Introduction

During recent years, there has been a growing interest in corporate social responsibility (CSR) across a range of disciplines. CSR in its simplest form is corporations’ broader responsibility towards society. Researchers and practitioners strongly believe that corporations should not be judged just on their economic success (Carroll 1979; Jamali et al. 2008; Shahin and Zairi 2007) as they are “… no longer expected to be mere contributors to the global economy, but rather to reconcile and skill-fully balance multiple bottom lines and manage the interests of multiple stakeholders” (Jamali et al. 2008, p. 443). Even though CSR is becoming increasingly significant, research still shows that CSR performance and CSR reporting (CSRR) by some countries are still limited compared to others (Chen and Bouvain 2009; Golob and Bartlett 2007; CPA Australia 2005). Among the possible reasons for this is that there could be a lack of ability within the major decision makers, in particular, boards of directors who are considered to be key players in firms’ CSR achievements (Krüger 2009) to make proper decisions with regard to CSR and CSRR. This is due to the fact that under the concept of CSR, boards of directors, being major decision makers, are collectively both responsible and accountable to a wider range of stakeholders. Therefore, examining corporate governance (CG) mechanisms, in particular board composition, and their influence on both CSR and CSRR is important.

In 2008, Brennan and Solomon, in a special issue on corporate governance, provided an overview of corporate governance research within the accounting and finance discipline and identified social and environmental reporting as being among the broader range of accountability mechanisms being studied and which needs additional research (Brennan and Solomon 2008).

Research on board composition so far has mainly focused on its effect on corporate financial performance, and much less attention has been given to how specific board attributes influence CSR and CSRR. Within the literature on board composition, one of the recent and emerging issues, which has been rapidly gaining attention from both academics and practitioners, is board diversity (Catanzariti and Lo 2011). It is well argued in the literature that diversity among board members has the potential to influence financial performance and reporting (Carter et al. 2003; Rose 2007); however, a very limited number of studies have been undertaken to examine whether this also applies to non-financial performance and reporting (in this case, CSR and CSRR). In addition, a limited number of studies that link corporations’ responsibility (i.e. CSR), and board diversity (Bear et al. 2010; Post et al. 2011; Wang and Coffey 1992; Williams 2003) indicate that diversity can have a positive effect on some aspects of CSR.

Assuming that both CSR and CSRR are outcomes of boards’ decisions, consideration of boards’ decision making processes with regard to CSR is important to understand if and how board diversity relates to CSR. Diversity of board members is assumed to bring broad and heterogeneous perspectives to the decision making process which is critical to voluntary and complex decisions like those regarding CSR. Further, one of the particular board diversity characteristics, gender, is much debated and there is a growing amount of literature highlighting the importance of gender diversity in boardroom decisions. Notwithstanding this, there has been no research linking board diversity, including gender diversity, with the CSR decision making process, with most research only considering the board–CSR relationship using quantitative analysis of diversity variables. This paper therefore explores the relationships between corporate governance, in particular board diversity and decision making processes, and their subsequent influence on CSR/CSRR. This is undertaken by critically reviewing the existing literature, and suggesting where gaps exist, and what further research could contribute to understanding how boards make decisions about CSR and whether that is reflected in CSR reporting. Moreover, the paper suggests that in order to understand the effect of boards’ decisions on CSR/CSRR, more rigorous qualitative studies (such as interviews and case studies) are essential as this type of research enables the researcher to investigate the real world which in turn helps in gaining a deeper understanding of the relationships among key subjects (investors, directors, regulators and managers), and of the decision making processes that take place (McNulty et al. 2013). This paper adds to the literature by providing a critical and comprehensive review of the literature linking CSR and CG, specifically board composition, to date. It includes a review of the empirical and commentary literature on board composition and diversity, and the literature on the relationship of CG issues to CSR and CSRR. Finally, it identifies the gaps where more research is needed to improve our understanding of the CSR–CG link, noting in particular, the lack of many qualitative studies.

The next sections review the literature on the links between Governance, Boards, CSR and CSRR. The final sections discuss the role of decision making and conclude by providing an overview of the major gaps in the literature and suggestions for future research.

Corporate Governance, Board Composition and CSR

Nowadays, boards are increasingly seen as responsible for matters relating to CSR and sustainability (Ingley 2008; CR-INDEX 2014) which is reflected quite often in many studies (Elkington 2006; Jamali et al. 2008; Kakabadse 2007; Mackenzie 2007; Mahoney and Thorne 2005). These studies indicate that CSR is a critical item on boards’ agendas (Kakabadse 2007), and boards have major responsibility in achieving these objectives (Elkington 2006). In fact, a recent study by Jamali et al. (2008) found that corporate governance is what drives managers and executives to set goals and objectives in relation to CSR, and the board is key in meeting and promoting these CSR objectives. A considerable amount of evidence also exists suggesting that various board attributes can have significant influence on CSR (Dunn and Sainty 2009; Huang 2010; Johnson and Greening 1999; McKendall et al. 1999; Webb 2004; Ayuso and Argandoña 2007). Table 1 contains a summary of various conceptual/theoretical/review studies that examine the link between overall CG structure and CSR. As can be seen from the table, while results are mixed, there appears to predominantly be a positive relationship between governance and CSR, suggesting that CG and boards play a major role in CSR. Table 1 also shows that both quantitative and qualitative studies have been used to examine this link. However, it is worth noting that these studies did not focus on board attributes or diversity, the attribute of particular interest in this paper.

