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We examine how social diversity and inclusiveness on corporate boards affect corporate performance and monitoring in Sri Lanka, a country subject to decades of polarization, civil war, and even genocide. Barely more than a decade after the civil war, we find that board social diversity on the basis of ethnicity, religion, language, gender, and nationality of the board members is positively related to corporate performance, both in terms of stock market performance and accounting returns, and to corporate financial stability. The main positive effects of social diversity derive from ethno-linguistic inclusiveness. The results are confirmed by an instrumental variable approach that addresses endogeneity issues. We find no evidence that inter-personal and moral conflicts or communication problems among board members negatively affect firm performance. [ABSTRACT FROM AUTHOR]

We examine the effects of taxes on Corporate Social Responsibility (CSR). Employing a tax reform in Korea that imposed a new tax on cash retention, we find that treated firms improved CSR performance after the tax reform was enacted. This result is driven by improvement in environmental and social performance. Moreover, the observed improvement is more pronounced in treated firms that face less severe financial constraints, are afforded fewer investment opportunities, feature large foreign ownership stakes, and employ stronger corporate governance mechanisms. The results suggest that tax increases lead to an increase in CSR investment and the magnitude of the increase depends on firm-level characteristics. As such, our results support the tax-strategic view of CSR in a country that has been a latecomer in incorporating CSR practices into business operations. [ABSTRACT FROM AUTHOR]

Increasing the participation of women in top-level corporate boards is high on the agenda of policy-makers. Yet, we know little about director appointment dynamics and the drivers and impediments of women appointments. This study builds on organizational and group-level behavior theories and empirically investigates how ex-ante board structures and gender-specific board dynamics impact the representation of women on corporate boards. We study boards of listed firms in Europe between 2002 and 2019 and find a declining appointment probability for every additional woman, i.e., the share of women already on the board negatively predicts the likelihood of additional women appointments. Further, we find evidence of a replacement effect, i.e., the likelihood of a woman being appointed as director is significantly larger when a woman, compared to when a man, leaves the board. We do not find spillover effects from non-executive to executive boards. These results are robust to econometric model specifications that address potential endogeneity concerns using matching and instrumental variables. Our results confirm that board director appointments are gender specific and suggest that demand-side factors such as explicit and implicit norms drive women appointments up to a certain threshold. [ABSTRACT FROM AUTHOR]

This study examines whether and how a CEO's personal traits (gender, altruism, age, and founder) influence organizational performance. Building upon upper echelons theory, this study develops a conceptual framework that gives explicit recognition to how the institutional environment surrounding the CEOs shapes their characteristics, which, in turn, are reflected in the different organizational strategies and performance. This study moves beyond the existing focus on for-profit corporations and conducts the empirical analysis on a novel, hand-collected, longitudinal dataset of 1342 firm-year observations of 128 faith-based charity organizations operating in a major developing, Muslim-majority country in the period 1996–2019. This study reveals that those faith-based charity organizations led by CEOs with specific personal traits (woman, altruistic, young, and founder) exhibit better organizational performance. Importantly, CEOs' personal traits, however, do not have a uniform, systematic effect; their effect is generally strengthened when the CEO is also the founder of the faith-based charity organization, given the greater latitude of managerial discretion that a CEO has in managing the organization. Our findings have important implications for individual charity organizations; their board of directors; and their stakeholders, in particular the communities they serve, as well as the whole society where they operate. [ABSTRACT FROM AUTHOR]

Business ethics can be regarded as a field dealing with corporate self-regulation as it relates to the treatment of stakeholders. However, a concern for corporate stakeholders need not take a corporate-centric perspective, as shown by recent efforts (especially Singer in Bus Ethics Q 25(1):65–92, 2015) to situate corporate conduct within Rawls' political theory. Although Rawls was largely mute on the subject himself, his theory has implications for business ethics and corporate governance more specifically. Given an understanding of a "Rawlsian society" as a whole—where corporations as associations are a part—this paper addresses how a Rawlsian perspective would safeguard against corporate harms in society. We argue that a Rawlsian society would primarily regulate corporate conduct through exogenous constraints in the form of legislation. To the extent that business ethics is concerned with endogenous constraints in the form of corporate-centric self-regulation regarding stakeholders, to adopt a Rawlsian perspective is to assume instead a society-centric perspective and to impose exogenous constraints on corporate conduct in the form of legislation for the benefit of citizens. In the context of Rawls' political liberalism, normative concerns in business are accounted for through legislation and the system of background justice. In a clear departure from Singer (Bus Ethics Q 25(1):65–92, 2015, Bus Ethics J Rev 6(3):11–17, 2018a), we further develop our argument to propose that Rawls' theory can be interpreted as providing a rule for corporate governance. The rule—which is imposed exogenously for the good of society—states: After choosing the corporate constraint mechanism (exogenous vs. endogenous) that best promotes the Liberty Principle, choose the corporate control regime (shareholder vs. stakeholder) that maximizes economic efficiency. [ABSTRACT FROM AUTHOR]

