Looking Inside the Black Box: The Effect of Corporate Governance on Corporate Social Responsibility

TLDR

This review systematically examines how corporate governance mechanisms at institutional, firm, group, and individual levels influence firm‑level corporate social responsibility, offers critical reflections on the literature, and maps their effects to guide future research. The authors analyze institutional formal and informal mechanisms, firm ownership types, board structures, director networks and diversity, and CEO demographics, and recommend a multi‑theoretical, qualitative and quantitative approach to study these governance systems. The synthesis of peer‑reviewed studies from 2000–2015 shows that CG mechanisms affect CSR outcomes, underscores the need to disaggregate variables and understand their interactions, calls for cross‑cultural research, and suggests that firm reforms must be coupled with institutional context changes to drive substantive CSR behavior.

Abstract

Abstract Manuscript Type Review Research Question/Issue This study provides a systematic multi‐level review of recent literature to evaluate the impact of corporate governance mechanisms (CG) at the institutional, firm, group, and individual levels on firm level corporate social responsibility (CSR) outcomes. We offer critical reflections on the current state of this literature and provide concrete suggestions to guide future research. Research Findings/Insights Focusing on peer‐reviewed articles from 2000 to 2015, the review compiles the evidence on offer pertaining to the most relevant CG mechanisms and their influence on CSR outcomes. At the institutional level, we focus on formal and informal institutional mechanisms, and at the firm level, we analyze the different types of firm owners. At the group level, we segregate our analysis into board structures, director social capital and resource networks, and directors' demographic diversity. At the individual level, our review covers CEOs' demography and socio‐psychological characteristics. We map the effect of these mechanisms on firms' CSR outcomes. Theoretical/Academic Implications We recommend that greater scholarly attention needs to be accorded to disaggregating variables and yet comprehending how multiple configurations of CG mechanisms interact and combine to impact firms' CSR behavior. We suggest that CG‐CSR research should employ a multi‐theoretical lens and apply sophisticated qualitative and quantitative methods to enable a deeper and finer‐grained analysis of the CG systems and their influence on CSR. Finally, we call for cross‐cultural research to capture the context sensitivities typical of both CG and CSR constructs. Practitioner/Policy Implications Our review suggests that for structural changes and reforms within firms to be successful, they need to be complemented by changes to the institutional makeup of the context in which firms function to encourage/induce substantive changes in corporate responsible behaviors.