Table 1 Studies on the link between Corporate Governance (CG)/boards of directors and Corporate Social Responsibility (CSR)
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Board Diversity

Diversity in general is heterogeneity among board members, and has an infinite number of dimensions ranging from age to nationality, from religious background to functional background, from task skills to relational skills and from political preference to sexual preference (Van Knippenberg et al. 2004). It can be either visible/observable (race/ethnic background, nationality, gender, age, etc.) or less visible (educational, functional and occupational background, industry experience and organisational membership) (Kang et al. 2007). Diversity is largely considered as a “double-edged sword” (Hambrick et al. 1996, p. 668), and hence, debate on homogeneity vs. heterogeneity (diversity) is common in the diversity literature where several arguments have been put forward both in favour and against diversity. The basic argument in favour of diversity is that heterogeneity results in a broader perspective which allows groups to be involved in in-depth conversations and generate different alternatives (Watson et al. 1998). This is possible because diverse team members perceive problems from a variety of perspectives, such views are discussed, which results in a wide range of solutions and a wide range of consequences for each option (Robinson and Dechant 1997). Further, in order to reconcile, different/conflicting opinions groups are forced to thoroughly process task relevant information and may prevent the group from opting too easily for a course of action on which there seems to be consensus (Van Knippenberg et al. 2004).

Diversity, however, may have a negative or null effect on group processes or decision making processes. It divides the group into two sub categories, i.e. the in-group (majority) and out-group (minority) (Westphal and Milton 2000). The in-group members may tend to favour those who are similar to them and oppose the dissimilar ones and as such dismiss or devalue the contributions of out-group members (Nielsen 2010). Group members who differ from the majority further tend to have lower group loyalty (Randøy et al. 2006), lower levels of psychological commitment and higher levels of turnover intent and absenteeism (Marimuthu and Kolandaisamy 2009). In addition, scholars in diversity research recently suggest that diversity can have a negative effect if the individuals do not value/believe in their diverse work groups (van Knippenberg and Schippers 2007; van Knippenberg and Haslam 2003). Finally, in order to come to any kind of consensus, these two groups inevitably experience challenges, conflicts and dissatisfaction which further slows down the group process.

Despite these drawbacks, the majority of studies indicate that diversity has the potential to outperform homogeneity. For Instance, Hambrick et al.’s (1996) study indicates that the benefits of diversity (broad gathering of information, decision creativity and boldness) are more than enough to compensate for some of the major drawbacks of diversity (in-group/out-group bias, conflicts, slowness in decision making and action). In summary, even though it brings conflicts and misunderstanding within groups, and various perspectives and alternative solutions, diversity leads to higher quality problem-solving and ultimately outperforms homogeneous groups.

Although there appears little doubt that diversity can have both positive and negative effects on various group processes and performances, more recently, scholars in diversity research have noted that various other factors may play a moderating role on the effects of diversity on group processes. One promising and recurrent theme is that of diversity beliefs (van Knippenberg and Haslam 2003; Ely and Thomas 2001; van Knippenberg et al. 2007; Homan et al. 2007). Diversity beliefs is defined as individual beliefs about the value of diversity to work group functioning (van Knippenberg and Haslam 2003), that is, “the extent to which individuals perceive diversity to be beneficial for or detrimental to the group’s functioning” (van Dick et al. 2008, p. 8). Further, these diversity beliefs are not general beliefs about overall diversity, rather they are specific to dimensions of diversity and task contexts (van Dick et al. 2008). For instance, an individual who perceives gender diversity as beneficial may perceive ethnic diversity to be detrimental to group functioning (van Dick et al. 2008). Differences in individual beliefs about diversity as such can make them to respond more favourably or less favourably towards their diverse work group which ultimately can have a positive or negative effect on group processes or performance (Van Knippenberg et al. 2004; Homan et al. 2007).

In this respect, several studies have recently demonstrated that diversity beliefs can moderate the relationship between diversity and group performance. For example, van Knippenberg and Haslam (2003) indicated that when differences are seen as valuable to group functioning, group members may respond more positively to diverse groups than to more homogeneous groups. In a similar vein, using a survey and a laboratory experiment, van Knippenberg et al. (2007) demonstrated that the relationship between diversity and group members’ identification with their work group was moderated by their diversity beliefs. The study particularly indicated that diversity tends to be positively related to group identification when team members believe in the value of diversity, whereas it is negatively related when they believe in the value of similarity (van Knippenberg et al. 2007). Homan et al. (2007) on the other hand showed that groups are more likely to effectively use their informational resources when group members hold pro-diversity beliefs rather than pro-similarity beliefs. van Dick et al. (2008) further confirmed that individuals’ diversity beliefs moderate the relationship between diversity and team performance. Using the diversity beliefs perspective, they found that the value placed on ethnic diversity moderates the extent to which ethnic diversity leads to positive or negative responses to diversity (van Dick et al. 2008). This evidence clearly indicates that diversity has the potential to result in positive as well as negative team performance and that diversity beliefs can play a moderating role in these effects.

