The influence of corporate governance practices on corporate social responsibility (CSR) reporting - evidence from Mauritius

The influence of corporate governance practices on corporate social responsibility (CSR) reporting - evidence from Mauritius

This study investigates the extent to which corporate governance practices impact on Corporate Social Responsibility (CSR) reporting in Mauritius. It is
mandatory for all profitable businesses in Mauritius to contribute 2% of their profit towards CSR activities (CSR levy). It is also mandatory for all Public Interest Entities to report their CSR activities in their annual report. The practice of CSR is the norm rather than the exception in Mauritius and the responsibility of ‘what’ and ‘how much’ to report on is the Board’s responsibility. This study, therefore, aims to answer the following primary question: To what extent do corporate governance practices influence the extent of CSR reporting in Mauritius? In seeking the answer to the overarching research question, the following sub-questions are asked: (1) To what extent are Mauritian companies disclosing CSR? (2) What themes of disclosure are favoured by Mauritian companies? (3) Which corporate governance practices/other factors determine the extent of CSR reporting? (4) To what extent does legislation affect CSR reporting? (5) Do companies undertake more than the minimum required on CSR? (6) What are the determinants of voluntary CSR practices?

The study is conducted using a sample of listed firms on the Stock Exchange of Mauritius (SEM) over a period of eight years (2007-2014). A checklist comprising of 41 items was developed based on four themes: environment, human resource, products and consumers and community. A dichotomous procedure was used whereby an item appearing on the checklist and disclosed in the annual report was given a score of ‘1’ else ‘0’. The disclosure score for each company based on the checklist was converted into an index (Corporate Social Responsibility Index) which is the disclosure score divided by the maximum allowable score (41). This index (CSRI) is used as proxy for the extent of CSR reporting. Empirical results show a pattern of reporting different from other countries with the ‘environment’ being the most disclosed theme. Regarding the determinants of CSR reporting, it was found that board size, board gender diversity, firms which are involved in employee volunteering and firms which contribute funds to a CSR foundation, report more often. Results also show that director ownership, government ownership and board independence have a negative influence on the level of reporting. The study also examines the characteristics of those firms which go beyond the 2% threshold. Results show that firms with a female board presence, firms with the presence of a director with a social qualification, larger firms, manufacturing firms and those firms which channel their funds to a CSR foundation are more likely to over-invest. Conversely, as director ownership increases a firm is less likely to over-invest. This study makes a number of contributions to the literature. First, the study is
carried out using a number of theories and thus contributes to legitimacy, stakeholder and neo-institutional theories showing the suitability of these theories in a period of pure voluntarism as well as in during a period of mandatory CSR. Second, it contributes to the scant number of studies on CSR practices and reporting in Small Island Developing States (SIDS) and from an ‘emerging governance’ perspective. Third, the study throws light on the contribution of two new determinants of CSR reporting: foundations and employee volunteering. Finally, this is one of the rare studies which investigates the determinants of voluntary CSR in a mandatory CSR setting.