Walking the Talk? A Corporate Governance Perspective on Corporate Social Responsibility Decoupling
| Published date | 01 October 2023 |
| Author | Ammar Ali Gull,Nazim Hussain,Sana Akbar Khan,Muhammad Nadeem,Alaa Mansour Zalata |
| Date | 01 October 2023 |
| DOI | http://doi.org/10.1111/1467-8551.12695 |
British Journal of Management, Vol. 34, 2186–2211 (2023)
DOI: 10.1111/1467-8551.12695
Walking the Talk? A Corporate Governance
Perspective on Corporate Social
Responsibility Decoupling
Ammar Ali Gull,1,2 Nazim Hussain,3Sana Akbar Khan,4
Muhammad Nadeem5and Alaa Mansour Zalata6,7
1Ecole Supérieure des Sciences Commerciales d’Angers (ESSCA), 4 Pont Pasteur, Lyon, 69007, France,
2International School, Vietnam National University, 144 Xuân Thủy, Di
.ch Vo
.ng Hậu, CầuGiấy, Hà Nội,
Hanoi, Vietnam, 3Department of Accounting, University of Groningen, Nettelbosje 2, Groningen, 9747AE,
The Netherlands, 4ESDES School of Business and Management, Lyon Catholic University, 10 place des
archives, Lyon, 69002, France, 5Department of Accounting, University ofOtago School of Business, Union
Street East, Dunedin, 9016, New Zealand, 6Centre for Research in Accounting, Accountability and Governance,
Southampton Business School, University of Southampton, Southampton, SO17 1BJ, United Kingdom, and
7Accounting Department, Faculty of Commerce, Mansoura University, El Gomhouria St, Mansoura, 35516,
Egypt
Corresponding author email: n.hussain@rug.nl
Information asymmetry and the pressure to conform to stakeholders’ expectationscause
rms to engage in corporate social responsibility (CSR) decoupling – a practice that has
severe socioeconomic consequences for rms. Adopting a corporate governanceperspec-
tive, this paper answers a novel question: whether board gender diversity (BGD) curbs
CSR decoupling. Using a battery of sophisticated analyses and robustness tests on 9276
rm-year observations for the period 2002–2017, our results conrm that BGD is neg-
atively associated with CSR decoupling. Analysis of the composition of gender-diverse
boards further reveals that this effect is strongerfor balanced boards than for skewed and
tilted boards. Furthermore, we note that independent female directors are more effective
monitors of decoupling than executive female directors. We also document that the re-
lationship between BGD and CSR decoupling is stronger when the overallgovernance is
weak. This implies that gender-diverse boards could act as a substitute mechanism for
corporate governance that would otherwise be weak. Our studyoffers important theoret-
ical and policy implications for the eld of corporate governance and CSR.
Introduction
Firms are increasingly undertaking corporate so-
cial responsibility (hereafter CSR) activities, be
they internal actions such as enacting sustainabil-
ity initiatives or external actions such as sustain-
ability disclosure (Hawn and Ioannou, 2016), to
respond to stakeholders’ demands that rmsbe
environmentally and socially responsible. In prac-
tice, however, managers often decouple these ac-
tions. CSR decoupling – the gap between rms’
CSR claims and actual CSR performance – is the
topic of much scholarly debate (Gull et al., 2022;
Sauerwald and Su, 2019; Tashman, Marano and
Kostova,2019). Extant research demonstrates that
rms deviate from their CSR targets to inuence
stakeholders’ perceptions (e.g. Bromley and Pow-
ell, 2012; García-Sánchez et al., 2022; Graaand
and Smid, 2019).
CSR decoupling allows executives to deceive
stakeholders about organizational practices,
thereby enabling the company to gain stakeholder
© 2022 The Authors.British Journal of Management published by John Wiley & Sons Ltd on behalf ofBritishAcademy
of Management.
This is an open access article under the terms of the Creative Commons Attribution-NonCommercial License, which
permits use, distribution and reproduction in anymedium, provided the original work is properly cited and is not used
for commercial purposes.
BGD and CSR Decoupling2187
legitimacy, at least temporarily (e.g. Crilly, Zollo
and Hansen, 2012). Faced with rising stakeholder
demands for fuel-efcient and green cars, Volk-
swagen(VW) promoted its Jetta TDI with a ‘Clean
Diesel’ label. However, in 2015, VW was found
guilty of installing defeat devices to cheat on emis-
sion tests. By misaligning its CSR actions, VW
created the temporary impression of a green com-
pany: the JettaTDI won the prestigious Green Car
of the Year award (Krall and Peng, 2012). Such
examples are not outliers. British Petroleum (BP)
spent millions of dollars promoting its ‘Beyond
Petroleum’ rebrand while investing signicantly
less money in improving its renewable energy
strategy (Hawn and Ioannou, 2016).