Although various benefits of diversity have been identified, progress towards board room diversity is very slow. Due to its broad nature, researchers still cannot come up with an agreed upon definition (Rose 2007). However, it has been broadly defined as “…variety in the composition of the BOD (Board of Directors)” (Kang et al. 2007, p. 195), which can be either visible or non-visible. More specifically, with regard to corporate governance, diversity is concerned with “board composition and the varied combination of attributes, characteristics and expertise contributed by individual board members in relation to board process and decision making” (Walt and Ingley 2003, p. 219). Walt and Ingley’s definition of board diversity seems to be more applicable because board diversity is not just variation among its members but rather how those differences in individual board members’ attributes, values and perceptions contribute towards various board process and outcomes. Board diversity is becoming an important factor in the modern world. Modern society is multicultural, gender sensitive, and exhibits diverse backgrounds, and in order to deal with such a challenge, “…boards need to examine how they can build the links that reflect democracy and civil society in its diversity, within their governance role as this relates to the organisations they serve and the wider community within which they exist” (Walt and Ingley 2003, p. 219). In addition, boards generally work in a group and “… variation in group composition leads to an increase in the skills, abilities, knowledge and information of the team as a whole” (Nielsen and Huse 2010b, p. 17) which enhances group performance and discussion (Van Knippenberg et al. 2004; Watson et al. 1993). Moreover, homogeneity at the senior level results in “… a more myopic perspective” (Robinson and Dechant 1997, p. 27). Homogeneous boards usually think alike and are more likely to have a similar perspectives/opinions, and such a high level of cohesion/unity among them tends to increase pressure towards conformity (Miller and del Carmen Triana 2009). Due to their lack of diverse perspectives, such boards may not be able to challenge the thinking of management which ultimately weakens the quality and variety of boardroom debate (Grady 1999).

Based on the above positive arguments favouring board diversity, recently a growing amount of contemporary research on boards suggests that diversity among board members has the potential to increase board effectiveness and thereby performance (Bonn et al. 2004; Carter et al. 2003; Erhardt et al. 2003). These studies focus on traditional financial performance, however, not CSR performance. For example, Carter et al. (2003) examined how the proportion of women and those of different ethnic origin influences performance. They argue that board diversity enhances independence, and that the difference in cultural background, gender and ethnicity may induce the diverse board to ask questions and it is less likely that such questions would be raised from directors with traditional backgrounds (Carter et al. 2003). Based on data from the fortune 1000, they find that there is a significant positive relationship between board diversity (women and minorities on the board) and firm value. Similarly, Erhardt et al. (2003) conducted a study based on US data and found that a higher degree of board diversity is associated with superior performance. While suggesting that board diversity (women and minorities on board) enhances creativity, innovation and quality decision making at both individual and group levels, they found a significant positive relationship between board diversity and accounting profit measured by return on invested capital and return on assets (Erhardt et al. 2003). Contrary to this positive evidence, diversity has also been found to have a negative effect on performance. For example, Bøhren and Strøm (2010) examined the relationship between firm value and various board diversity attributes including use of employee directors, board independence, directors with multiple seats and gender diversity. Their evidence shows that the firm creates more value for its owners when the board has no employee directors, when its directors have strong links to other boards and when gender diversity is low. They concluded that value-creating board characteristics support neither popular opinion nor the current politics of corporate governance (Bøhren and Strøm 2010). Evidence also exists suggesting that diversity may well not have any effect on board-level outcome or performance. For example, Carter et al. (2010), while investigating the relationship between the board diversity and financial performance, found no significant relationship between the gender or ethnic diversity of the board or important board committees, and financial performance for a sample of major US corporations. They concluded that the valuable resources provided by the women and ethnic minority directors may have been offset by socio-psychological dynamics of the board such as exclusion or conflict. They further speculate that effects of having women and ethnic minority directors may be different under different circumstances at different times. Similarly, Randøy et al. (2006), while investigating the 500 largest companies from Denmark, Norway and Sweden, found no significant diversity effect of gender, age and nationality on stock market performance or on return on assets. They conclude that increasing diversity may be attractive or may be political preference but does not affect performance (Randøy et al. 2006).

Board Diversity and CSR

With regard to board diversity and CSR, even though limited, research still suggests that board diversity to a certain extent can also influence social and environmental aspects of the business (i.e. CSR) (Bear et al. 2010; Coffey and Wang 1998; Ibrahim and Angelidis 2011; Krüger 2009; Post et al. 2011; Ibrahim and Angelidis 1995; Hafsi and Turgut 2013). While some of these studies have focused on examining the board diversity effect on overall CSR, others have focused on specific component(s) of CSR (for example, environment, philanthropy or donations). However, most of the research linking board diversity and CSR provides similar justifications as discussed above for the link. One of the most widely used diversity characteristics in the literature is board independence. With regard to the link between board independence and CSR, two major arguments were provided. First that outside directors tend to be more sensitive to society’s needs (Ibrahim and Angelidis 1995) and are more concerned with the ethical aspects of the corporation than inside directors (Ibrahim et al. 2003). The second argument is that independent board members are more interested in compliance with regulations and responsible behaviour by the entity (Zahra and Stanton 1988). Further, complying with regulation and acting in a responsible way will enhance reputation, and such reputation and image of the company is important to independent directors as it provides them with more chance of being selected for other boards (Lorenzo et al. 2009). The majority of these studies linking board independence and CSR seem to confirm the positive relationship between them.