How do wealth managers understand and comply with the social norms embedded in banks' codes of conduct (CoC), and how do they cope with ethical dilemmas? Do they have a tendency after the global financial crisis to prioritize banks' financial security over clients' interests? To answer these and related questions, we conduct a nonincentivized online survey with wealth management employees of the Swiss legal entity of a large multinational bank. We propose a method to estimate the comprehension and the level of expected adherence to the CoC principles that we test with our sample. We further show that framing questions under the label of "Financial Security" increased response accuracy and that employees' honesty helped guide their decision-making toward integrity in ethical dilemmas. Thus, in addition to validating a method for testing the level of CoC comprehension and the expected adherence to its principles, our study is among the first to show that in the wealth management business, honesty and social injunctive norms defined in the bank's CoC reinforce one another. [ABSTRACT FROM AUTHOR]

In response to stakeholder pressure, companies increasingly make ambitious forward-looking sustainability commitments. They then draw on corporate policies with varying degrees of alignment to disseminate and enforce corresponding behavioral rules among their suppliers and business partners. This goal-based turn in private sustainability governance has important implications for its likely environmental and social outcomes. Drawing on paradox theory, this article uses a case study of zero-deforestation commitments in the Indonesian palm oil sector to argue that goal-based private sustainability governance's characteristics set the stage for two types of paradoxes to emerge: performing paradoxes between environmental, social, and economic sustainability goals, and organizing paradoxes between cooperation and competition approaches. Companies' responses to these paradoxes, in turn, can explain the lack of full goal attainment and differential rates of progress between actors. These results draw our attention to the complexities hidden behind governance through goal setting in the corporate space, and raise important questions about the viability of similar strategies such as science-based targets and net-zero goals. [ABSTRACT FROM AUTHOR]

In ways accentuated by the global coronavirus pandemic, corporations constitute vital instruments of the acts of beneficence needed by the people of the world to make progress in public health and increase collective and individual well-being. This article contributes to understanding the variety of moral forces that may lead corporations to commit acts of beneficence, including Friedman's business case for corporate beneficence, the duty of beneficence as developed by business ethicists, and Dunfee's social contract account of corporate obligation. Whereas Mejia recently contributed to scholarship on corporate beneficence by expressly adopting shareholder primacy's conception of corporate governance, this article embraces a stakeholder-oriented, managerialist picture of corporate governance. I extend the literature on beneficence by incorporating what I argue is the intuition underlying Dunfee's contractualist formula of minimal contribution, namely that management's duty to do good is awakened and unshackled to the extent management judges the corporation can afford to commit acts of beneficence, all stakeholders considered. The all-stakeholders-considered case for corporate beneficence compels management to act, I argue, when inaction would undermine the moral integrity of managers personally committed to promoting the well-being of humanity. [ABSTRACT FROM AUTHOR]

Committees multiply in firms, whether stakeholder boards or committees, multi-stakeholder initiatives, ethics committees, or oversight boards. These arrangements aim to organise and legitimise the social and political activities of corporations. This article raises the question of the appropriate form of such governance structures. The examples above illustrate three possible ways of legitimising corporate quasi-public social and political activities: deliberation within the company, deliberation outside, and an approach we label corporate constitutionalism. While the first two models have been tested in practice and assessed in theory, the third one is comparatively more recent, both in practice and in theory. This article focuses on the latter model and asks whether corporate constitutionalism offers a suitable addition, or alternative, to deliberation (with or within firms) for legitimising corporate quasi-public social and political activities. It examines the respective merits of the three models and argues that a corporate constitutional court may mitigate some of the limits of deliberative practices alone. It argues the court is needed in weak regulatory environments, whether they are failing or inherently limited. [ABSTRACT FROM AUTHOR]

Previous studies have been split over how to view family owners' CSR engagement, arguing that they either engage in or disengage from CSR based on different motives (i.e., preserving socio-emotional wealth vs. seeking rent expropriation). Focusing on family owners in business groups, this study integrates these divergent views. We hypothesize that family owners would pursue both motives simultaneously by optimizing the level of CSR of each affiliated firm depending on their ownership level. Furthermore, we argue that this tendency is moderated by group-level contexts. Using a sample of Korean business groups, we found that family ownership is negatively associated with affiliated firms' CSR. Also, this negative relationship is more pronounced when firms belong to business groups with more charitable corporate foundations and when business networks are greater in their scope and scale. This study contributes to the literature by offering a more complete understanding of how family owners make CSR decisions in business group contexts. [ABSTRACT FROM AUTHOR]

Market participants continue to demand greater transparency from boards of directors, yet little is known about the effect of increased transparency on director decisions. Using a sample of practicing board members, our first experiment provides evidence that increased transparency via disclosure may license directors to make more biased decisions. Guided by rich insights provided by these directors, we examine whether considering a company's ethical values can deter disclosure-induced licensing by activating a morality mindset. In two additional experiments, we find that exposure to a code of conduct that includes an ethics component does not mitigate the licensing effects we observed; however, considering a separate, concise ethics statement does mitigate these effects. Our findings highlight important differences between the code of conduct and ethics statement for decision-making which can help organizations to mitigate adverse effects of disclosure. Implications for users of financial information and regulators are also discussed. [ABSTRACT FROM AUTHOR]

