influence of corporate social responsibility disclosure on corporate governance and company performance

INFLUENCE OF CORPORATE SOCIAL RESPONSIBILITY DISCLOSURE ON CORPORATE GOVERNANCE AND COMPANY PERFORMANCE BY LE ANH CONG Graduation Project Submitted to the Department of Business Studies, HELP University College, in Partial Fulfillment of the Requirements for the Degree of Bachelor of Business (Accounting) Hons i OCTOBER 2010 Declaration of Originality and Word Count DECLARATION I here by declare that this graduation project is based on my original work except for quotations and citation which have been duly acknowledged I also declare that it has not been previously or concurrently submitted for any other courses/degrees at HELP University College or other institutions The word Count is 10,093 words LE ANH CONG 28 October, 2010 ii Acknowledgement This project would not have been made possible without the assistance, support and encouragement of many people I wish to take this opportunity to thank all the people who have helped me during the time of completing the dissertation Firstly, I would like to express my deep gratitude to my supervisor Dr Nguyen Thi Phuong Hoa at the National Economics University (NEU) of Viet Nam SHe has kindly helped me and supported me all the way through For that, I am very grateful I also would like to express my thank to Ms Sumathi and Ms Shenba at Help University College, who initiated the project and give so much instruction and support LE ANH CONG iii Abstract INFLUENCE CORPORATE SOCIAL RESPONSIBILITY DISCLOSURE ON CORPORATE GOVERNANCE AND COMPANY PERFORMANCE BY LE ANH CONG October 2010 Supervisor: Nguyen Thi Phuong Hoa Corporate social responsibility (CSR - Corporate Social Responsibility) is a growing trend in the world but is still very new in Vietnam, only focused on footwear and apparel industries due to the needs of the customer orders overseas Vietnam is clearly hard goods that can compete on price or quantity with China, that way I can help local businesses get the advantage in a difficult war in this market? CSR may be the answer if your business really understand the meaning and turn into a CSR culture, thinking and working methods The objective of the research is to assess the understanding of Vietnamese individual businessmen on the topics of CSR Besides, the research also businessmen wants to define which major factors contributing to the CSR importance by asking respondents‟ understanding and opinion on CSR Besides that, the business in Viet Nam find hard to use CSR as a tool to value firm and it is also difficult for them to make investment decision when CSR issues are mentioned iv TABLE CONTENT Declaration of Originality and Word Count ii DECLARATION ii Acknowledgement iii Abstract iv LIST OF FIGURES AND TABLES .viii LIST OF ABBREVIATIONS ix CHAPTER : INTRODUCTION 1.1 Research background 1.2 CSR in Viet Nam 1.3 Problem Statement 1.4 Objectives of Research 1.5 Research Methods CHAPTER : LITERATURE REVIEW 2.1 Definition of CSR 2.2 Caroll’s concept 2.3 The concepts related to CSR 11 2.3.1 Business Ethics 11 2.3.2 Corporate culture 11 2.3.3 Socially responsible investing 12 2.3.4 Sustainability investing 12 2.4 Stakeholder theory 12 2.5 Legitimacy Theory 13 v 2.6 Institutional Theory 13 2.6 Tripple bottom line 14 2.7 CSR reporting 14 2.8 CSR’s impacts on accounting 15 CHAPTER 3: RESEARCH METHODOLOGY 16 3.1 Research Objectives 17 3.2 Theoretical framework and measurement 17 3.2.1 Corporate governane 17 3.2.2 Links between CG and CSR 18 3.2.3 Global Reporting Initiative (GRI) 18 3.3 Research methodology 19 3.4 Data sources 19 3.4.1 Primary data 19 3.4.2 Secondary data 20 3.5 Research method 20 3.6 Research tool 20 3.7 Limitations 21 CHAPTER : ANALYSIS 22 4.1 Description of Result 23 4.1.1 Age 23 Table : Age 23 4.1.2 Gender 23 Table : Gender 23 4.1.3 Corporate governance 24 vi 4.1.4 Links between Corporate governance and Corporate social responsibility 28 4.1.5 Global Reporting Initiative 31 4.2 Result Analysis 33 4.2.1 Assessment of CSR/ CSR practices 33 4.2.2 Assessment of the CG – CSR Link 35 4.2.3 Global Reporting Initiative 35 CHAPTER 5: CONCLUSION AND RECOMMENDATION 37 5.1 Conclusion 38 5.2 Recommendation 39 5.3 Limitation of Sutdy 40 5.4 Suggestion for Furture Research 40 REFERENCES ( Harvard referencing system) 41 APPENDICES 47 Appendix A: Questionnaire Sample 47 vii LIST OF FIGURES AND TABLES Figure 2.1 A hierarchy of CSR (adapted from Carroll, 1991) Table : Age 23 Table : Gender 23 Table : Question - Description of Result 24 Table : Question - Description of Result 25 Table : Question 3- Description of Result 26 Table : Question 4- Description of Result 27 Table : Question - Description of Result 28 Table : Question - Description of Result 29 Table : Question -Description of Result 30 Table 10 : Question - Description of Result 31 Table 11 : Question - Description of Result 32 Table 12 : Question 10- Description of Result 33 viii LIST OF ABBREVIATIONS CG Corporate governance CSR Corporate Social Responsibility GRI Global Reporting Initiative SI Sustainability investing SRI Socially responsible investing TBL Triple Bottom Line VCCI Chamber of Commerce and Technology of Vietnam WBCSD World Business Council for Sustainable Development WTO World Trade Organization ix CHAPTER : INTRODUCTION 1.1 Research background 1.2 CSR in Viet Nam 1.3 Problem Statement 1.4 Objectives of Research 1.5 Research Methods 4.2.2 Assessment of the CG – CSR Link CG and CSR is part of the same company responsible for continuously promoting sustainability and growth, but also happy stakeholders and CG and CSR are two aspects (external and internal) of the same commitment implementation of business ethics In contrast, corporate governance can not be effective without a sustained drive CSR, because companies have to meet the needs of all stakeholders to be profitable and create value for shareholders owners This proves that the link between CG and CSR is clearly an outstanding two-way relationship Related links CG-CSR, most respondents seemed to support the view that there is a link between CG and CSR with the CG formed as a necessary foundation for long-term oriented sustainable CSR As a result , from the questionnaire, the respondents think that choosen “ strongly agree” or “ agree “ the relationship between corporate governance and corporate social responsibility with the highest percentage 4.2.3 Global Reporting Initiative The Global Reporting Initiative (GRI) provides a number of categories for disclosing sustainability performance information, together with related performance indicators The GRI has pioneered the development of the world‟s most widely used sustainability reporting framework and is committed to its continous improvement and application worldwide This framework sets out the principles and indicators that organisations can used to measure and report their economic, environmental and social performance GRI is to develop a globally applicable framework for reporting on sustainability performance of an organization framework presents reporting principles and specific content indicators to guide the preparation of that report sustainability report or CSR reports For the most common application of GRI and comprehensive opinion from GRI, 35 types are designed according to GRI guidelines in this study Based on this question to 10 the percentage with respondents choosen „ strongly agree‟ or “ agree‟ about the GRI‟s concept is popular 36 CHAPTER 5: CONCLUSION AND RECOMMENDATION 5.1 Conclusion 5.2 Recommendation 5.3 Limitation of Study 5.4 Suggestion for Furture Research 37 5.1 Conclusion Social responsibility of business is not new but sremains hot for enterprise, investors, consumers and society Social responsibility of business is a matter to be mentioned quite a lot in Viet Nam in recent time However, awareness of this issue of enterprises is still limited, therefore, the implementation of social responsibility of enterprises remains fully in accordance with requests made of it is still insufficient CSR is one of the requirements for the enterprise, if the enterprise does not comply with CSR will not be able to access world markets However, in Vietnam, the implementation of CSR is still relatively difficult First of all, businessmen not understand about CSR Second, implementing CSR by enterprises lack financial resources, and techniques to implement CSR standards, especially small and medium enterprises, where most of Vietnam enterprises are small and medium enterprises Moreover, the enterprise itself when in operation has been a subject of society, use of social resources and the environment, therefore the negative impact on society and the environment Therefore, enterprises must be aware of the impact from the operation of their business and are responsible for their acts before the society Can tell the nature of the business not only for-profit enterprise which originally had the role of citizens in a society with all the obligations and rights which suited Therefore, social responsibility is a very urgent problem today Businesses need to address properly the responsibility to raise the prestige of your business 38 5.2 Recommendation CSR is a new concept in Asian developing countries like Vietnam The pressure of globalization on Vietnam's economic strengths in order to comply with international standards and cope with high-speed development of the world.This study investigates how important CSR is and the impact it has on the Vietnamese businesses Currently, Vietnam does not have legal framework nor guidelines on businesses to report on social accounting, social auditing and reporting to the community for social surveillance purposes Legal regulatory institutions, market economy, Vietnam has promulgated the Law on Competition, but did not