In addition to independence, the other widely used board diversity characteristic is board tenure. The studies linking directors’ tenure with CSR issues mainly argue in favour of having a balanced board in terms of tenure; however, results are mixed and inconclusive. For example, Hafsi and Turgut (2013) argue that as the tenure increases directors become familiar with company strategy/management practice, but at the same time can become the captive of management. Their results showed no effect, suggesting that longer tenured directors may be too close to managers and avoid any controversy in decision making process, whereas shorter tenured board members are too shy to speak up. Such a situation may lead board members to follow rather than lead when it comes to dealing with social responsiveness and responsibility issues (Hafsi and Turgut 2013). Similarly, Krüger (2009) examined the issue from both a management friendliness hypothesis (echoing and supporting CEO/management, support short term rather than long-term outcome) and an experience hypothesis (enhances experience, skills and expertise, more willing to confront CEO). His results supported the experience hypothesis where he found that companies with substantial tenure of board members show lower incidence of negative social outcomes. He further concluded that neglecting CSR issues is risky, and hence, experienced directors, whether due to commitment to the company or due to self-protection of their career, are more likely to support decisions which are consistent with long-term outcomes.

As well as independence and tenure, another emerging diversity characteristic which is gaining attention in the CSR literature is age diversity. Particularly with regard to age and CSR, even though limited, research still indicates that age diversity among board members tends to influence CSR (Post et al. 2011; Hafsi and Turgut 2013). However, there seems to be no solid argument favouring one age group when it comes to board processes. Both the experience of older managers and energy and alertness of younger managers are considered as important in the decision making process as well as impacting on performance. Linking director’s age with corporate social performance, Hafsi and Turgut (2013) argued that older directors are more likely to be sensitive to welfare of the society (due to their increased generational behaviour) and younger directors tend to be more sensitive to environmental and ethical issues (as a matter of logic and principle).

Similar to age, a very limited number of studies also examined the influence of directors’ occupational background on CSR (Ibrahim et al. 2003; Siciliano 1996). Recently, Ibrahim et al. (2003) found that directors’ occupational background has the potential to influence corporate social performance. Their study highlighted that government officials and physicians on a board have different values, perspectives and backgrounds towards social performance, and those values and perspectives again vary in for-profit and not-for-profit organisations. Similarly, Siciliano (1996) found that the greater the occupational diversity at board level, the greater the level of fundraising and social performance. Their interview results further suggested that a variety of viewpoints from different occupational background compel the board to consider all aspects of the decision.

Other diversity characteristics such as educational qualifications, race/ethnicity and functional background have been identified to have some influence on various group processes and performances, but studies linking it with CSR are very rare. Finally, gender diversity is one of the most widely used diversity characteristics in the CSR literature recently. Since one of the major aims of the paper is to identify the gaps within the literature of gender diversity and CSR decisions, a detailed review of gender diversity is provided in the next section.

Due to the importance of board diversity characteristics in CSR, recently, studies have begun to examine the combination of various diversity characteristics in a single study linking it with CSR, including specific components of CSR. Most recently, Post et al. (2011) examined the relationship between various board diversity characteristics and environmental corporate social responsibility (ECSR). They particularly argued for the value of differences among directors in their access to information about, and values regarding, environmental issues. Drawing on evidence of demographic differences in ethical and environmental attitudes, they found that a higher proportion of outside board directors, firms with boards composed of three or more female directors, boards whose director’s average closer to 56 years in age, and those with a higher proportion of Western European directors, are positively associated with favourable ECSR. Similarly, Kabongo et al. (2013), while examining board diversity influence on corporate giving (one of the aspects of CSR), found that the significant presence of women, minorities and/or people who are disabled encourages more corporate giving. They suggest that the presence of diverse board members who bring and control unique resources results in the organisational behaviour of corporate giving (Kabongo et al. 2013).

While board diversity has the potential to influence CSR, it may also reflect the company’s commitment to CSR. The firms who are committed to CSR issues in order to achieve their goals may want to appoint directors with diverse values, background and experience. Recently, Webb (2004), while investigating the board structure of socially responsible firms and non-socially responsible firms, found that the boards of socially responsible firms tend to have fewer insiders (23 %) and more outsiders (71 %) compared to non-socially responsible firms (31 and 61 %, respectively). Further, demographically diverse board can send signals to the public about firms’ commitment to social justice (Bilimoria 2000; Miller and del Carmen Triana 2009); firms’ norm adherence and positive working conditions (Miller and del Carmen Triana 2009); firms’ particular strategy for improving the oversight of corporations (Galbreath 2011) and an indication of companies’ attention to women and minorities, and thus be considered to be socially responsible (Bear et al. 2010).

