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The Relationship of Corporate Social Responsibility and Financial Performance
Under Corporate Governance Aspects in Selected Southeast Asian Companies
DISSERTATION of the University of St. Gallen,
School of Management, Economics, Law, Social Sciences
and International Affairs to obtain the title of
Doctor of Philosophy in Management
submitted by
EUNICE MARETH QUEROL-AREOLA
from
the Philippines
Approved on the application of
Prof. Dr. Andreas Gruener and
Prof. Dr. Martin Hilb
Dissertation no. 4618
Gutenberg AG, Schaan, 2017
2
The University of St. Gallen, School of Management, Law, Social Sciences
and International Affairs hereby consents to the printing of the present
dissertation, without hereby expressing any opinion on the views herein
expressed.
St. Gallen, October 24, 2016
THE PRESIDENT:
Prof. Dr. Thomas Bieger
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ACKNOWLEDGEMENT
“To everything there is a season,
and a time to every purpose under the heaven….”(Ecclesiastes 3:1)
I praise and thank the Lord for allowing me to finish what I have started
in the Spring of 2008. In between a critical career change, a major surgery,
countless episodes of resource scarcity and the challenge of secular work, my
journey as a student has now ended. It was a humbling experience to ask for
material help, seek academic guidance and request for intellectual assistance
from countless people who were certainly heaven-sent, all gifts from the Great
Provider. I have felt mental exhaustion and physical pain, but each time I do, I
simply remind myself that, this too shall pass. I have been restored, filled and
satisfied by the Divine Healer.
I am indebted to my supervisor, Prof. Andreas Gruener, for accepting
me as his supervised student. I am fortunate to have met my co-supervisor,
Prof. Martin Hilb and I am grateful to him not only for the profound insights he
has shared in class, but more so for his warm personality, his enthusiasm, his
encouragement and his kindness. I owe Dr. Agung Wicaksono a tremendous
amount of gratitude, for without him I would not have known about the
University. I would like to thank Prof. Kirpal Sing, my brother in spirit and my
mentor, for believing in me. My gratitude also goes to Frs. Mateo de Jesus,
OSB and Alberic Lazerna, OSB who acknowledged my worth and knew that I
am capable of earning this degree. I thank my brothers and sisters in the
Community of Couples for Christ and in Handmaids of the Lord for their
prayers and encouragement. (From Geneva: Bro. Ferdinand Clemente,
Monsieur and Madame Ruben and Leana Pinazo; and from Zurich: HOLD in
Winterthur and Mr. and Mrs. Markus and Imelda Vollenweider). I will be
forever grateful to Nanay Josie and Papi Franz Scherer who gave me a home in
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Wil and supported me during my stays in St. Gallen. I thank each and every
person who made it possible that I finish this endeavor.
In this milestone in my professional life, I honor my (+) father, Ernesto
Ranario-Querol and my mother Erlinda Galang-Cruz, for planting in me the
intellectual genes and the seeds of tenacity. I thank my siblings Eleanor
Monique, Ethel Myra, Ena Magdalene, Emily Martha, Evita Marie and Miguel
Eleazar for their encouragement, support and prayers.
My heart and spirit is nourished by my children, my sons Freilich
Ezekiel, Friedrich Emmanuel and Feodore Elijah, and my daughter Ellianna
Franzl. Their unconditional love, thoughtfulness, care, generosity,
understanding and extreme consideration embraced me throughout my
professional and academic life. Your presence in my life is the wind beneath
my wings. Thank you for keeping your faith in me.
Finally, I say this to my best friend, my favorite travel companion, my
compassionate financier, my creative problem solver, my greatest critic and
biggest cheerleader, my dream maker and reality checker, to the one who lifts
me up when I am lost and troubled, the one who laughs and cries with me, and
assures me every day that I am his priceless diamond, my husband Farley
David-Areola…you have my deepest gratitude and full measure of devotion
and love.
I am everything I am because of all of you. Thank you.
That in All Things, God May Be Glorified
UIOGD
AMDG
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ABSTRACT
This paper studies the Corporate Social Responsibility and Financial
Performance relationship among selected companies in the ASEAN countries
of Indonesia, Malaysia, Philippines and Thailand during a 10-year period
ending 2015. Financial performance was determined using financial ratios of
Return on Assets, Return on Equity, Return on Capital Employed, Gross
Margin, Net Profit Margin, Earnings per Share, Price to Earnings Ratio, Price
to Book Value Ratio, Price to Cash Flow Ratio and Dividends Yield Ratio.
Corporate Social Performance was determined using author-created
sustainability scoring based on the presence or absence of identified Corporate
Social Responsibility reporting factors for the year.
The relationship of Corporate Financial Performance and Social
Performance was statistically determined using Pearson Product Moment
Correlation, with other variables namely company size and level of risk. The
study revealed mixed results whereby the CSR and Financial Performance of
selected companies in the Southeast Asian countries of Indonesia, Malaysia,
Philippines and Thailand exhibited positive, negative and neutral correlation at
various significance levels. Consistent with previous studies, the Southeast
Asian corporate situation illustrates a mixed relationship between Financial
Performance and Corporate Social Responsibility performance following the
theories described under the Stakeholder theory, the Shareholder theory and
some aspects of New Corporate Governance. This study further suggests that
regardless of financial situation, Southeast Asian companies are encouraged to
perform well in the environment, social and governance standards.
Keywords: Corporate Social Performance; Corporate Social Responsibility;
Financial Performance; Corporate Governance; Southeast Asia
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ZUSAMMENFASSUNG
In diesem Beitrag wird die Beziehung zwischen sozialer Verantwortung
und Finanzerfolg von ausgewählten Unternehmen in den ASEAN-Laendern
Indonesien, Malaysia, Thailand und Philippinen während einer 10-Jahres-
Periode bis Ende 2015 untersucht. Finanzerfolg wird anhand von relevanten
Finanzkennzahlen (wie Return on Assets, Return on Equity, Return on Capital
Employed, Brutto-Marge, Nettogewinn-Marge, Erfolg pro Aktie, Kurs-
Gewinn-Verhaeltnis, Kurs-Buchwert-Verhaeltnis, Kurs-Cash-Flow-Verhaeltnis
und Dividenden-Rendite) gemessen.