Firm managers make ethical decisions regarding the form and quality of disclosure. Disclosure can have long-term implications for performance, earnings manipulation, and even fraud. We investigate the impact of venture capital (VC) backing on the quality and informativeness of disclosure controls and procedures for newly public companies. We find that these controls and procedures are stronger, as evidenced by fewer material weaknesses in internal control under Section 302 of the Sarbanes–Oxley Act, when companies are VC-backed. Moreover, these disclosures are informative and are more likely to be followed by subsequent financial statement restatements than are disclosures made by non-VC-backed IPO companies. [ABSTRACT FROM AUTHOR]

This paper examines the effects of a decrease in auditor litigation risk in a setting that isolates a change in auditor litigation risk from changes in auditor reputation. StoneRidge Investment Partners v. Scientific Atlanta is a 2008 U.S. Supreme Court ruling that restricted secondary actor liability in class action suits, resulting in a decrease in class actions that listed auditors as defendants. We document that the StoneRidge decision is associated with a negative CAR for clients of Big 4 auditors and industry specialist auditors, in particular those associated with high-litigation risk, low cash, and past incidences of modified going concern opinions. These findings are consistent with investor perception of lower potential payoffs from secondary defendants in class action suits, in particular auditors, following the StoneRidge decision. We also document that auditors are more (less) likely to accept (reject) risky clients and charge lower audit fees to risky clients after StoneRidge, consistent with a decrease in auditor litigation risk that increases auditor risk tolerance. Finally, we provide evidence that audit firms issue fewer going concern opinions following StoneRidge, consistent with a decrease in litigation risk leading to lower audit quality. Our results are relevant to policy makers as they consider the disciplinary role of litigation on audit markets. [ABSTRACT FROM AUTHOR]

This study uses insights from the political perspective on corporate governance to investigate the influence of geographic concentration of institutional blockholders on workplace safety violations. When institutional investors who have a blockholding stake (i.e., institutional blockholders) are geographically concentrated, corporate managers are more likely to pursue efficiency at the expense of employee interests because these blockholders may find it easier to coordinate their actions, strengthening their power over corporate managers and ultimately giving rise to more workplace safety violations. We also contend that the influence of institutional blockholders' geographic concentration on workplace safety violations hinges upon the ownership of employees, socially responsible investment funds, and the CEO. Findings from a longitudinal sample of 1316 U.S. firms support our arguments. This study contributes to a nascent stream of research examining the influence of capital market participants on workplace safety by highlighting the role of institutional blockholders' geographic concentration as a new channel through which investors can shape employee outcomes. [ABSTRACT FROM AUTHOR]

Increasingly organizations have dedicated systems and personnel (recipients) to receive and handle internal whistleblower reports. Yet, the complexity of handling whistleblower reports is often underestimated, and there is a dearth of literature that attempts to describe or analyse the challenges internal recipients face. This paper uses an agency theory inspired lens to provide insight into the complexity of internal whistleblowing, with the aim to identify focal points for improving internal whistleblowing processes. We conceive of internal recipients as agents of two principals in the event of whistleblowing: owner/top management as well as whistleblowers. We identify sources of agency problems and agency costs within these double-agent relationships. We provide avenues for solving these problems and reducing the agency costs. We close by offering paths for future research. [ABSTRACT FROM AUTHOR]

This first wave study of the Covid-19 pandemic investigates why the governments of different countries proceeded to lockdown at different speeds. We draw upon the literature on Corporate Governance Institutions (CGIs) to theorize that governments' decision-making is undertaken in the light of prevailing beliefs, norms, and rules of the collectivity, as portrayed by the focal country's CGIs, in their effort to maintain legitimacy. In addition, drawing on motivated cognition we posit that the government's political ideology moderates this relationship because decision-makers are biased when assessing the impact of lockdown on commerce. Running negative binomial regressions on a sample of 125 countries, we find that the more shareholder-oriented the CGIs, the slower the governmental response in shutting down the economy to protect from the pandemic. Moreover, the main relationship is stronger the more right-leaning the government's ideology. Our study contributes to the research on corporate governance institutions and political ideology and illustrates how societal and ideological biases affect government decision-making, especially when important decisions about public welfare are taken with little information on hand. [ABSTRACT FROM AUTHOR]

This paper presents an examination of the relationship between the presence and composition of a corporate social responsibility (CSR) committee on the corporate governance board and CSR decoupling. Using a sample of listed firms drawn from 41 countries, we found that the presence of a CSR committee on the corporate board is negatively associated with CSR decoupling. We also noted that the nature of the industry to which a firm belongs, a firm's level of CSR orientation, and corporate governance quality strengthen such association. Further analysis of the relationship between the structure of the CSR committee and CSR decoupling shows that larger CSR committee size and a greater independence and longer tenure of its members negatively affect CSR decoupling. Our results are robust to various alternative specifications and offer important research and managerial implications. The findings of this study contribute to the growing literature on corporate governance and CSR. [ABSTRACT FROM AUTHOR]