It is also highlighted in previous literature that the effect of diverse boards on various types of performance, including CSR, is more likely to be positive with the existence of a sufficiently diverse board. Consistent with this view, previous research has identified that unless there is a ‘critical mass’ (three or more) of women on a board, individual influence will be minimal (Konrad et al. 2008). Consistent with this, Williams (2003) found that boards with a higher number of women engage in charitable giving to a larger extent than boards with fewer women. Similarly, Bear et al. (2010) found that firms’ CSR ratings increase with the increase in the number of female directors and that the contributions women bring to the board are more likely to be considered by the board when the group diversity dynamics move away from tokenism to normality (Erkut et al. 2008).

Even though a limited number of studies examine board diversity and CSR aspects of the firm, a majority of studies still find a positive association between various board diversity characteristics and CSR. In addition, due to its voluntary nature, decisions with regard to CSR become complex and consideration of various alternatives, and in-depth discussion and debate facilitated by diversity will definitely result in high-quality decisions at board level. Moreover, empirical results show that, under high environmental uncertainty, heterogeneous top management teams achieve better performance, whereas less heterogeneous teams will be more successful in stable contexts (Hambrick et al. 1996; Nielsen 2010).

Gender Diversity

Among the various board diversity characteristics, gender diversity is one of the most significant issues faced by modern corporations (Carter et al. 2003). It has been recently perceived as an issue of interest not only in the diversity literature but also in politics and in other general societal situations (Kang et al. 2007). Even though there are a number of female directors occupying top-level positions, particularly on corporate boards (Vinnicombe 2009), the pressure to enhance the presence of female directors seems to be an ongoing global issue. Several countries have started adopting either legislative or voluntary initiatives to promote female representation on corporate boards. This includes, for example, Norway (40 % gender quota for female directors or face dissolution), Sweden (25 % voluntary reserve for female directors or threat to make it a legal requirement), Spain (comply-or-explain type law requiring companies to reach up to 40 % female directors by 2015), France (law which requires 50 % gender parity on the board of every public firm by 2015) (Bøhren and Strøm 2010) and more recently Italy (law requiring listed and state-owned companies to ensure one-third of their board members is female by 2015) (Arguden 2012). In addition to European countries, many developing countries such as India, China and Middle Eastern countries are also recognising the importance of female board members’ talent (Singh et al. 2008). Finally, in Australia, the Stock Exchange (ASX) in its recent changes to corporate governance principles now requires listed companies to specifically report on gender diversity at board and senior management levels (Kulik 2011). Most of these initiatives, whether voluntary or legislative, clearly indicate that the presence of women on boards could affect the governance of companies in significant ways (Adams and Ferreira 2009).

The presence of female directors in top-level positions has been linked to various outcomes resulting in mixed evidence. For example, some find a positive relationship between gender and financial performance (Carter et al. 2003; Erhardt et al. 2003), while others find no significant or even negative relationships (Adams and Ferreira 2009; Rose 2007; Shrader et al. 1997; Smith et al. 2006). Although still relatively small in number, a number of studies also suggest that having women on boards does exert some influence on non-financial performance and in particular CSR (Stanwick and Stanwick 1998; Wang and Coffey 1992; Williams 2003; Ibrahim and Angelidis 1991; Bernardi and Threadgill 2010; Smith et al. 2001; Siciliano 1996). For example, a recent study by Bear et al. (2010) found a positive relationship between CSR and the number of female directors on the board. They identified that two major strengths, increased sensitivity (Williams 2003) and participative decision making styles (Konrad et al. 2008), brought by the women to the board are found to be the key reasons for corporate responsibility strength ratings (Bear et al. 2010). The study further suggests that by contributing to a firm’s CSR, women play a role in enhancing corporate reputation, and hence, female representation should move away from tokenism to normality (Bear et al. 2010). Similarly, Krüger (2009) found that companies with higher female board representation have higher incidence of positive social responsibility. More specifically, the study indicates that companies with a higher fraction of female directors tend to be more generous towards communities and pay more attention to the welfare of a firm’s natural stakeholders (e.g. communities, employees or the environment), indicating that stronger presence of board members with altruistic preferences does indeed translate into more pro-social corporate behaviour (Krüger 2009). Another recent study by Braun (2010) concentrated on one aspect of CSR (Environmental commitment) and found that women had stronger environmental attitudes and commitment to a green entrepreneurship programme than males, suggesting that women entrepreneurs may be more engaged in green issues than male entrepreneurs. In Australia, a recent study by Galbreath (2011) confirmed that due to their relational abilities, women are more able to engage with multiple stakeholders and to respond to their needs, indicating CSR achievement. Various other evidences also exist, which indicate that female directors influence different aspects of CSR, such as charitable giving (Wang and Coffey 1992; Williams 2003), and higher levels of environmental CSR (Post et al. 2011).