Corporate Social Performance wird anhand des von der Autorin
entwickelten Nachhaltigkeits-Index aufgrund verschiedener CSR-Faktoren
bestimmt. Diese statistikbasierte Studie ergibt gemischte Ergebnisse. Die
Beziehung zwischen CSR und Finanzerfolg ausgewählter Unternehmen in den
ASEAN-Laendern Indonesien, Malaysia, Thailand und den Philippinen
ergeben z.T. positive, z.T. negative, z.T. neutrale Korrelationen bei
unterschiedlichen Signifikanzniveaus.
Diese Ergebnisse bestätigen frühere Untersuchungen, die auf
unterschiedlichen Theorien (wie Stakeholder, Shareholder und New Corporate
Governance Theorien) basieren. Diese Studie empfiehlt Unternehmen in den
ausgewählten ASEAN-Laendern, ungeachtet des Finanzerfolgs, in Zukunft
relevante Umwelt-, Sozial- und Governance-Standards zu erfüllen.
Keywords: Corporate Social Performance; Corporate Social Responsibility;
Financial Performance; Corporate Governance; Southeast Asia
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TABLE OF CONTENTS
Acknowledgement………………………… ………………………………… 3 Abstract…………………………………… …………………………………. 5 Zusammenfassung………………………… …………………………………. 6 List of Tables……………………………... …………………………………. 7 List of Figures……………………………. …………………………………. 12 List of Appendices………………………... …………………………………. 13 1 Introduction Section…………………… ………………………………….. 15
1.1 The Research Theme………....... …………………………………. 15 1.2 Relevance of Research………… …………………………………. 19 1.3 Research Objectives and Questions ………………………………….. 23 1.4 Research Scope……………….. …………………………………. 28 1.5 Structure of Research…………. ………………………………….. 31
2 General Theoretical Sections………… …………………………………. 34 2.1 Corporate Social Responsibility …………………………………. 38
2.1.1 Definition of Corporate Social Responsibility: The Beginning of a Concept……………………………………………………………
39
2.1.2 Importance of Corporate Social Responsibility: The Business Case of CSR……………………………………………………….
47
2.1.3 Arguments Against and in Support of Corporate Social Responsibility: The CSR Ambivalence…………………………..
53
2.1.4 Metrics of Corporate Social Responsibility: In Search for a Corporate Social Performance Identity…………………………..
66
2.1.5 Summary: CSR Performance in Relation to Financial Performance………………………………………………………
84
2.2 Financial Performance…………………………………………………. 86 2.2.1 Definition of Financial Performance: There is Definitely More To
Numbers………………………………………………………….
88 2.2.2 Importance of Financial Performance: The Business Case of
Financial Performance……………………………………………
91 2.2.3 Arguments Against and in Support of Financial Performance:
Understanding the Value of a Company…………………………
93 2.2.4 Metrics of Financial Performance: What Works Well With
Corporate Social Responsibility Relationships…………………
98 2.2.5 Summary: Financial Performance in Relation to CSR
Performance……………………………………………………….
109 2.3 Corporate Governance: The Dynamics of Company Existence……….. 123
8
2.3.1 Definition of Corporate Governance: Putting Corporate Social Responsibility and Financial Performance Relationship in the Picture…………………………………………………………….
126 2.3.2 Theories in Corporate Governance That Embrace the CSR-FP
Relationship: A Revisit…………………………………………..
132 2.3.3 Corporate Governance in Southeast Asia: Laying the Groundwork
for an Important Region………………………………………….
144 2.4 CSR-FP Relationships: The Foundation of this Research……………… 151
2.4.1 Positive CSR and Financial Performance Relationship………….. 152 2.4.2 Negative CSR and Financial Performance Relationship…………. 156 2.4.3 Neutral CSR and Financial Performance Relationship…………… 158
2.5 Section Synthesis: The Way Forward in CSR-FP Relationship Study… 161 3 Specific Empirical Sections…………………………………………………… 168
3.1 Research Hypotheses…………………………………………………… 168 3.2 Research Design…………………………………………………………
3.2.1 Unit of Analysis and Statistics Used……………………………… 3.2.2 Selection Method…………………………………………………. 3.2.3 Data Source………………………………………………………. 3.2.4 Data Analysis ……………………………………………………..
171 171 172 173 176
3.3 3.4
Research Limitations…………………………………………………… Research Findings……………………………………………………….
177 177
4 Conclusion and Recommendations…………………………………………… 208 REFERENCES…………………………………………………………………. 216 APPENDICES…………………………………………………………………. 237 Author’s CV…………………………………………………………………… 281
9
LIST OF TABLES
Table 1 : Summary of Margolis and Walsh’s Empirical Studies on CSP-FP Relationships………………………………………………………….
37
Table 2 : Continuum of CSR Progression……………………………………… 45 Table 3 : Corporate Social Performance Model Extensions…………………….. 46 Table 4 : Giving USA Data on Charitable Giving……………………………… 48 Table 5 : Approaches to Corporate Philanthropy in the CSR Literature……….. 53 Table 6 : Carroll’s 4-Part CSR Model………………………………………….. 55 Table 7 : Summary of Arguments Against Corporate Social Responsibility …… 61 Table 8 : Summary of Arguments in Support of Corporate Social Responsibility 64 Table 9 : Summary of Metrics Used to Represent CSR Performance in Similar
CSR-FP Studies……………………………………………………… 82
Table 10 : Common Financial Ratios and their Importance……………………… 90 Table 11 : Summary of Arguments Against Financial Performance……………. 95 Table 12 : Summary of Arguments in Support of Financial Performance……….. 97 Table 13 : Common FP Indicators according to Margolis and Walsh…………… 99 Table 14 : Summary of Ratios Used to Represent Financial Performance in CSR-
FP Studies…………………………………………… 101
Table 15 : Compilation of Empirical Studies of CSR-FP Relationships in Decades…………………………………………………………
111
Table 16 : Corporate Social Responsibility Performance Measures……………. 115 Table 17 : CSR Prioritization According to Stakeholder View…………………… 137 Table 18 : Perspectives of Philippine CEOs on CSR……………………………. 150 Table 19 : Summary of Studies of Positive CSR and FP Relationships…………. 153 Table 20 : Summary of Studies of Negative CSR and FP Relationships………… 158 Table 21 : Summary of Studies of Neutral CSR and FP Relationships………….. 160 Table 22 : Recent Direction of CSR and Financial Performance Relationship
Studies…………………………………………………………………. 164
Table 23 : Philippine business leaders’ perception of benefits derived from doing CSR …………………………………………………………………..
