Governance and Corporate Social Responsibility: How Well-Connected and Diverse Boards Can Help Companies Tackle the World’s Biggest Challenges
A new Telfer study suggests that a well-connected and influential board can help companies address the world’s biggest challenges. A Telfer alumna believes that information advantage and influence are valuable resources for the board, but diversity of skills and experiences also matter.
Corporate social responsibility and governance
In today’s corporate world, companies are expected to have more than higher financial performance. Many firms look for ways to take better care of their workforce, address environmental challenges or leave a positive mark on their communities. These long-term outcomes are also referred to as corporate social responsibility (CSR) initiatives.
Does the board of directors play a role in supporting corporate managers in implementing corporate social responsibility? A new study by Lamia Chourou, associate professor at the Telfer School of Management, suggests that board members’ ability to improve the firm’s CSR performance depends on how influential and well-connected the board is.
Firms often look to appoint independent directors who sit on more than one board and bring in reputation, knowledge and other invaluable resources. Research has shown that influential and well-connected boards of directors may be better equipped to strategically support the managerial team. As a result, such boards may have a positive effect on firm financial performance. However, little is known about how they can help firms improve their CSR performance.
Board connectivity and greater social impact
Professor Chourou and a group of international collaborators wanted to understand if board connections have a positive impact on firms’ CSR. The researchers measured how 2,820 publicly listed U.S. firms addressed society’s grand challenges from 2002 and 2013, by taking care of their workforce, adhering to product quality standards and reducing their environmental impact.
The research team found that boards that have access to a network of directors and their resources gain valuable insights and contribute best practices around CSR. The board can also use these resources to exercise their influence on the managerial team and to drive greater alignment between the purpose of the company and the adoption and implementation of CSR initiatives.
“Access to network connections can create an information advantage allowing directors to more strategically align the priorities, objectives and tone of the organization to make meaningful contributions to the greater social good,” explains Chourou.
Telfer alumna Tanya Gracie (EMBA ’17) is Director, Strategy at Central 1 Credit Union. She explains that we need to unpack the meaning of ”well-connected boards” and ask: “Are companies seeking out, nominating, electing or appointing influential board directors because these resourceful members support both the business goals and the pursuit of being good corporate citizens?”
Diversity also matters
Chourou’s study suggests that diversity in board network connections may facilitate information exchange and help managers cope with the increasing need for business to become socially involved. The researchers found that the following characteristics of board members can be very successful in aiding managers to adopt CSR practices in specific industries:
- independent directors working in the top 25 most charitable firms in the U.S.
- female independent directors working in other firms
- independent directors working in non-polluting industries
- independent directors working in the unionized industry
- independent directors in R&D-intensive industries
Information advantage and influence are valuable, but they are not the only benefits that will enable people to change the world in corporate Canada. Gracie reminds us that diversity of experiences and skills also matter. “The board should be comprised of individuals from diverse backgrounds and with a diversity of lived experience, who collectively look at the organization in a holistic manner.”
A member of the board of the National Capital Commission (NCC), Gracie and her fellow board directors received their appointments through the federal Governor in Council process. The process was revised in 2016 to be more open, transparent and merit based. For Gracie, “good governance practices are continually evolving, and today many organizations are using new tools and practices to increase board diversity, and ultimately improve strategy, risk and performance, including CSR performance.”
Practical recommendations for companies
Gracie sees major opportunities to continue to advance environment, social and corporate governance, but a few things need to happen before we reach that state. She suggests a few recommendations:
- Through the board nomination and election committee and process, companies should hold skills and competencies related to corporate social responsibility in the same regard as skills and experience in financial, law and technology.
- Make corporate social responsibility part of board education, for both boards and individual directors.
- Embrace director education opportunities that help foster director connections in a more diverse way: for instance, some programs encourage connections with individuals with varying levels of board experience across different organizations and industries.
- Ensure that the board and CEO evaluation processes include an assessment of the overall understanding and importance of CSR initiatives, as well as the firm’s level of commitment to these initiatives and performance results.
Read the full article to learn more about this study:
Amin, A., Chourou, L., Kamal, S., Malik, M. and Zhao, Y. 2020. It’s who you know that counts: Board connectedness and CSR performance. Journal of Corporate Finance, 64.
Lamia Chourou is an Associate Professor at the Univeristy of Ottawa's Telfer School of Management. She is also a CPA Ontario Fellow. Her research focuses on capital markets and in particular corporate disclosure, financial reporting quality and analysts’ forecasts.
Tanya Gracie (EMBA ’17) is Director, Strategy at Central 1 Credit Union.
Does Corporate Social Responsibility Performance Depend Primarily on its Location?