While evidence and arguments discussed so far indicate that female directors are more likely to have a positive influence on CSR outcomes, their influence might be limited or even none. One major barrier which has been widely identified in the literature is that women in top-level positions often face discrimination or a stereotyping challenge which restricts their ability to fully contribute to corporate strategy and oversight (Arfken et al. 2004; EOWA 2008; Galbreath 2011). For example, in interviews with Australian board members, male directors stated that they tend to welcome women directors’ input on so-called ‘soft issues’ (such as human resources, occupational health and safety, corporate donations and ethics), but usually discount input on technical issues (such as engineering) (EOWA 2008). Recently, Galbreath (2011) further indicated that sex-based biases or stereotyping by male directors can limit women directors’ influence on decision making and thereby sustainable outcomes. In addition to the stereotype barrier, it is also often questioned in the literature whether gender differences actually apply to leadership/managerial positions. Women who pursue management careers usually reject feminine stereotypes and may be more likely to have needs, values and leadership styles similar to men (Powell 1990) hence tend to behave in a masculine manner. Consistent with this, Eagly et al. (1995) found no overall differences in the effectiveness of male and female managers and concluded that gender per se is unlikely to be a predictor of leadership effectiveness. However, the majority of the literature on gender differences argues that there are significant differences in values, perceptions and beliefs between men and women in general (Eagly et al. 1995; Powell 1990). Such differences are likely to be reflected in their various leadership roles including their board role. While differentiating leadership qualities of men and women, Eagly et al. (2003) suggest that agentic (i.e. related to agency) characteristics such as being assertive, ambitious, aggressive, independent, self-confident, daring and competitive are usually recognised in men, whereas communal characteristics such as a concern with the welfare of other people and being affectionate, helpful, kind, sympathetic, interpersonally sensitive, nurturing, and gentle are identified in women. Their research has further established that female leaders, compared to male leaders, are less hierarchical, more cooperative and collaborative, and more oriented towards enhancing others’ self-worth (Eagly et al. 2003). Moreover, evidence exists suggesting that women directors are more likely to influence issues related to stakeholders/CSR. While assessing the effect of board members’ gender on corporate social responsiveness orientation, Ibrahim and Angelidis (1991) found that, unlike men, women directors are less concerned about economic performance and rather more concerned about discretionary aspects of corporate responsibility. Further, women usually hold positions in ‘soft’ managerial areas such as human resources, CSR, marketing, advertising, etc., (Zelechowski and Bilimoria 2006) indicating that female representatives on boards are more likely to have in-depth knowledge of soft managerial issues. This evidence further indicates that female directors may perceive community or stakeholders’ interests, particularly CSR issues, differently than male directors. Table 2 provides a summary of the relevant studies on board diversity and CSR. The table specifically highlights the various empirical studies examining the effects of board attributes and board diversity (including gender diversity) on CSR. It is important to note that the studies, however, are predominantly quantitative, and the results are mixed and inconclusive, suggesting a need for more in-depth analysis of these attributes.

Table 2 Empirical studies on the effects of board attributes and board diversity (including gender diversity) on corporate social responsibility (CSR)
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Corporate Governance, Board Composition and CSRR

CSR, as mentioned earlier, extends firms’ accountability to wider stakeholders through reporting on their CSR activities, i.e. CSRR. Since accountability is an essential part of corporate governance (Donnelly and Mulcahy 2008), boards of directors become responsible for CSRR. Thus, the relationship between board composition and CSRR is explored in this section.

The link between corporate governance and reporting emerges from Jensen and Meckling’s (1976) agency theory framework under which it is assumed that management can exploit information asymmetry to act in a manner that is contrary to the interests of shareholders. One way of mitigating such an agency problem is to reduce that information asymmetry (Donnelly and Mulcahy 2008), and this is possible through one of the important qualities of governance, i.e. transparency/accountability (Hermalin and Weisbach 2007). Htay et al. (2012) suggest that disclosure of information, or transparency, is an integral part of corporate governance as higher disclosure could reduce information asymmetry which not only clarifies the conflicts of interests between shareholders and management but also makes corporate insiders accountable. A good governance structure as such goes hand in hand with increased transparency/disclosure (Mallin 2002). Given that boards of directors are major players in corporate governance, board composition is likely to have some influence on CSRR.

Based on the view that corporate governance enhances transparency/accountability, researchers have linked board composition to various disclosures such as mandatory reporting (financial reporting) as well as non-mandatory voluntary disclosure including CSR disclosures. The evidence indicating the link between board composition and disclosure is mixed. For instance, Chen and Jaggi (2001) found a positive association between a firm’s mandatory financial disclosures and the proportion of independent non-executive directors. Eng and Mak’s (2003) result on the other hand indicated that non-mandatory disclosure in Singapore is significantly and negatively associated with percentage of independent directors. Ho and Wong (2001), using a direct measure of voluntary disclosure based on analyst perception, were unable to confirm a significant relationship between the level of voluntary disclosure and board independence. With regard to board diversity (including gender), the research is rare linking it with CSR disclosure (Barako and Brown 2008; Haniffa and Cooke 2005; Khan 2010; Fernandez-Feijoo et al. 2012), but results seem to confirm a positive relationship. The arguments advanced by these researchers are the same arguments discussed in the earlier section linking board diversity and CSR, which suggests that diversity among the board members has the potential to influence CSR (diverse background, different values, perceptions about CSR, access to information, experience, expertise etc.). For example, Fernandez-Feijoo et al. (2012) argue that the values women assign to social issues are different and that they are highly committed to CSR. They found that boards with three or more women are determinants for CSR disclosure, produce less integrated reports, inform more on CSR strategy and include Assurance statements. Similarly, Haniffa and Cooke (2005) found that Malay dominated boards are positively related to CSD where a majority of respondents identified ethnicity background of board members as a determinant of CSD in Malaysia. In addition to the government’s favoured ethnic group, boards had feminine cultural values of the Malays which is considered to be partly the reason for such a positive relationship (Haniffa and Cooke 2005).