In the long run, false claims have high costs for
rms: they damage public reputations (Du, 2015),
undermine stakeholder relationships (Doh et al.,
2010), challenge the license to operate (Zhang,
Zhu and Ding, 2013), and increase regulatory
oversights (Gelles, 2015) and regulatory penalties
(MacLean and Behnam, 2010). Recent research
provides compelling evidence that CSR decou-
pling negatively impacts rm performance (Hawn
and Ioannou, 2016) and limits rms’ ability to ac-
cess nance (García-Sánchez et al., 2021). Schol-
ars agree that CSR decoupling is harmful for rms
and must be avoidedfor normative and instrumen-
tal reasons.
What should be done to curb such practices?
The corporate governance (hereafter CG) litera-
ture suggests that boards of directors can monitor
rms’ activities and it identies the characteris-
tics of strong monitoring boards. It is generally
advocated that female directors are more effec-
tive monitors of managerial behaviour (Adams
and Ferreira, 2009; Buse,Bernstein and Bilimoria,
2016; Hussain et al., 2021; Nielsen and Huse, 2010)
and more likely to detect nancial frauds (Cum-
ming, Leung and Rui, 2015) and improve nancial
performance (Araratand Yurtoglu, 2021; Brahma,
Nwafor and Boateng,2021; Ð ˘
ang et al., 2020). Ev-
idence shows that rms with female directors on
boards enjoy superior CSR performance (e.g.Atif
et al., 2020; Jain and Zaman, 2020; Post, Rahman
and Rubow,2011) and higher CSR reportingqual-
ity (Al-Shaer and Zaman, 2016). However, very
little is known about whether female directorsalso
curb CSR decoupling by aligning internal CSR
activities with external CSR communications.
This is an important gap in the board gender
diversity (hereafter BGD) and CSR literature.
A positive relationship between BGD and CSR
disclosure (Liao, Luo and Tang, 2015; Rupley,
Brown and Marshall, 2012; Zaman et al., 2020)
is well established. BGD also increases nancial
performance and the transparency of nancial
performance information (Krishnan and Parsons,
2008). However, there is limited evidence con-
cerning BGD’s effect on the transparency of CSR
information.
The information asymmetry between executives
and stakeholders provides managers with an op-
portunity to intentionally fakeCSR actions (Crilly,
Zollo and Hansen, 2012; Marquis, Toffel and
Zhou, 2016). Female directors reduce information
asymmetry, monitor executives effectively, and are
more likely to question and report incidents of
fraudulent reporting (Kaplan et al., 2009); thus,we
argue that they are likely to improve CSR infor-
mation transparency and reduce the gap between
CSR disclosure and performance.CSR decoupling
research is still emerging and has so far focused
on its antecedents at the rm level (Delmas and
Burbano, 2011; Sauerwald and Su, 2019), mar-
ket level (García-Sánchez et al., 2021), and insti-
tutional level (Jain, 2017; Luo, Wang and Zhang,
2017; Marquis and Qian, 2014; Tashman, Marano
and Kostova,2018). The CG determinants ofCSR
decoupling are scantly explored – recent excep-
tions being Gull et al. (2022) and García-Sánchez
et al. (2022). Gull et al. (2022) note a signicant
negative relationship between the existence ofa
CSR committee on the corporate board and a CSR
gap. Their ndings also revealthat the structure of
such committees plays a signicant role in curb-
ing decoupling practices. García-Sánchez et al.
(2022) use women on the board as one of their
control variables and seek to examine the impact
on CSR decoupling of two credibility-enhancing
mechanisms, that is, symbolic versus substantive
use of external CSR assurance, and compliance
with global reporting initiative’s guidelines. They
nd that women’s presence on boards increases the
CSR gap, which contrasts with the dominant be-
lief that female directors improve CSR-relatedcor-
porate transparency. In the presence of such con-
trasting evidence related to BGD and CSR decou-
pling, it is pertinent to examine this relationship
further.
We adopt a CG perspective to examine the
association between BGD and CSR decoupling.
We assembled data for non-nancial US rms for
the period 2002−2017 and tested the association
© 2022 The Authors.British Journal ofManagement published by John Wiley & Sons Ltd on behalf ofBritish
Academy of Management.
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