From an institutional perspective we contribute to corporate governance of firms by (1) proposing a procedurally fair mechanism that is ethically desirable, and (2) experimentally testing whether procedural fairness crowds-in ethical behavior of managers (on behalf of shareholders) and workers. The experiment sees one 'manager' and three 'workers' (possibly representing three sections of the firm) co-determining an efficiency-enhancing investment which could harm some workers. Firstly, the manager claims a share of the investment surplus, then workers 'bid' for the investment to express their willingness to satisfy the manager's claim in case the investment is implemented. If the sum of workers' bids is less than the manager's claim, the investment is not implementable, which means its surplus will be lost. Workers' behavior is 'ethical' when they veto unfair managerial claims, because the workers have to sacrifice own earnings. Hence, a manager's fair claim is the ethical response to the threat of workers' veto. If the manager claims fairly, workers' ethical behavior is to 'truthfully' bid their investment evaluations; by all doing so, they equally share whatever surplus the manager has left for them. The experimental results show ethical behavior of managers in the form of fair claims. Despite these fair claims, workers behave less ethically by strategically underbidding. So the procedurally fair mechanism only partially crowds-in ethical behavior. This study should interest theorists of stakeholder management, especially those engaged in designing the rules of corporate governance. [ABSTRACT FROM AUTHOR]

Extant literature on Political CSR and the role of governments in the governance of business conduct tends to neglect key implications of the political-institutional macro-context for public deliberation. Contextual assumptions often remain rather implicit, leading to the need for a more nuanced, explicit and context-sensitive exploration of the theoretical and practical boundary conditions of Political CSR. In non-democratic political-institutional contexts, political pluralism and participation are limited, and governmental agencies continue to play the most central role in regulation and its enforcement. Drawing on a qualitative case study on a nuclear energy project in the Hashemite Kingdom of Jordan, we show how both governments and MNCs co-create a context hostile to socially responsible business conduct in the sense of Political CSR. Utilizing rich qualitative data derived from interviews, public documents, and participant observation between 2008 and 2018, we specifically illuminate how—through which interactions and strategies—the multiple governmental and corporate actors involved counter civil society demands for public deliberation, indicating the limitations of Political CSR in non-democratic political-institutional contexts. We particularly contribute to the development of Political CSR by analysing the role of coercive and discursive forms of power. We thus offer a more nuanced perspective on the role of governments in constraining the room for public deliberation in the sense of Political CSR. [ABSTRACT FROM AUTHOR]

Over the past decade, corporate scandals have proliferated. These scandals, along with the emergence of the #MeToo movement and Environmental, Social, and Corporate Governance (ESG) mandates, have increased the scrutiny of corporations' ethics culture. How have companies responded in terms of the language appearing in their public ethics documents? We compare the Code of Ethics in 2008 versus 2019 for a sample of S&P 500 firms. For the vast majority of firms, their Code of Ethics lengthened, with the average 2019 code having 29% more words (about 1760 words) than the 2008 average. The language of the codes has also changed. Words such as bribery, corruption, sustainability, speak up, bullying, slavery, and human rights all saw significantly higher usage in the later period. We review possible reasons for the dramatic changes and suggest what questions remain about the motivations behind them. Whether the changes we observe are primarily intrinsically motivated or simply market responses to public pressures is yet to be determined. What is clear from our findings is that society seems to be entering a new age of increasingly moral—or, at least, moralized—corporate governance. [ABSTRACT FROM AUTHOR]

Through a combination of a controlled experiment and a survey, we examine the effect of voting power on shareholders' voting behavior at general meetings. To avoid a selection bias, common in archival voting data, we exogenously manipulate shareholders' power to affect the outcome. Our findings suggest that, when it comes to corporate decisions involving conflicts of interest, voting power nudges shareholders to oppose management and to choose the "right" alternative, that is, vote against a proposal which prima facie does not serve the company's best interest. This effect obtained even when the dissenting vote contravened the choices of all other voters. Furthermore, the drive "to do the right thing" was established as significant, above and beyond the size of the economic stake. We also demonstrate that strategic voting among institutional investors is contingent on voting power: when in a position to affect the outcome of a vote, institutional investors tend to eschew strategic considerations and display fewer consistent patterns in their voting, compared to situations in which their ability to make a difference is limited. In anticipation of a "bad" proposal to be put to vote at the general shareholder meeting, institutional investors prefer to negotiate terms with management beforehand, and vote against it only after such negotiations fail. Our results shed new light on the "behind the scenes" processes in shareholder voting and underscore the importance of institutional investor agency to corporate governance, accountability, and minority shareholder representation. [ABSTRACT FROM AUTHOR]

Using listed firms in China over the period 2010–2018, we investigate the association between directors' network and quality of corporate social responsibility (CSR) disclosure from the lens of resource-based view. We find a significantly positive effect of directors' network centrality on the CSR disclosure quality, and the effect is more pronounced when the firm (1) invests less in advertising; (2) is followed by less analysts; (3) is less financially constrained; and (4) has no assurance of sustainability report. Furthermore, we document that independent directors' network centrality is positively associated with CSR disclosure quality. Our findings have important implication for practitioners, policy makers, and regulators. [ABSTRACT FROM AUTHOR]