Table 3 presents a summary of relevant empirical studies which examined the effects of board attributes on various types of disclosure, including CSRR. One of the drawbacks in these studies linking board diversity and CSRR is that the majority of them examine the potential direct relationship between the two. However, the relationship between board diversity and CSRR is more complex than such an examination implies. CSRR is widely considered as a strategy (Haniffa and Cooke 2005), and the reporting is usually the outcome of strategic decision making processes. The diversity effect on the CSR decision making process is therefore likely to be reflected in CSRR. In summary, board diversity, through decision making processes, has the potential to influence CSRR but this has been neglected in the studies reviewed in this paper, which generally imply a more direct relationship. This is reflected in the predominance of studies that use quantitative modelling to consider the relationship, rather than a more nuanced, qualitative investigation.

Table 3 Empirical studies on the effects of board attributes on various types of disclosure, including Corporate Social Responsibility Reporting (CSRR)
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The board’s Role in Strategy/Decision Making Processes and CSR

Evidence on board diversity and performance (whether financial or CSR) discussed throughout this paper shows mixed results suggesting that board diversity attributes can influence performance positively or negatively (or may have no effect at all). In response to this mixed evidence, many papers have suggested that it is important to examine intermediate variables rather than examining direct relationships (Nielsen and Huse 2010b; Nielsen 2010). Given that CSR is a part of a firm’s strategy (McElhaney 2009; McWilliams et al. 2006) and boards of directors are responsible for formulating those strategies (Judge and Zeithaml 1992; Ruigrok et al. 2006), examining boards of directors’ strategic decision making processes would provide more insight into the relationship between board diversity and CSR/CSRR.

Both the corporate governance and strategic management literature indicate that a director’s role in strategy is the most complex and crucial one which requires thorough investigation. Strategy is regarded as “… a set of decisions that a) guide the organisation according to the environment, b) affect the internal structure and processes and c) consequently, its performance” (Balta et al. 2010, p. 58). Directors’ role in strategy in this sense is their involvement in the decision process and their ultimate effect on performance. The board’s role in strategy and decision making processes has been highlighted in many previous studies (Adams and Ferreira 2007; Deegan 1999; Elkington 1999; Kent and Monem 2008; Ricart et al. 2005; Walt and Ingley 2003; Wiersema and Bantel 1992; Zahra and Pearce II 1989; Pugliese et al. 2009; Deloitte 2011) suggesting that boards are significantly involved in the decision making process. With regard to CSR, the board’s role is considered as “a stream of board-level decisions that induce an integrated set of activities intended to produce social outcomes favourable to the firm’s alignment of its interest with that of society” (Hung 2011). However, such board-level decisions related to CSR are an understudied area of research in the CSR literature.

The relationship between board diversity and decisions with regard to CSR, even though evidence is limited, is still well supported. For example, Krüger (2009, p. 7) states that the

“… board of directors will have a substantial influence on the decision to support local communities or the extent to which a firm chooses to provide non-monetary and/or monetary benefits to its workforce (e.g. child-care, elder care, fitness canters and other work/life benefits). Likewise, it seems plausible that director characteristics such as experience or expertise will impact the ability of a company to manage its (social) risks effectively (e.g. avoiding environmental contamination and workforce safety violations, managing its pension and retirement liabilities responsibly, etc.)”.

According to Rose (2007), diversity ensures that corporate decisions are taken with a broader view, e.g. including a higher degree of stakeholder orientation than merely following the notion of maximising shareholder value. In addition, due to its voluntary nature, decisions with regard to CSR become complex and various alternatives, and in-depth discussion and debate facilitated by diversity will likely result in high-quality decisions related to CSR issues at board level. Moreover, evidence from previous empirical results shows that, under high environmental uncertainty, heterogeneous teams achieve better performance, although less heterogeneous teams may be more successful in stable contexts (Hambrick et al. 1996; Nielsen 2010).

Within the literature on board diversity, gender composition is considered to be an important aspect when considering boards’ decisions (Bear et al. 2010; Bilimoria 2000; Fielden and Davidson 2005; Hillman et al. 2002; Johnson and Greening 1999; Peterson and Philpot 2007; Singh et al. 2008; Terjesen et al. 2009; Wang and Coffey 1992; Williams 2003). Female directors tend to bring different perspectives to the board and can influence various board-level outcomes including the decision making process. Such unique perspectives could be due to their different experiences of the workplace, marketplace, public services and community, which are likely to add different perspectives to the decision making process (Daily and Dalton 2003; Zelechowski and Bilimoria 2004). Supporting female presence on boards, Walt and Ingley (2003) suggest that quality decision making requires a balance between skills and attributes among the board members which could be achieved by appointing more female directors. Some authors even argue that female directors are more likely to be objective and independent (Fondas 2000) and as such tend to ask questions more freely than male directors (Bilimoria and Wheeler 2000). Their presence therefore enhances board information, perspectives, debate and decision making (Burke 2000). Nielson and Huse (2010b), based on survey data from multiple respondents in 120 Norwegian firms, found that women directors contribute towards board decision making processes and thereby influence board strategy. They examined the effect female board members have on board operational control and board strategic control. They find the ratio of women directors to have a positive direct relationship with board strategic control. In addition, they also find women directors reduce the level of conflict, which is detrimental to board strategic control. They concluded that “… it is not the gender per se, but the different values and professional experiences that women may possess that enable them to make a difference to actual board work and influence board decision-making” (Nielsen and Huse 2010b, p. 17). Despite the evidence suggesting gender composition is likely to influence various decisions including decisions related to stakeholders, research linking gender with CSR-related decision making is rare and in need of more in-depth consideration.