166
Table 24 : Industry type by country…………………………………………….. 177 Table 25 : CSR Performance of Southeast Asian companies…………………… 178 Table 26 : Type of CSR Engagements Percentage……………………………… 179 Table 27 : Type of Institutional Collaboration…………………………………. 180 Table 28 : Financial Performance of Southeast Asian companies using Return on
Assets…………………………………………………………………... 181
Table 29 : Financial Performance of Southeast Asian companies using Return on Equity………………………………………………………………….
181
Table 30 : Financial Performance of Southeast Asian companies using Return on Capital Employed…………………………………………………….
182
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Table 31 : Financial Performance of Southeast Asian companies using Gross Profit Margin…………………………………………………………..
182
Table 32 : Financial Performance of Southeast Asian companies using Net Profit Margin………………………………………………………………..
182
Table 33 : Financial Performance of Southeast Asian companies using Earnings per Share……………………………………………………………..
183
Table 34 : Financial Performance of Southeast Asian companies using Price/Earnings Ratio………………………………………………….
183
Table 35 : Financial Performance of Southeast Asian companies using Price/Cash Flow Ratio………………………………………………..
183
Table 36 : Financial Performance of Southeast Asian companies using Price/Book Value Ratio……………………………………………..
184
Table 37 : Financial Performance of Southeast Asian companies using Dividend Yield………………………………………………………………….
184
Table 38 : Firm size (EBITDA/Total Assets) of SEA companies……………….. 185 Table 39 : Level of risk of SEA companies…………………………………….. 186 Table 40 : Pearson r value and Relationship of CSR and firm size……………… 186 Table 41 : Pearson r value and Relationship of CSR and level of risk………….. 187 Table 42 : Pearson r values – Relationship between CSR and ROA……………. 188 Table 43 : Pearson r values – Relationship between CSR and ROE……………. 189 Table 44 : Pearson r values – Relationship between CSR and ROCE…………… 189 Table 45 : Pearson r values – Relationship between CSR and Gross Profit
Margin………………………………………………………………… 190
Table 46 : Pearson r values – Relationship between CSR and Net Profit Margin.. 190 Table 47 : Pearson r values – Relationship between CSR and Earnings per Share. 191 Table 48 : Pearson r values – Relationship between CSR and Price/Earnings
Ratio………………………………………………………………….. 191
Table 49 : Pearson r values – Relationship between CSR and Price/Cash Flow Ratio……………………………………………………………………
191
Table 50 : Pearson r values – Relationship between CSR and Price/Book Value Ratio…………………………………………………………………..
193
Table 51 : Pearson r values – Relationship between CSR and Dividend Yield…. 193 Table 52 : F-computed values– Significant Relationship between CSR and firm
size…………………………………………………………………… 194
Table 53 : F-computed values – Significant Relationship between CSR and level of risk………………………………………………………………..
195
Table 54 : F-computed values – Significant Relationship between CSR and Return on Assets…………………………………………………….
195
Table 55 : F-computed values – Significant Relationship between CSR and Return on Equity………………………………………………………
196
Table 56 : F-computed values – Significant Relationship between CSR and Return on Capital Employed………………………………………….
197
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Table 57 : F-computed values – Significant Relationship between CSR and Gross Profit Margin………………………………………………….
197
Table 58 : F-computed values – Significant Relationship between CSR and Net Profit Margin…………………………………………………………
197
Table 59 : F-computed values – Significant Relationship between CSR and Earnings per Share……………………………………………………
198
Table 60 : F-computed values – Significant Relationship between CSR and Price/Earnings Ratio…………………………………………………
198
Table 61 : F-computed values – Significant Relationship between CSR and Price/Cash Flow Ratio……………………………………………….
199
Table 62 : F-computed values – Significant Relationship between CSR and Price/Book Value Ratio………………………………………………
200
Table 63 : F-computed values – Significant Relationship between CSR and Dividend Yield……………………………………………………….
200
Table 64 : Summary of Significant CSR and Financial Performance Relationship Incidences……………………………………………………………..
201
Table 65 : Aggregate CSR Performance and Financial Performance for Southeast Asian Companies……………………………………………………..
201
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LIST OF FIGURES
Figure 1: Structure of Dissertation………………………………………… 32 Figure 2: Structural Flow of General Theoretical
Section…………………………………………………………. 34
Figure 3: Modified CSP Model of Carroll………………………………………………………….
56
Figure 4: Multiple Bottom Line Perspective……………………………………………………...