The disaggregation and geographic dispersion of global value chains (GVCs) have expanded the responsibility of international buyers from firm-level corporate social responsibility (CSR) towards social sustainability of their emerging country suppliers. We theorize, in this paper, that the effectiveness of lead firms' GVC governance strategies for social sustainability—which can be audit-based or cooperation-based—depends on the local institutional context of the supplier. Supplier country institutions exert legal and civil society pressures for social sustainability, which shape suppliers' attitude and receptiveness towards lead firm requests. Using unique primary data from 356 garment and footwear suppliers in 11 emerging countries, which supply to Western European or North American buyers, we show that GVC governance strategies are particularly effective for suppliers' social sustainability implementation when there is 'contextual fit' with local institutional pressures for social sustainability in the supplier country. Our study identifies the boundary conditions of GVC governance modes, and demonstrates a complementary relationship between organizational arrangements and their institutional-level counterparts in the context of social sustainability. [ABSTRACT FROM AUTHOR]

The paper builds on the stakeholder salience framework and applies a social identity approach to explain family firm dynamics and how these could impact on family firm governance and ethics. In particular, we consider the family as the main stakeholder for family firms and we refer to the recent approaches to stakeholder theory based on 'names-and-faces' and on social identity to focus on family members at the individual and organizational level. Family businesses offer an opportunity to study stakeholder salience in settings with multiple logics. Our paper acknowledges how the attributes of legitimacy, power and status, for family business members, can derive from three different institutional settings (family, business and local community) and how these attributes are assigned and gained by family members on the basis of the stakes they put (or could put) on the business. From the analysis of these dynamics specific ethical considerations emerge. [ABSTRACT FROM AUTHOR]

We explore corporate environmental accountability by examining how carbon emissions affect voluntary climate-related information disclosure based on TCFD principles. Using computerized textual analysis to measure such climate-related disclosure, our results show that firms with higher levels of carbon emissions disclose more climate-related information. This relation is stronger in firms belonging to carbon-intensive industries, such as energy, materials, and utilities. We also examine this relationship at the category level for Governance, Strategy, Risk Management, and Metrics and Targets, finding that carbon emissions drive disclosure in all categories except in Governance. Overall, our findings indicate that high carbon emitting firms appear to discharge their corporate accountability by increasing climate-related disclosure, consistent with legitimizing their potentially unethical actions and submitting to stakeholder and societal pressure. [ABSTRACT FROM AUTHOR]

The authors present this journal's Thematic Symposium section which features several papers on topics including voluntary reporting on greenhouse gas emissions by foreign institutional investors, the role of minority shareholders on a company's environmental performance, and the role of institutional development on climate change.

This longitudinal case study identifies corporate governance responses in a Chinese state-owned enterprise facing institutional logic multiplicity and demands to shoulder sociopolitical responsibilities beyond economic responsibility. We find that overseas listing led to the incorporation of market logic into an enterprise in which party-state logic prevailed. The prioritization of sociopolitical responsibilities vis-à-vis economic responsibility has shifted through three phases, reflecting changes in institutional logic centrality amid changing politico-institutional and firm conditions. In response, the enterprise developed hybrid corporate governance structures based first on decoupling (2001–2011) and then on translation of a "foreign" corporate governance model to fit the domestic context (2012–2016) but has since sought to dehybridize by strengthening the state-controlled governance structure (2017–2019). Our study contributes to the varieties-of-capitalism approach to corporate governance and offers perspectives on institutional change, institutional logic, and hybrid organizing as well as the implicit ethical issue. [ABSTRACT FROM AUTHOR]

This study examines the influence of women's board representation on the proportion of women senior managers in the United Kingdom (UK) from 1999 to 2019. We take a multi-theoretic approach, drawing on the trickle-down effect, critical mass theory, and agency theory, to explore several aspects of this topic. We find that more women on boards is associated with more women in senior management as suggested by the trickle-down perspective. We also find support for a critical mass effect; while one or two women on a board is beneficial for advancing women into senior management, three or more women directors is more advantageous. Consistent with agency theory expectations, the relationship between women on boards and senior management gender diversity is driven almost entirely by women in non-executive, rather than executive, board positions, presumably as a result of the relative independence non-executive directors have compared to their executive director counterparts. Our study suggests that increasing women's board appointments is a potential solution to the underrepresentation of women senior managers and may assist in building a pipeline for future CEO and board appointments. [ABSTRACT FROM AUTHOR]

This study examines whether the delegated monitoring of main banks effectively decreases severe agency problems. For example, this includes accounting fraud in bank-dominated corporate governance. In this context, the fraud triangle specifies the three main factors of opportunity, incentive, and rationalization. Main banks may reduce the factor of opportunity through actions such as monitoring, which plays a moderating role by reducing the potential for managerial misconduct, whereas, the incentive factor may be enhanced through the subsequent pressure that influences managers to force turnover when they do not repay debts. The potential influence that the main banks have on the fraud rationalization factor may be stronger in firms that are more dependent on main-bank borrowing. This study analyzed data from publicly listed firms in Japan for the period between 2008 and 2016 to determine how main-bank relationships affected accounting fraud, thus allowing an assessment of delegated monitoring practices. Findings showed that main-bank relationships were helpful for reducing accounting fraud, suggesting its overall effectiveness in delegated monitoring. Results also showed that large audit firms did not necessarily prevent accounting fraud, which implies that main banks can employ their own monitoring as a substitute for the roles typically played by these firms. Here, the main policy implication is that main-bank relationships may strengthen business ethics in the context of bank-dominated corporate governance. In conclusion, the continued analysis of bank monitoring may benefit stakeholders while strengthening business ethics in bank-centered economies. [ABSTRACT FROM AUTHOR]