Table 4 provides a summary of relevant studies undertaken on the effect of board attributes on strategy/decision making processes. The majority of the studies in the table indicate that board attributes/diversity have the potential to influence various strategic outcomes. However, the board diversity effect on CSR strategy/decision is an understudied area, particularly in more recent times.

Table 4 Studies on the effect of various board attributes (including Top Management Team—TMT) on strategy/decision making processes
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Conclusion

Due to globalisation and technology, the nature of organisations and their relationship with stakeholders has been evolving and now requires boards of directors to “… move forward from the traditional role of controlling the management, towards a much more proactive role” (Hung 2011, p. 397). In other words, boards’ roles and responsibilities have been extended from the traditional shareholder-centric one to encompass various stakeholders, and this has been clearly highlighted as being part of the broader perspective of corporate governance.

Within this broader view, board composition seems to be a major factor which can be assumed to have some influence on both CSR and CSR reporting. One of the emerging and rapidly growing areas of research is board diversity. Greater diversity among board member characteristics has been advocated as “a means of improving organisational performance by providing boards with new insights and perspectives” (Siciliano 1996, p. 1313). Even though a reasonable consensus exists in the literature suggesting that corporate governance, in particular, boards of directors, plays an important role in ensuring companies meet CSR objectives (Mackenzie 2007), limited research actually examined whether diversity among board members has any influence on CSR and even less has considered CSR reporting.

The review conducted in this paper has, in fact, identified a number of gaps and deficiencies in the literature on board composition to date.

First, the majority of empirical papers focus on examining the effect of board diversity on corporate financial performance. In addition, most of the prior studies are cross sectional and hence restricted from identifying causality between the diversity and organisational performance.

Second, since CSR is widely perceived as a strategy, research should also explore how board processes, in particular decision making processes, with regard to CSR or CSRR is taking place in an organisation. This is an important gap in the literature, and would provide more insight into whether and how boards are involved in decision making processes with regard to CSR and whether CSR and CSRR are outcomes of these decisions. Moreover, the decision making process is the one where boards collectively decide upon various CSR initiatives (e.g. whether to invest or not to invest in CSR activities) as well as reporting such CSR issues (e.g. whether to report or not to report certain positive or negative CSR issues to wider stakeholders). Very little research, however, has directly examined decision making by directors facing social responsibility decisions. Most of the board research studies are quantitative, examining the direct association between board diversity and CSR/CSRR resulting in contradictory findings. Qualitative methods such as case studies, observation and interviews should be adopted to gain in-depth understanding of boards’ decision making processes with regard to both CSR and CSRR. This lack of qualitative methods in the field of corporate governance has been highlighted by a recent review paper by McNulty et al. (2013). While providing an overview of published qualitative research between 1986 and 2011, they suggest that more qualitative methods are essential in order to explore the array of interactions and processes involved in corporate governance.

Third, with regard to board diversity, there has been limited research linking various board diversity characteristics to CSR or CSRR decisions by the board. Further, while diversity beliefs seem to play a moderating role in the effects of diversity on group performance generally (van Knippenberg and Haslam 2003; van Knippenberg et al. 2007; Homan et al. 2007), far less attention has been given to the potential influence of the board members’ beliefs on board-level outcomes. So far, there seems to be no research focussing on examining the possible effect of board members’ beliefs on CSR decisions made by the board. Further work is clearly needed to develop understanding of the diversity beliefs of board members and its impact on CSR decisions.

Fourth, within the board diversity characteristics, gender is one of the most debated and significant issues faced by modern corporations. Yet, even though there is growing amount of literature suggesting that female directors can influence various board decisions, the research examining gender and CSR decision making processes is rare. Given such importance placed on gender diversity by academics, policy makers and firms, it is crucial to examine whether gender diversity really matters in CSR or CSRR decisions through both qualitative and quantitative means.

Finally, many of the studies previously conducted focus on a ‘black box’ approach to considering the various board characteristics. That is, they identify potential influences and relationships, which they study using statistical tests and models, but do not include an in-depth examination.

This paper proposes that further research linking gender composition with CSR, in particular the CSR decision making process, is required in order to gain thorough understanding of gender influence on CSR. This should include interviews, case studies and longitudinal studies to enrich our knowledge of the complex interactions that take place on boards and in organisations.

More specifically, the paper proposes that examination of boards’ decision making processes with regard to CSR would provide more insight into the relationship between board diversity and CSR.