power

Products

Community

Human
resources
t

Fair business
practice
t

2.07**

1.59*

3.37***

1.95**

1.17

0.40

3.83***
5.52***

4.04***
9.46***

2.45**
1.94**

2.73***
5.20***

-0.66
1.38*

4.54***
2.41**

0.34
0.64

0.14
3.19***

0.14
0.46

0.56
2.76***

0.17
1.20

-0.03
0.81

1.01
-1.07

-0.87
-0.68

-1.68**
-0.51

Economic performance
Constant

0.94
-1.26

0.94
-3.08***

1.23
-4.50***

-0.23
-2.41**

2.41**
-1.91**

-2.44**
0.60

0.53
-0.61

1.26
0.31

F
Prob. (F)

20.98
0.00

10.01
0.00

26.70
0.00

3.77
0.00

12.55
0.00

2.64
0.02

6.51
0.00

1.05
0.39

0.35
222

0.20
222

0.41
222

0.07
222

0.24
222

0.04
222

0.13
222

0.00
222

Adjusted R
N

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

In terms of our control

variables, the significant
positive association between
Our findings are consistent with the view that companies CSR disclosure and firm
with good corporate governance are likely to be more size supports earlier studies
socially and environmentally responsible than those withby Cormier and Magnan (
poor corporate governance. This result is in keeping with van1999) in Canada, Haniffa
der Laan Smith et al. ( 2005, p. 130) who found that and Cooke ( 2005) in
stakeholders in countries with a communitarian (stake- Malaysia, Hackston and
holder) orientated corporate governance system (Denmark Milne ( 1996) in New
and Norway) have more power and legitimacy than in Zealand, Purushothaman et
countries with a contractarian (shareholder) influenced
al. ( 2000) in Singapore, and
corporate governance system (US). Our results also supCowen et al. ( 1987) and
port Haniffa and Cooke ( 2005), who found a positive
relationship between the level of CSR disclosure provided in Patten ( 1991) in the US.
a companys annual report and the number of director-shipsHowever, Roberts ( 1992)
held by the Chair of its Board. At a more general level, our found firm size was not
results are consistent with Eng and Mak ( 2003) who foundsignificantly associated with
that corporate governance variables associated with CSR disclosure in the US
after including a number of
ownership structure and board composition affect the
other variables (such as
disclosure of non-mandatory strategic, non-financial and
leverage; return on equity;
financial information. Our results also suggest that the reason
and industry classification).
a number of prior studies have failed to find a sig-nificant
association between corporate governance quality and CSR Similarly, a significant
disclosures might be due to the limited measures of corporatepositive association between
governance quality used by those previous studies (see, for CSR disclosure and industry
profile was also recorded by
example, Faisal et al. 2012). In summary, our findings
suggest that promoting high quality corporate governancePatten ( 1991) and Roberts (
practices is likely to impact positively on the provision of 1992) in the US, Cormier
voluntary CSR disclosures, thereby reducing the imperative and Magnan ( 1999) in
Canada, and Hackston and
to mandate such disclosures.
Milne ( 1996) in New
Discussion

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
classification
was
not
significant in Singapore.
Our finding of a signifi-cant
positive association between
CSR
disclosure
and
leverage (creditor power)
supports the earlier findings
of Roberts ( 1992), who
reported
a
positive
association between creditor
influences
and
CSR
disclosure in the US, and
Purushothaman et al. (
2000), who reported a
positive association between
leverage
and
CSR
disclosure in Singapore.
Our findings 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

123

Corporate Governance Quality and CSR Disclosures

studies. For example, Roberts ( 1992) also failed to find 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 firm size, industry profile, 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 significantly
positively associated with good corporate governance. This
finding 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, firm size, industry profile, and creditor
power/leverage. However, for the two remaining control
variables (stockholder power/dispersion and economic
performance) no significant association with CSR disclosure
was found; a finding that is also consistent with much of the
previous literature.