have exclusive control law and the implementation of competition law is much more limited The law on accounting, auditing standards were issued, but the implementation in practice has many shortcomings Vietnam is preparing the Law on the Rights of access to information, but no law on associations and not prepared Law on Advocacy hallway Economic information is still restricted, more data is not publicly available and timely Activities for banking supervision, securities market, real estate markets are primitive and should be completed quickly The organizations of civil society, Vietnam has been formed and operated, with practical contributions, such as Chamber of Commerce and Industry of Vietnam, professional associations, such as Textiles Export Fisheries Association Assembly of financial investors Many organizations have training, guidance, advocacy and implementation of the provisions of the standard of social responsibility, especially for workers and consumers However, due to lack of necessary legal basis, so that contribution is limited Associations which themselves also need to improve the professional and practical results for our members In short, social responsibility in Vietnam was the first step is awareness and 39 implementation Sure, along with the development of the country, that responsibility will become even more important along with the perfection of the legal framework, the state apparatus, institutions, market economy and the institutions of society civil 5.3 Limitation of Sutdy This study has some limitations which make the research not sufficient and accurate The first limitation is that the research is conducted with Vietnam business only The limited objects could lead to the narrow and limited understanding the concept of population The second limitation is the small sample size in the research Furthermore, the research does not pay attention to characteristics of business such as age and gender Moreover, including the three theoretical framework : corporate governance, links to corporate governance and Global Reporting Initiative may not be enough for understanding the CSR importance 5.4 Suggestion for Future Research With the various 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Governance : Question 1: I am aware of the term “corporate governance” a Strongly Agree b Agree c Neither Agree nor Disagree d Disagree e Strongly Disagree Question 2: I am understand the meaning “corporate social responsibility” a Strongly Agree d Disagree b Agree c Neither Agree nor Disagree e Strongly Disagree Question 3: Companies‟ governance structure influences the quality of Corporate social responsibility disclosure a Strongly Agree b Agree c Neither Agree nor Disagree d Disagree e Strongly Disagree Question 4: Companies may benefit from Corporate social responsibility disclosure a Strongly Agree d Disagree b Agree c Neither Agree nor Disagree e Strongly Disagree 47 Links between Corporate governance and Corporate social responsibility : Question 5: Corporate Governance as foundation for Corporate social reponsibility a Strongly Agree d Disagree b Agree c Neither Agree nor Disagree e Strongly Disagree Question 6: Corporate social responsibility as an extended model of Corporate governance a Strongly Agree b Agree c Neither Agree nor Disagree d Disagree e Strongly Disagree Question 7: Corporate governance and Corporate social responsibility as coexisting components of the same continuum a Strongly Agree b Agree c Neither Agree nor Disagree d Disagree e Strongly Disagree Global Reporting Initiative Question 8: The GRI divided social performance into four sub-groups of performance indicators, including: labour practices, human rights, community and other stakeholdes in society a Strongly Agree d Disagree b Agree c Neither Agree nor Disagree e Strongly Disagree Question 9: There are three types of Global Reporting Initiative guidelines disclosures, namely : Strategy and Profile , Management Approach, and Performance Indicators a Strongly Agree d Disagree b Agree c Neither Agree nor Disagree e Strongly Disagree 48 Question 10: The Global Reporting Initiative – a conceptual framework for what social and environmental reporting a Strongly Agree b Agree c Neither Agree nor Disagree d Disagree e Strongly Disagree 49 ... Corporate Governance as foundation for Corporate social reponsibility Model : Corporate social responsibility as an extended model of Corporate governance Model : Corporate governance and Corporate social. .. meaning of ? ?Corporate social responsibility? ?? 17 - Companies‟ governance structure influences the quality of Corporate social responsibility disclosure - Companies may benefit from Corporate social responsibility. .. should enterprises implement social responsibility? Which are benefit of implementation of social responsibility How is the situation of implementing social responsibility of Vietnamese enterprises