This study examines how the CSR committee and CSR-linked executive compensation jointly affect CSR performance as governance mechanisms. Prior studies provided mixed results on the CSR committee's effect on CSR performance. We posit that a CSR committee has both a direct and an indirect positive effect on CSR performance, with CSR-linked compensation playing the role of mediator in the relationship. We base our analysis on a sample of 164 Canadian firms covering the period 2012–2018, for a total of 952 firm-year observations. We propose a regression-based approach for our mediation research design. Our findings reveal that CSR-linked compensation mediates the CSR committee's positive effect on performance, but the type of mediation depends on whether the performance is social or environmental. We provide evidence of both direct and indirect effects on environmental performance but only a positive indirect effect on social performance. These results suggest that demands from the firm's internal and external stakeholders are treated differently, with the former receiving priority. [ABSTRACT FROM AUTHOR]

Institutional investors, policy makers, and researchers have advocated for greater director independence in hopes of improving corporate governance and discouraging unethical behaviors such as corporate frauds, accounting irregularities, and other organizational failures. However, increasing demands upon directors and sitting CEOs, as well as constraints on the number of boards on which they can serve, has resulted in a dramatic increase in the use of retired independent directors ("RIDs"). Compared to other directors with full-time job demands, we argue that RIDs (who lack full-time primary employment) have lesser time constraints and greater attentional capacities with which to discharge their responsibilities, thereby improving overall board "bandwidth." Using S&P 1500 firms for the period of 2000–2012, we find that enhanced board bandwidth associated with an increased proportion of RIDs on the board relates to greater resource provisioning through reducing costs of capital, improved monitoring through reducing disclosure-related weaknesses, and better accounting and market performance. We thereby advance traditional board bandwidth research by contemplating the available time that independent directors would have by virtue of being retired (i.e., whether a director lacks a "day job") and relating this to board effectiveness. [ABSTRACT FROM AUTHOR]

The study focuses on the mobile telecommunications industry in Afghanistan prior to the Taliban takeover of the country in 2021 and seeks to study how the mobile telecommunications corporations engage with the different area-specific governance systems in order to gain legitimacy to operate across Afghanistan. The study capitalises on mixed qualitative data to conduct an embedded case study of the Afghan mobile telecommunications industry as an extreme context for understanding business-society relations in South Asia. Theoretically, the article integrates insights from governance literature on areas of limited statehood to conceptualise business–society relations in Afghanistan beyond state-centric views and assumptions. The findings result in two modalities of business engagement that are conceptualised as a single vis-à-vis multiple governance system approach. Each of these modes of engagement implies a political nature and role for the businesses that are embedded in ethical dilemmas as discussed in the article. These findings contribute to the debate on the 'political turn' in the CSR literature and the governance literature on areas of limited statehood. [ABSTRACT FROM AUTHOR]

Cyber risk has become one of the greatest threats to firms in recent years. Accordingly, boards of directors must be continually vigilant about this danger. They have a duty to ensure that the companies adopt appropriate cybersecurity measures to manage the risk of cyber fraud. Boards should also ensure that the firm disclose material cyber risk and breaches. We examine how the board's gender composition can influence the extent of such disclosure, based on a sample of the companies listed on the S&P/TSX 60 Index over the period 2014–2018. Results show evidence of a positive association between the presence and level of cybersecurity disclosure and board gender diversity. However, the board must boast a critical mass of at least three women before this positive impact can be observed. Our findings contribute to the debate on the importance of gender diversity by adding the concept of the positive influence of heterogeneity on cyber disclosure. We also augment the literature on the critical mass of women in boardrooms by providing empirical evidence that three or more women constitute the threshold for better governance. Our study has important implications for investors, stakeholders and regulators. If investors wish to increase cybersecurity disclosure, they should ask for more diversified boards. Our findings support regulators in their efforts to increase women's representation on boards by providing empirical evidence of better outcomes with this type of board composition. [ABSTRACT FROM AUTHOR]

We introduce the concept of fraud tolerance, validate the conceptualization using prior studies in economics and criminology as well as our own independent tests, and explore the relationship of fraud tolerance with numerous cultural attributes using data from the World Values Survey. Applying partial least squares path modeling, we find that people with stronger self-enhancing (self-transcending) values exhibit higher (lower) fraud tolerance. Further, respondents who believe in the importance of hard work exhibit lower fraud tolerance, and such beliefs mediate the relationship between locus of control and fraud tolerance. Finally, we find that people prone to traditional gender stereotypes demonstrate higher fraud tolerance and document subtle differences in the influence of these cultural attributes across age, religiosity, and gender groups. Our study contributes to research on corporate governance, ethics, and the antecedents of work-place dishonesty. [ABSTRACT FROM AUTHOR]