141
13
LIST OF APPENDICES
Appendix A: Indonesia Firm Size and Level of Risk Appendix B: Malaysia Firm Size and Level of Risk Appendix C: Philippines Firm Size and Level of Risk Appendix D: Thailand Firm Size and Level of Risk Appendix E1: Indonesia CSR and Financial Performance Year 2006 Appendix E2: Indonesia CSR and Financial Performance Year 2007 Appendix E3: Indonesia CSR and Financial Performance Year 2008 Appendix E4: Indonesia CSR and Financial Performance Year 2009 Appendix E5: Indonesia CSR and Financial Performance Year 2010 Appendix E6: Indonesia CSR and Financial Performance Year 2011 Appendix E7: Indonesia CSR and Financial Performance Year 2012 Appendix E8: Indonesia CSR and Financial Performance Year 2013 Appendix E9: Indonesia CSR and Financial Performance Year 2014 Appendix E10: Indonesia CSR and Financial Performance Year 2015 Appendix F1: Malaysia CSR and Financial Performance Year 2006 Appendix F2: Malaysia CSR and Financial Performance Year 2007 Appendix F3: Malaysia CSR and Financial Performance Year 2008 Appendix F4: Malaysia CSR and Financial Performance Year 2009 Appendix F5: Malaysia CSR and Financial Performance Year 2010 Appendix F6: Malaysia CSR and Financial Performance Year 2011 Appendix F7: Malaysia CSR and Financial Performance Year 2012 Appendix F8: Malaysia CSR and Financial Performance Year 2013 Appendix F9: Malaysia CSR and Financial Performance Year 2014 Appendix F10: Malaysia CSR and Financial Performance Year 2015 Appendix G1: Philippines CSR and Financial Performance Year 2006 Appendix G2: Philippines CSR and Financial Performance Year 2007 Appendix G3: Philippines CSR and Financial Performance Year 2008 Appendix G4: Philippines CSR and Financial Performance Year 2009 Appendix G5: Philippines CSR and Financial Performance Year 2010 Appendix G6: Philippines CSR and Financial Performance Year 2011 Appendix G7: Philippines CSR and Financial Performance Year 2012 Appendix G8: Philippines CSR and Financial Performance Year 2013 Appendix G9: Philippines CSR and Financial Performance Year 2014 Appendix G10: Philippines CSR and Financial Performance Year 2015 Appendix H1: Thailand CSR and Financial Performance Year 2006 Appendix H2: Thailand CSR and Financial Performance Year 2007
14
Appendix H3: Thailand CSR and Financial Performance Year 2008 Appendix H4: Thailand CSR and Financial Performance Year 2009 Appendix H5: Thailand CSR and Financial Performance Year 2010 Appendix H6: Thailand CSR and Financial Performance Year 2011 Appendix H7: Thailand CSR and Financial Performance Year 2012 Appendix H8: Thailand CSR and Financial Performance Year 2013 Appendix H9: Thailand CSR and Financial Performance Year 2014 Appendix H10: Thailand CSR and Financial Performance Year 2015
15
1. Introduction Section
1.1 The Research Theme
What is Corporate Social Responsibility? The notion that business is
just for the creation of profit has become increasingly challenged by the new
practices and roles which society desires for corporations to pursue. Within the
new responsibility of businesses are initiatives that address some of the social
and environmental concerns that are within the spectrum of its stakeholders’
interests. Corporate Social Responsibility has become a major thrust that
dramatically entered the consciousness of business institutions and its
practitioners. Corporations were no longer seen as entities that only exist in
order to pursue some form of economic benefits. Elsewhere in the world,
companies are continuously challenged to create greater social visibility and
become champions in some of the most crucial social and environmental issues
of our time. This new role was added to the corporation’s primary purpose of
generating profits. The companies in the Southeast Asian region are not
exempted from this strategic corporate governance direction.
While written information on corporate performance continues to
emphasize the value of financial data or the normal bottom line, various
stakeholders are now expecting concrete business visibility even in the primary
social issues of a country (Avi-Yonah, 2005). Large corporations were
identified to make substantial earnings even in the midst of challenging
economic situations. Congruently, a growing belief exists among stakeholder
communities that these corporations could be potential partners of the society
where they operate. For these reasons, companies were expected to make solid
contributions in addressing social ills as a way of paying forward to the public
who continues to patronize their businesses. Corporations are getting the
identity of being potent co-creators of community-based undertakings and
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possible crucial allies in the pursuit of larger societal and environmental goals.
The interconnectedness of companies with their various stakeholders that is
often concretized through CSR activities underscores the value of business-
society relations as a hallmark of good corporate governance practice.
What is Financial Performance? The response to this question is rather
simple. The Accounting discipline is replete with the various metrics to
identify a firm’s financial condition. Depending on the specific stakeholder
requirement and area of interest, the financial situation of a firm can be isolated
and exactly determined. Meanwhile, of greater interest would be to ask how a
firm sustains its good financial performance. This question could be answered
with two schools of thought. First, a sustained financial performance that
emanates from a remarkable society relation. This can be partly achieved
through the company’s involvement in CSR activities. A sustained financial
performance can be created through a CSR performance that was both
meaningful and highly appreciated by all the stakeholders of the company. The
second school of thought is that of a financial performance that comes as a
result of a strategic action. This action began with the creation of good
products and value-adding services that gained acceptance with the consuming
public. Consequently, this continuous patronage provided steady and sustained
financial performance that could finance any new product improvement,
expansion of operations or any corporate social responsibility action.
Determined in profitability, growth and valuation metrics, financial
performance is the primary and concrete basis of a company’s economic
legitimacy to exist. As a corporate governance tool, a good financial
performance guarantees the continued reward of corporate ownership,
management and control. A good financial performance is achieved when the
company’s leaders and movers make decisions, which considers the welfare
and interests of its shareholders. A good financial performance is a pragmatic
tool that explains the company’s adherence to standards of corporate
governance. In the simplest of terms, it is financial performance that outlines
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the over-all health of a company. The public expectation for companies to
maintain transparency and accountability as a vital aspect of corporate
governance will continue to drive firms toward a positive and sustained
financial performance (Mark, 2000).
What is Corporate Governance? The term Corporate Governance has
become so widely used yet differently interpreted. The various debacles that
happened in the name of profit generation raised the focus on corporate
governance as a tool to put corporate actions in the right direction. As a result,
adherence to corporate governance codes and submission of disclosure
documents, voluntary or otherwise became a commitment, almost an
obligation rather than a choice. Though a fit-for-all definition of corporate
governance is not possible, it is secure to say that this terminology is more than
the financial and compliance paradigm that originally outlined it.