It is hoped that the findings from this study will contribute 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 find-ings from this
study should provide some useful insights to
regulators/policy makers who may be considering the

69

introduction of legislation to
mandate annual report disclosures in this area. In
particular,
our
findings
suggests that (rather than
mandating
specific
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 firm size
and voluntary CSR disclosures 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
findings are consistent over
time
and
across

geographical boundaries. Similarly, we only exam-ine CSR CSR disclosure between the
disclosures contained in company annual reports and, companies in our sample
therefore, future research could usefully examine othercan be explained by the
sources of CSR information (such as company websites). As independent and control
acknowledged earlier, our study also ignored CSR variables we examined.
disclosures in the form of photographs, tables, graphs, orClearly content analysis can
charts because they are highly subjective (Wilmshurst and only take us so far in our
Frost 2000, p. 17) making it difficult to meaningfullysearch to better understand
the key drivers of CSR
combine them with sentences. We also note that our cordisclosure in company
porate governance variable simply ranks the companies in
annual reports. Therefore,
our sample from best to worst; that is, we do not have any
although the level of
absolute measure of a companys corporate governance
explained variance in our
quality.
study compares favorably
Finally, it is important to acknowledge that our adjusted with prior studies (for
2
Branco
and
R indicates that only 35 % of the variation in the level of example,

123

Rodrigues 2008, were only

able to explain 33.5 % of
the variance in their study of
social
responsibility
disclosure for a sample of
Portuguese firms), 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

70

M. C. Chan et al.
Appendix continued

annual reports. However, prior to (or as part of) under-taking

2.0
Environment
such research, it might be time to consider devel-oping a more
holistic/over-arching theoretical framework within which 2.1 Undertaking
environmental impact
CSR activities/disclosures could be situated and the drivers of
studies & monitoring
programs/Environment
CSR disclosures better understood. As noted in the theory
al research
development section, there does not appear to be a universally
accepted framework when it comes to investigating CSR 2.2 Disclosure of (reportable)
environmental incidents
reporting practices; rather, researchers have adopted a variety
or
noncompliance/infringemen
of different theoretical perspectives (such as legitimacy theory
ts or fines
and stakeholder theory). However, there appears to be a
Conducting
growing consensus that, rather than being distinct, these 2.2.1 environmental
various
theories
might
be
better
seen
as
(compliance) audits
overlapping/complimentary theories when investigating CSR
the
activities/disclosures; and certainly our results appear to 2.3 Protecting/Improving
environment/climate
change
support this view.
There are a number of other specific areas that future research
could also usefully explore. First, future research might consider 2.3.1 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 2.3.2 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
2.3.3 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 2.3.4 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.

2.3.5 -

2.3.6 Appendix A
CSR Measuring Instrument

General

1.1

Acknowledgment or management of corporate social

responsibility

1.2

Disclosure of corporate objectives or policies with regard to

corporate social responsibility

2.6

Land reclamation,
remediation,
rehabilitation or
revegetation/reforestat
ion, habitat
conservation/Planting
trees

2.7

SustainabilityUsing
renewable
energy/renewable
resources/recycled
materials/Sustainabl
e management or
technology or
development/Conser
vation and research

3.0

Pollution
control in the
manufacturing
process/
Greenhouse gas
emissions
abatement

Disclosing
the
companys
efforts
to
reduce energy
consumption/E
nergy
management/A
wards

3.2

Using or marketing or
producing renewable
energy/Green energy

3.3

Disclosing
increased
energy
efficiency
of
products/
Research
in
reducing energy
consumption

3.4

Energy
Management
System/Usin
g
energy
more
efficiently in
the
manufacturin
g process

3.5

Utilizing waste
materials for
energy
production/
Disclosing
Energy Use

Efficiently
using
material resources in the
manufacturing
or
business process
Environmental
regulations
(e.g.,
compliance or
breaches)/Reha
bilitation Bonds
Environmental
management
system/training/pla
n/
project/audit/impact
/performance/comp
liance
Environmental
awards/commendat
ion/certification/
performance
Certificates/Carbon
Credits/Carbon
Trading/Environmental
Credits/Green house
Gas Abatement
Certificates

2.4 Conserving resources by

using waste
materials/Setting up a
recycling facility/plant

2.4.1 -

2.5

Recycling
waste
materials
(e.g.,
chemicals, paper, and
water)/Use of recycled
products

Waste
use

Management/Reof
by-

Energy

3.1

Using
facilities
harmonious with the
environment/Water
management
&
consumption

4.0

Human
Resources

2.3.7 - Renewable Energy

Company Name: ________________________________

1.0

strategies/Environme
ntal performance

products/Taking part
in or sponsoring antilitter

4.1

Promotion
of
employee wellbeing/health &
safety
(including
accident
statistics
disclosure)

4.2

Health & Safety

Management
System/Plan/Traini
ng/
Audits/Compliance
/Awards/Certificati
on

4.2.1 -

Health & Safety

Regulations/Breaches
or
fines/Injury

prevention

4.3

Improvement

physical/tangible
working conditions

of

123

Corporate Governance Quality and CSR Disclosures

Appendix continued

4.3.1 -

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