Corporate governance (CG) is a key area of management with important implications for business ethics. The interface of CG and business ethics is populated with rich intellectual debates on the role of ethics in governance from a multi-disciplinary perspective. Within these debates, the relationship between CG and outcomes for business and society, and the role of CG structures and processes and their comparative aspects across institutional settings are discussed. Despite a proliferation of research at the interface of CG and ethics, we observe that an engagement with topics, methodologies, and expected outcomes drawing on established frames and theories of CG tends to the ignoring or even the preclusion of an explicit engagement with debates in business ethics. Through this VSI, we as section editors showcase previously published papers in the Journal that proactively explore the explicit linkages and interfaces between CG and ethical societal challenges, with the aim of inspiring further such CG research. [ABSTRACT FROM AUTHOR]

This paper provides a systematic analysis of how hometown ties, the most common and distinct bases for interpersonal ties to build upon in China, could influence corporate governance in Chinese corporations by focusing on its impact on CEO dismissals and corporate social responsibility. We find that hometown ties between CEOs and board chairs reduce the likelihood of CEO dismissals and that the negative relationship between firm performance and CEO dismissals is weaker for hometown-connected CEOs in locally administered state-owned enterprises, for inside CEOs, for firms located outside board chairs' hometowns, and for firms operating in regions with low social trust. Moreover, we find consistent evidence that hometown ties affect Chinese firms' engagement in corporate social responsibility. Our study highlights the important role of hometown ties in Chinese relationship-based corporate governance. It also advances a normative ethical assessment of hometown-based favoritism by highlighting its distinct dynamics and impacts on focal actors and the third parties in specific contexts of actions. [ABSTRACT FROM AUTHOR]

Whereas extant literature has examined the overall effect of corporate social responsibility (CSR) on innovation, it is argued that CSR is a multidimensional concept encompassing both progressive activities concerning a firm's engagement in the social domain, as well as rational aspects pertaining to corporate governance practices and the protection of shareholder rights. This study integrates organizational hypocrisy with the knowledge-based view literatures to examine how different forms of CSR engagement affect the rate of new product introductions (NPI). Results suggest that the mechanisms by which progressive and rational CSR are associated to increases in the rate of NPI differ. Specifically, while progressive CSR positively affects the rate of NPI and such effect is deemed stronger for firms that are more vertically integrated, the effect of rational CSR on the rate of NPI is conditional on a firm's level of absorptive capacity. [ABSTRACT FROM AUTHOR]

Banks play a unique role in society. They not only maximize profits but also consider the interests of stakeholders. We investigate whether banks consider firms' pollution records in their lending decisions. The evidence shows that banks offer significantly higher loan spreads, higher total borrowing costs, shorter loan maturities, and greater collateral to firms with higher levels of chemical pollution. The costly effects are stronger for borrowers with greater risk and weaker corporate governance. Further, the results show that banks with higher social responsibility account for their borrowers' environmental performance and charge higher loan spreads to those with poor performance. These results support the idea that banks with higher social responsibility can promote the practice of business ethics in firms. [ABSTRACT FROM AUTHOR]

This paper examines the role of mutual funds in corporate social responsibility (CSR). Using a fund-level, holdings-based CSR score, we find that CSR-friendly mutual funds improve firms' CSR standings. This effect is more pronounced for firms with higher mutual fund ownership and stronger corporate governance. We further show that while CSR-friendly mutual funds have influence on almost all CSR categories, they focus on increasing CSR strengths rather than reducing CSR concerns. We also discover that CSR-friendly funds are more likely to vote in favor of CSR proposals, and that firms owned by CSR-friendly funds are more likely to link their CEO compensation to CSR outcomes. These results suggest that actively managed mutual funds, which were previously thought to be indifferent (or even detrimental) to social and ethical issues, play a significant role in corporate social outcomes of the firms they invest in. [ABSTRACT FROM AUTHOR]

Using PitchBook's private equity (PE) database of 4548 PE funds from 42 countries for the 2000 to 2012 period, we find that higher reporting frequency is associated with lower information asymmetry in performance reports from general partners (GPs) to limited partners. We also find that endowments are systematically associated with less reported unrealized returns as a percentage of total returns generated from GPs. Moreover, endowments receive more performance reports from their PE funds, implying more stringent governance. These findings persist after controlling for various institutional and GP characteristics and are robust to several adjustments for endogeneity concerns. This study also contributes to the finance, accounting, and business ethics literature on financial reporting quality. [ABSTRACT FROM AUTHOR]

Firms have traditionally responded to environmental violations by increasing information disclosure and/or communication to manage stakeholder perceptions. As such, these approaches may be symbolic in nature, with no genuine intention to improve the environment. We draw from restorative justice grounded in stakeholder theory and explore a relatively new approach in the form of supplemental environmental projects (SEPs) aimed at restoring the environment, and empirically examine the role of corporate governance (board structure) in firms' decisions to undertake reparative actions. Using environmental violations and SEPs data from the US Environmental Protection Agency between 2002 and 2015, we find that firms with smaller boards are more likely to undertake SEPs. We also find that firms with higher board independence and CEO duality undertake SEPs more frequently; however, board gender diversity and the existence of a sustainability committee appear to have no impacts. These results are robust to propensity score matching and an alternative data source. We extend the scope of stakeholder theory by emphasizing a new approach—restorative justice—by which corporations can repair damaged relationships and also improve the environment. We also contribute to corporate governance and environmentalism literature by identifying governance structures that promote environmental restorative justice. Thus, our study will inform different stakeholders, including regulators, shareholders, and boards of directors, and will open new avenues for business ethics scholarship. [ABSTRACT FROM AUTHOR]