When the private sector supplement or initiate society-enhancing
pursuits, the inadequacy in government and social infrastructures could
become a source of frustration or a chance for image building for local
corporations. Likewise, this inadequacy in public service delivery can also be a
way for a company to share to society some of its corporate rewards. This
direction must not be neglected if companies desire to stay in business and
continue to reap the benefits of good society relations. This survival mode
could be anchored on the reality that for business sustainability to happen,
people must see the footprints of corporations in the various societal concerns
that plague nations. As companies make deliberate measures to create profit
despite bigger operating challenge, CSR becomes a critical aspect of good
Corporate Governance practice and considered as another area to gain a new
competitive advantage (Barney, 2002).
Taken together, the good performance of a company in its financial
areas and its relationship with its society is a fertile ground to promote aspects
of good corporate governance. A noteworthy and sustainable CSR practice
18
could be the company’s competitive positioning in the market. A financially
performing company attracts more business activity because the company is
seen not only as a producer of goods and services but also as an employer of
choice, a good investment vehicle and an exemplar management practitioner.
The relationship of CSR and Financial Performance as an aspect of
good Corporate Governance is an area of inquiry that is worth exploring in the
Southeast Asian region. As literature in Corporate Governance continues to
emphasize more European and American reflections, the Southeast Asian
context remains scarcely explored. Though the understanding and treatment of
Corporate Governance depends on the situation of a country, its systems
movers, its corporate practitioners, the academic researchers or the theorists of
the discipline, it is of interest to begin an undertaking that explored regional
uniqueness in some aspects of good corporate governance. The use of
Southeast Asian context in this research is aimed to highlight the CSR and
financial conditions of the companies that have contributed and still continue
to contribute in the economic situation of their respective country locations and
in the creation of governance policies in the region.
Perhaps it would be of interest to inquire how companies in the
Southeast Asian region perform in both social and financial performance areas.
As a region that is composed of contrasting economic conditions, yet with
common social concerns, it would be interesting to look at this area of study in
the hope of identifying some Corporate Governance aspects that may give
emphasis to the needed balance that must exists between CSR and FP. It would
also be of value to profile the CSR and financial status of large and established
regional-based companies taken in the context of their unique social backdrop.
This paper could also be instrumental in shedding light to new challenges in
private sector initiated social responsibility work that aims to augment the
observed inadequacy in public sector-managed social development initiatives
in the region.
19
Essentially a revisit of the CSR and FP relationship, this paper situates
its inquiry on the novelty of giving focus in the Southeast Asian region as a
vital aspect to describe some aspects of good Corporate Governance. This
paper posits that a company’s business continuity relies on its capacity to
address the interests of its various stakeholders. It follows an understanding
that the operation of a business presupposed the provision of a management
direction that in effect oversees and controls the enterprise in all aspects.
Together with the effort of placing importance on the people and the system, a
well-governed business is one that underscores responsibility and
accountability within and beyond the boundaries of the corporation. This
responsibility embraces both financial and non-financial realms. A company
that can excellently balance its situation in the two-pronged realities of firm
performance, that is, CSR and Finance, can also claim that it observes the very
foundation of good Corporate Governance.
1.2 Relevance of Research
This paper examines the Corporate Social Responsibility and Financial
Performance relationship that is prevalent among selected corporations located
in the four countries of the Southeast Asian region. Although there were
already previous research evidences that revealed vague and conflicting
relationships between CSR and Financial Performance, this paper hopes to
help in clarifying the relationship further with the use of a regional isolation.
This purposeful shift to do a parallel study modeled after previous American
and European-focused studies is aimed at making a relevant contribution to
some aspects of good corporate governance practice in the region. It should be
noted that the study made use of profitability and valuation ratios that is
consistent with previous studies that used Accounting ratios, market-based
ratios or a value representation of financial performance. Beyond the
20
previously used variables of Return on Assets, Return on Equity and Earnings
per Share (Margolis and Walsh, 2001), this study has also used seven other
metrics to illustratethe financial performance of the companies in the region.
Meanwhile, the CSR performance variable that this research used was a
multi-year score determination based on specific criterion and used a Likert
scale-type measurement specifically developed for the purpose of this study.
The protection being given by third party agencies that have done prior CSR
rating for companies in the region was the major consideration for a
researcher-made CSR metric. It was understandable that although general
scores can be made available to the public, the specific scores on sensitive
items would not be published. Hence, the itemization of scores was not open
for academic referencing.
This constraint allowed the researcher the flexibility to provide an
alternative scoring methodology, which would be explained in later discussion.
It followed the score-specific evaluation tool for the presence or absence of a
practice on a yearly basis (Ruf, Muralidhar, Brown, Janney and Paul, 2001).
The scoring factors focused on the documentary evidences that were either
publicly available or provided to the author by the company representatives
after signing a non-disclosure oath. Document analysis was augmented with
the result of the focused group discussion that was made during the proposal
stage of the research. Critical information that was gathered by the researcher
at that time provided supplemental basis for the interest in this inquiry.
Additional factors such as company size and its level of risk were included to
identify a possible significant relationship with Corporate Social
Responsibility. The industry category and the country location of the
companies that were studied were only made as classification modalities for
the summarization of data.
This is a deviation from the style of previous researches on CSR-FP
relationship wherein SIC index was included as a controlling variable
21
(Waddock and Graves, 1997). The use of this variable was no longer adopted
since this study does not aim to compare CSR-FP relationship differences
across industries. The data used for this research stretched out over a period of
ten years1 to account for any short or long term effects in financial performance
ratios. Accountants, corporate drivers, business consultants, shareholders,
government regulators, interested groups, third party assessors, academics and
the concerned civil society will find the results of this study useful on the
following areas:
First, corporations may find it valuable to consider the best social
responsibility practice of financially performing companies in Southeast Asia
on a cross-industry context. A broader understanding of the country and
context-specific nature of CSR work in relation to the economic condition of a
country, as a future research agenda, is also a good angle to consider. Valuable
to both business and academic research, the status, weaknesses and strengths of
current CSR activities of Southeast Asian corporations with focus on selected
businesses were looked into. Reasons that range from creating competitive
advantage, to product marketing, to attracting the best of human capital and to
maintain a good business reputation are areas of competitive advantage,
achieving which would require substantial cost for the business. Therefore, the
understanding of the right tools and the area of concentration where businesses
could enhance their financial and social performance require the emphasis on
programs and activities that are closer to the heart of the society. It is after all
in the interest of this society why corporations continue to exist.