Today the public, investors, and governments are concerned about the social and environmental impacts of companies and how they are held accountable. This is why companies make corporate social responsibility a strategic priority. They may choose to support local charities, commit to using biodegradable materials, or take better care of their employee wellbeing.
Research has shown that institutional factors also influence companies to tackle society’s greatest challenges and have a positive impact on their communities. These institutional factors are however shaped by unique social-cultural contexts underlying in each country that, in turn, affect government regulations, corporate governance, and managers’ incentives to engage in corporate social responsibility. Walid Ben Amar, Professor at the University of Ottawa’s Telfer School of Management and a team of researchers from Université Clermont Auvergne, University of Toronto, and HEC Montreal examined the cascade effect of these three levels—State institutions, firm and CEO—and how they directly and indirectly influence companies to pursue corporate social responsibility or prevent them from doing so.
Their findings show that, even when government regulations do not encourage companies to engage in corporate social responsibility, managers and CEOs still can counterbalance their institutional barriers and aim for a positive impact on their societies.
To learn more how these three factors play a role in corporate social responsibility, read the Conversation article published by Professors Sylvain Marsat, Aida Wahid, Claude Francoeur, and Walid Ben Amar.
The Future of the Family Business: 4 Strategies for a Successful Transition
Accounting for 75% of all businesses around the globe, family businesses are the backbone of our economy. However, only 4.9% of millennials intend to take over their family businesses. How can aging parents who own a family business pass the company onto millennials?
In their decade-long research, Professors Peter Jaskiewicz from the University of Ottawa’s Telfer School of Management, Alfredo Massis from the Free University of Bozen-Bolzano, and Marleen Dieleman from the National University of Singapore analyzed over 400 interviews and conversations with members of family businesses from Asia, Europe, and North America. The authors identified four strategies for a successful transition.
Their results indicate that all families are unique: imposing a transition strategy that does not fit families and their respective leaders can significantly hurt the family business.
To discover the main insights gained from this study, read the full article published by Telfer Professor Peter Jaskiewicz in the Conversation.
Gender Entrepreneurship Education and Training Plus: Building Entrepreneurial Ecosystems to Support Underserved Entrepreneurs
On March 23, 2021, this round table launched the Gender Entrepreneurship Education and Training Plus (GEET +), a multi-country project that mobilizes evidence-based insights in the development of entrepreneurship education and training as drivers of economic empowerment of girls, women, and other disadvantageous groups.
The GEET + is the work of Telfer School of Management’s Professors Barbara Orser and Catherine Elliott. Led by The Women's Economic Imperative and funded by the International Development Research Centre (Canada), the pilot project is being launched in Peru, Mexico, Kenya, and Nigeria.
You can now watch the event highlights to learn more about the GEET+ action strategy:
The Telfer School of Management is committed to driving the design and delivery of inclusive entrepreneurship education and training to enhance the UN Sustainable Development Goals of gender equality and women’s economic empowerment. Telfer’s Inclusive Entrepreneurship scholars are informing research, practice, and policy to strengthen entrepreneurial ecosystems around the world.
The Business of Accelerating Sustainable Urban Transformations in Canada
Our society is currently facing the imminent dangers of climate change: an increase of natural disasters, resource scarcity, and other environmental and social sustainability challenges. As these grand challenges threaten our ability to live within the Earth's carrying capacity, we must transition to sustainable practices in urban built environments. Businesses must play a significant role in this transition, but how can we increase their involvement in the design, development, and construction of sustainable urban cities and, as a result, enable the transition to a more sustainable future?
Research findings
Associate Professor Daina Mazutis received a Knowledge Synthesis grant by the Social Sciences and Humanities Council to review the existing research on the topic. She has recently produced a report determining key issues, best practices, limitations, and knowledge gaps around the governance and capacity-building required to accelerate the role of business in sustainable urban transformation projects in Canada.
Read the report and discover how Mazutis' insights can help foster a greener Canada:
The Business of Accelerating Sustainable Urban Transformations in Canada
Professor Daina Mazutis has written a paper based on the above report that has won a Best Paper Award in the Social Responsibility Division at the ASAC 2021 Conference.
Who will benefit from this research?
“Insights gained from this research have the potential to influence both the policy and practice of sustainable urban transitions in Canada, from a business perspective. This review will also identify areas where industry executives and policy makers can work together to effectively facilitate the planning, design and construction of more sustainable communities in the future.”
Professor Mazutis
Learn more about Social Sciences and Humanities Research Council Knowledge Synthesis Grants.
- Looking at digital innovation in the workplace
- Exposing the power gap in Canada’s C-Suite and challenging the language of merit in corporate disclosures
- “Building back better” for women entrepreneurs: A policy reboot for Canada’s feminist recovery plan
- Mental Health during COVID-19: Examining the Role of Peer Support Services