This study analyzes how the board's characteristics could be associated with globally corporate social responsibility CSR and specific areas of CSR. It is drawn on all listed firms, in 2016, on the SBF120 between 2003 and 2016. Our results provide strong evidence that diversity in boards and diversity of boards globally are positively associated with corporate social performance. However, they influence differently specific dimensions of CSR performance. First, we show that large boards are positively associated with all areas of CSR performance, while specific and overall CSR scores are negatively associated with CEO-chair structures. Second, board gender diversity is positively associated with human rights and corporate governance dimensions. Third, age diversity is positively associated with corporate governance, human resources, human rights, and environmental activities. Also, our results provide evidence that outside directors care about CSR performance. Specifically, the presence of foreign directors is positively associated with environmental performance and community involvement, whereas CSR-Governance dimension is positively associated with the presence of independent directors. Regarding the director's educational level, post-graduated directors are positively and significantly associated with overall CSR score and all CSR sub-scores, except the corporate governance one. When directors have multiple directorships, they are more concerned about human resources, environmental performance, and business ethics. Finally, our findings are robust only in non-family firms. In fact, family boards are less diverse than non-family ones; specifically, they have a lower number of independent, foreign, and high-educated directors. [ABSTRACT FROM AUTHOR]

We test competing theoretical perspectives of family firm governance in two separate studies by investigating whether family firm control moderates the detrimental effect of a management training ground (MTG) on internal auditor objectivity and on the external auditor's decision to rely on the internal audit function (IAF). In Study 1, we assess the objectivity of internal auditors working under an IAF that serves as a MTG or non-MTG and located in a family or non-family firm. A key result of Study 1 is the mitigating role of family firm control, as we find that the objectivity of internal auditors is reduced when the IAF serves as a MTG but only in non-family firms. When the IAF is located in a family-controlled firm, the objectivity of internal auditors is unaffected by the opportunity to be promoted into management positions outside of the IAF. In Study 2, we utilize a controlled laboratory experiment with experienced Big 4 auditors as participants and examine their decision to rely on an IAF when it serves as a MTG. Our analyses indicate that external auditors reduce their reliance on non-family firm IAFs that are also MTGs and their decision is fully mediated by the perceived objectivity of non-family firm internal auditors. In contrast, external auditors' reliance on family firm IAFs and their perceptions of internal auditor objectivity are unaffected under a MTG regime. The results of Studies 1 and 2 provide support for the alignment perspective of family firms. [ABSTRACT FROM AUTHOR]

Multinational enterprises (MNEs) dominate the governance of global value chains (GVCs), such that according to the concept of political corporate social responsibility (PCSR), they are responsible to address governance gaps throughout the chains, even at the level of their independent suppliers. In practice, MNEs often struggle to cope with the complexity of these governance gaps, and PCSR does not provide a clear definition nor offer guidance for how to analyze and address them. By adopting the notion of governance mechanisms from GVC literature, this study proposes a more nuanced view, in which governance gaps result from inactive, ineffective, or inequitable governance mechanisms adopted by relevant actors, rather than a complete absence of governance. MNEs, through their governance mechanisms, commonly create governance gaps. This study distinguishes different types of governance mechanisms to create a typology of governance gaps, such that it contributes to the literature on PCSR by offering a more refined understanding of governance gaps, along with a means to identify mechanisms to address them. Furthermore, it contributes to the literature on GVCs by defining governance-related terms and adding an ethical perspective on MNEs' global business conduct. To illustrate the typology, this article presents the case of low wages (below a living wage) for workers in the textile industry and efforts by H&M to deal with this governance gap. [ABSTRACT FROM AUTHOR]

Using U.S. listed firms during the period from 1971 to 2010, this paper investigates the effect of religion on corporate cost behavior. We find that religion mitigates cost stickiness induced by agency or behavioral biases of managers. This result holds for several robustness tests that address endogeneity concerns. The mitigating effect of religion on cost stickiness is through the channel of reducing top managers' overconfidence and optimistic bias regarding future demand change (risk-aversion mechanism) and promoting managers' adherence to fiduciary responsibilities and consideration of shareholder benefits (ethic mechanism). Further evidence shows that the reduction in cost stickiness caused by religion increases firm value. Overall, our findings suggest that religion reduces the wedge between a firm's actual and optimal resource commitments, which helps to improve firm value and resource allocation efficiency. [ABSTRACT FROM AUTHOR]

This article contributes to the general literature on the relationship between corporate social performance and corporate financial performance, as well as to the emerging HRM–CSR literature, by exploring the curvature of the relationship between HRM–CSP and CFP. We advance conceptual arguments in favor of an inverted U-shaped relationship. Our results demonstrate a significant quadratic relationship between HRM–CSP and CFP. We provide evidence that this relationship is not linear or S-shaped but rather inverted U-shaped. [ABSTRACT FROM AUTHOR]