Second, most economies in Southeast Asia see themselves as recipients
of CSR benefits rather than actors, players or support providers for it. A study
of this nature is valuable to academic discussion, in academic volunteer
programs and in the overall curricula enhancement measures pertaining to
business-society relations. The academic field can also find inspiration to make
1Adjustments from the coverage year during the research proposal stage of 2004-2013 to 2006-2015 was made to ensure that current financial data would be presented.
22
a solid contribution in the future in the nascent research area of CSR impact,
measurement, benchmarking and evaluation in the Southeast Asian region.2
Third, as several factors were considered to anchor the relationship
between CSR and Financial Performance, a unique output that cuts across the
many peculiarities of regional corporate scenarios may be clarified in this
research. This study can help CSR practitioners including decision-makers,
analysts and accountant regulators in fine-tuning their regional-based reports.
The results of the study could show the corporate leaders the real benefit of
their CSR work to their shareholders. Hinged on an improved financial
performance that comes from an enhanced corporate social performance,
corporate image is lifted and its value to the various stakeholders could be
improved. The value-added potential of good social performance, which may
have contributed to better financial performance, has created a virtuous cycle
that could be strategically used to advance corporate sustainability and market
appeal. As emerging economies continue to identify new business models, it
would be valuable to consider the richness of Southeast Asian practices that
allowed companies to endure and compete well in both financial and social
performance with other non-locally initiated firms.
Finally, this study is relevant to the researcher and her associates in the
LEAP Into Sustainability Mindset Network3 who are persistent in their
advocacy on responsible management education. Through their collective work
and various forms of academic and practice involvement, they are expected to
generate additional materials to reasonably push the agenda of a relevant
business education. The pragmatic nature of this topic would serve as an
impetus for the researcher and her associates to pursue further studies on
2This role of the academe in providing platforms for responsible management education is already at the heart of the United Nations Principles for Responsible Management Education or UN PRME at www.unprme.org accessed on January 16, 2015. 3LEAP- Into Sustainability, Sustainability Mindset Network was established in 2014. It was identified as one of the working groups of the United Nations Principles for Responsible Management Education UN PRME since June 2015 and is a partner of the AIM2Flourish, a student-led initiative to identify businesses that are agents of world benefit. http://www.business.nova.edu/leap/ is hosted at the Nova Southeastern University website and accessed since 2014.
23
sustainability, on valuation of sustainability efforts of companies and on
regionally relevant CSR practices that can be replicated by other developing
economies.
1.3 Research Objectives and Questions
This research endeavors to ascertain the CSR Performance and
Financial Performance relationship among Southeast Asian companies. This
study intends to verify a positive relationship between Corporate Social
Responsibility and Financial Performance among Southeast Asian companies,
which is consistent with the results of a number of previous studies performed
in corporate America and Europe (Waddock and Graves, 1997).
The financial performance data was determined using the combined
profitability and valuation ratios of the top twenty companies of each of the
countries namely Indonesia, Malaysia, Philippines and Thailand. The Financial
Performance metrics taken up in this study include, Return on Assets, Return
on Equity, Return on Capital Employed, Gross Profit Margin, Net Profit
Margin, Earnings per Share, Price/Earnings Ratio, Price/Book Value,
Price/Cash Flow and Dividends Yield representing profitability and market-
based measures of growth, value and management effectiveness.
Theoretically, Accounting measures reflect previous and short-term
financial performance. Meanwhile, market measures reflect prospective and
long-term financial performance (Hoskisson, Johnson and Moesel, 1994; Keats
and Hitt, 1988, Gentry and Wei, 2010). Other variables that were used when
CSR was studied in relation to financial performance included Risk in the form
of debt to equity ratio, and company size measured through the ratio of
enterprise value and EBITDA. The use of these new measures was intended to
compliment the measurement process used in previous research as identified
by Margolis and Walsh (2001) namely, Return on Equity, Return on Assets,
24
Return on Sales, Debt/Equity and Current Ratio, Alpha, Beta, Cumulative
Annual Returns, Price/Earnings Ratio and Tot al Returns. The companies that
were covered in this study belong to different industry types, with a distinction
in terms of ownership classification and varying in sizes.
The CSR performance data was obtained from the scores generated
from a ten-year criterion created for the purpose of this research and was
determined through the content analysis of publicly available documents of
each corporation. Ten factors representing the companies’ CSR performance
include ownership type, direct environmental effect, documented philanthropic
activities, presence or absence of code of conduct, status in the Global
Reporting Initiative or GRI and United Nations Global Compact reporting
platforms, presence of discussion items on good Corporate Governance,
Corporate Social Responsibility, publication of a sustainability report in their
websites and received local or international awards. The company ratings that
were originally in Likert-type scores of 20, 40, 60, 80 and 100 were given
additional equivalent points depending on the number of factor occurrences per
component. This was done for purposes of statistical compatibility.
The companies that were made part of this study were cross-compared
to the indexed companies in the Dow Jones Sustainability Index World, the
Dow Jones Sustainability Index Asia Pacific and the Dow Jones Sustainability
Index for Emerging Markets from 2006-2015. The Dow Jones Sustainability
Index is a scoring identified by Sustainability Asset Management or
RobecoSam. It has the World Index and corresponding indexes for Europe,
Asia Pacific, Emerging Economies and Korea. The confidential data was
obtained under a non-disclosure agreement and only in its limited content from
RobecoSAM, a company founded in 1995.4 It belonged to Robeco, of the
Dutch Rabobank Group. This research also looked into the database used by
Dow Jones Sustainability Index, the country used as sustainability cohorts and
which was created for the region on an annual basis from the time Asia Pacific 4RobecoSAM. The confidential data given to the researcher by the DJSI is not a score-level information.
