Managing What You Measure: Corporate Governance, CSR and Water Risk
Posted: 19 Apr 2012
Date Written: April 19, 2012
Research Question/Issue: This paper explores the function of CSR within a corporate governance framework, using corporate water risk disclosure as a proxy for the policy choices that are shaped by firms’ CSR strategy. It uses the lenses of agency, institutional and resource dependence theory to frame strategic policy choices, and applies an empirical analysis of disclosure to contextualise the multi-scalar institutional governance environments in which firms operate. The first such study of corporate water risk disclosure, the paper builds on the extant literature to deliver new and empirically supported theoretical insights.
Research Findings/Insights: The relationship between CSR and corporate governance is less a function of regulation and control, and is more a function of complex interdependencies between and within firms; shaped by the institutional governance environment across specific geographic and industry vectors. This relationship holds true for both local and multinational firms, and the empirical findings are applicable towards a global theory of corporate governance.
Theoretical/Academic Implications: This paper offers fresh insight into the relationships between a firm’s CSR strategy, its policy choices, and the governance environments in which it operates. The relationship between CSR strategy and corporate governance can only be optimised by ‘bundling’ both internal and external monitoring and incentive systems in a context-sensitive manner.
Practitioner/Policy Implications: The risk of water insecurity features with increasing prominence in both firms’ CSR strategies and policymakers’ governance frameworks. This study empirically demonstrates why existing approaches to CSR disclosure are not sustainable over the long term, and offers robust theoretical arguments as to why alternative approaches by practitioners and policymakers alike will (and must) be forthcoming.
Keywords: corporate governance, CSR, disclosure, water risk
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