25
was given a separate indexing.5 They were checked for comparison in specific
country components that were also identified as relevant indicators of CSR
practice based on the Asian Sustainability Rating of 2010.6
Eighty companies from diverse industries consisted of health care,
tobacco, food and agriculture, banking and financial services, general
industrial, oil and gas, property development, telecommunications and
consumer retail and within an inter-society context consists the sample. The
four countries were studied because of the similarities in the industry types
where their top businesses operate, the characteristic likeness in the context of
doing business in these countries and the parallelism of their geo-political and
socio-cultural situations. Singapore and Brunei were excluded to eliminate
extreme conditions. The conditions considered include situations that could
have been caused by Singaporean companies that exhibited regular reporting
activities. Likewise, a parallel condition would be the non-reporting default
observed in Brunei-based companies.7The four countries were purposely
chosen from the original signatories of the Association of Southeast Asian
Nations or better known as ASEAN but excluded the Sultanate of Brunei
Darussalam as previously articulated and Singapore, an advanced country in
terms of sustainability reporting.8 Both factors of country and industry types
were also made part of the descriptive analysis to ascertain the industry and
country that have exhibited either low or high CSR performance or
5 Dow Jones Sustainability Index provides sustainability rating for investors. For this academic exercise the index composition was given after an NDA was signed by the author. The list however does not contain the four countries that were the object of this study. Hence, a variation in scoring had to be created for this study. Dow Jones Sustainability Indexes World, for Asia Pacific and for Emerging Markets was accessed as early as September 2010 from the Dow Jones Sustainability website http://www.sustainability.indices.com/review/review-history.jsp and http://www.djsi.com 6 Published in September 2010 by Sustainability in Asia ESG Reporting Uncovered and indicated helpful information to the researcher to create a variation in CSR performance scoring. It was edited by Read-Brown, Bardy and Lewis. 7Brunei, a constitutional monarchy, operates on the premise that the ruling monarch is the Father of the nation and therefore controls most of the country’s resources. The Report : Brunei Darussalam 2012. Brunei Darussalam, A Publication to Analyse the Sultanate’s 2013 Role. Accessed at http://oxfordbusinessgroup.com 8Code of Corporate Governance of Singapore (2001) was published by the Monetary Authority of Singapore. It was first issued on March 21, 2001. It articulated the requirements of the Singaporean government for the corporations operating under its jurisdiction. Compliance with the Code is not mandatory but listed companies are required under the Singapore Exchange Listing Rules to disclose their corporate governance practices and give explanations for deviations from the Code in their annual reports. Accessed at http://www.mas.gov.sg
26
concentration. A document analysis of annual reports and sustainability articles
published about these companies, was performed which would substantiate the
comparison and contrasting of CSR practices in the region against the
backdrop of the unique nature and circumstances of the identified country.
This research seeks to identify the relationship of CSR performance and
Financial Performance in selected Southeast Asian companies to determine if
there is uniqueness that may merit an additional feature in good corporate
governance practice among these countries. Specifically, the research
addresses the following questions:
1. What is the Corporate Social Responsibility (CSR) performance of
Southeast Asian companies from 2006-2015?
2. What is the Financial Performance of Southeast Asian companies from
2006-2015?
3. What is the size of financially performing companies which do
Corporate Social Responsibility work in Southeast Asia from 2006-
2015?
4. What is the level of risk of financially performing companies which do
Corporate Social Responsibility work in Southeast Asia from 2006-
2015?
5. What is the degree of relationship of Corporate Social Responsibility
and firm size in Southeast Asian companies from 2006-2015?
6. What is the degree of relationship of Corporate Social Responsibility
and level of risk in Southeast Asian companies from 2006-2015?
7. What is the degree of relationship of Corporate Social Responsibility
and Financial Performance in Southeast Asian companies from 2006-
2015?
8. What is the significant relationship between Corporate Social
Responsibility and firm size in Southeast Asian companies from 2006-
2015?
27
9. What is the significant relationship between Corporate Social
Responsibility and level of risk in Southeast Asian companies from
2006-2015?
10. What is the significant relationship of Corporate Social Responsibility
and Financial performance in Southeast Asian companies from 2006-
2015?
10.a What is the significant relationship between Corporate Social
Responsibility and Return on Assets in Southeast Asian companies from
2006-2015?
10.b What is the significant relationship between Corporate Social
Responsibility and Return on Equity in Southeast Asian companies
from 2006- 2015?
10.c What is the significant relationship between Corporate Social
Responsibilityand Return on Capital Employed in Southeast Asian
companies from 2006- 2015?
10.d What is the significant relationship between Corporate Social
Responsibility and Gross Profit Margin in Southeast Asian companies
from 2006- 2015?
10.e What is the significant relationship between Corporate Social
Responsibility and Net Profit Margin in Southeast Asian companies
from 2006- 2015?
10.f What is the significant relationship between Corporate Social
Responsibility and Earnings per Share in Southeast Asian companies
from 2006- 2015?
10.g What is the significant relationship between Corporate Social
Responsibility and Price/Earnings Ratio in Southeast Asian companies
from 2006- 2015?
28
10.h What is the significant relationship between Corporate Social
Responsibility and Price/Cash Flow Ratio in Southeast Asian companies
from 2006- 2015?
10.i What is the significant relationship between Corporate Social
Responsibility and Price/Book Value Ratio in Southeast Asian
companies from 2006- 2015?
10.j What is the significant relationship between Corporate Social
Responsibility and Dividend Yield in Southeast Asian companies from
2006- 2015?
The above-mentioned questions which were grounded on the
discussions found in the general theoretical section of this study guided this
research to answer the main problem statement: How does Corporate Social
Responsibility relate to Financial Performance in the Southeast Asian region?
1.4 Research Scope
This research intends to fill the gaps that were identified in the
following areas: a) a relationship between Corporate Social Responsibility and
Financial Performance in Southeast Asian corporate context that is yet to be
empirically established. There is limited literature, even Asia-wide. For
example the CSR study for Hang Seng Constituent Companies for Hong Kong
in 20099 and another for Indonesian companies (Fauzi and Idris, 2009). Hence,
there is also no definitive statement that can affirm a positive, negative or
inexistent relationship between CSR and Financial performance for the region;
b) a study that utilized other financial ratios on top of the ones that were used
in previous studies in other country context like that of the United States. The
9CSR Study of Hang Seng Constituent Companies for Hong Kong in 2009 found at http://www.csr-asia.com/upload/OHK_CSR_survey.pdf contained the study made for corporate Hong Kong which empasized the existence of CSR initiatives among financially performing companies in the country. However, most of the companies covered by the survey were MNCs which only maintains a regional office in Hong Kong.
29
financial performance metrics that were previously used were limited to ROA,
ROE and ROS (Waddock and Graves, 1997). Even if there were studies, which
used accounting and market-based measures, both were not used together in a
single study (Margolis and Walsh, 2001); c) the lack of established explanation
of CSR and Financial Performance relationship in the Southeast Asian region,
particularly when Indonesia, Malaysia, Philippines and Thailand companies
were taken together.
Although there were various socially relevant programs and activities
that existed among companies in the region, it is not established whether the
same are common practices elsewhere or that they were unique to Southeast
Asian business and society context only. Similarly, a definitive statement that
these practices can be sustained in the long-run or not is non-existent; and d)
the current dearth of published information in good Corporate Governance
practice in the region. If corporate governance practice and definition is
culturally distinct, literature is yet to identify a comprehensive description of
prevailing good Corporate Governance practice in the region, if any.
The requirement to the economic entities by the various stakeholder
groups has become increasingly pronounced, directed and specified. The
terminologies coined some decades ago such as corporate social responsibility,
sustainability, triple bottom line or TBL by Elkington in 1994 have appeared
once again this time as part of mainstream corporate agenda and practice.10
Environment-society-governance (ESG) proves this increasing awareness of
the general public about the other role of corporations. Although, Southeast
Asian companies have done their share in the CSR work, the same has not
been fully studied nor measured. Standards used in the past particularly in the
western business milieu may prove to be a mismatch as far as the regional
10Transforming Our World : The 2013 Agenda for Sustainable Development. Published by the United Nations in August 2015, it identified the 17 SDGs that were being targetted for achievement by a multi-sectoral engagement that was initiated by both the public and the private sector. It could be accessed at http://www.un.org/pga/wp-content/upload/sites3/20/15/08/120815_outcome-document-of-Summit-for-adoption-of-the-post-2015-development-agenda.pdf
30
context and circumstances were concerned. It is also helpful to ascertain if
these activities could remain relevant for a long time or if they were efficient in
financial terms. In effect, what could not be generalized in this study in relation
to the previously mentioned limitations could be a direction for further
inquiries or for future research areas that are worth exploring.
Outside this research is the story behind the value orientation of
corporate boards that either inhibits or drives their respective companies to do
well socially while doing great financially and vice versa. This is still a limited
area for information and research direction. Corporate performance goes
beyond the company’s capacity to earn and includes the overall synergy of
strategies, internal structure and the control framework (Gupta and
Govindarajan, 1982; Govindarajan, 1988). Therefore, it is arguable that the
overall corporate performance is shaped by certain realities such as macro and
micro business environment, corporate size, level of risk, company type, its
direct impact onthe natural environment, the ownership structure, its
documented philanthropic activities, the status of the company in present
sustainability reporting platforms, awards and recognition given by third
parties, some of which this paper will try to address.
This study does not address methodological concerns that were
common with primary data collection and in the testing of content, validity and
reliability. Mismatching of data may occur when companies from varying
industries are pooled together as a cohort. However, sampling and
measurement errors are areas that were avoided by this research, through the
multi-dimensionality of both finance and social performance metrics that were
considered (Waddock and Graves, 1997).
31
1.5 Structure of Research
This research work unfolds based on the structure presented in Figure 1.
This structure was adopted for simplicity and clarity of presentation. The
dissertation begins with the discussion of the research theme followed by its
identified relevance to corporate practice, to the academe, to the practitioners,
the interested parties in the practice of both CSR and Finance and to the
researcher. The research objectives and questions were presented as an answer
to the gap identified.
The General Theoretical Sections begin with an overview of the two
important concepts considered in the study, performance on CSR and Finance.
The background and historical standpoints of the two concepts were discussed.
Both were defined and their business relevance was given. Arguments against
and in support of these two variables were explained. These explanations were
anchored on results of previous and related studies, and mainly those that
focused on the existence of a positive CSR and financial performance
relationship. A discussion of the arguments supporting the inclusion of social
responsibility in the broad business spectrum was presented. This included a
discussion of the evolving views on CSR as well as the divergent opinions why
companies continuously pursue it. The various ways by which CSR has been
measured over the course of time were enumerated.
32
Figure 1: Structure of Dissertation
The method of measuring financial performance in the form of
accounting ratios as a comprehensive and pragmatic indicator of company
situation was explained. The reason for adding other ratios beyond what
previous studies have used was likewise articulated. Previous researches that
explained the CSR and FP relationship using selected financial ratios anchored
this study’s deliberate inclusion of other metrics to eliminate and avoid any
measurement errors. Each additional ratio was justified as to its value in
general Accounting terms and in its importance in generating additional
resources for CSR and other strategic company activities.
Corporate Governance was explained as the overarching discipline
where the relationship of CSR and Financial performance could be found. An
explanation of the theories relevant to underscore these variables and in
determining their relationship followed thereafter. Major study results that
related Financial Performance and Corporate Social Responsibility were
discussed. Existing work on this area in European and American context were
highlighted.
Research Proposal Process
Interesting PhenomenonExisting ResearchResearch Gap
Data (Collection, Method and Analysis)Findings Interpretation
Research QuestionsLiterature ReviewResearch Criteria
Answers to Research QuestionsDiscussion in the Context of the Existing LiteratureLessons LearnedLimitations / Further Research
Structure of the Dissertation
1 Introduction SectionTheme , Relevance, Objectives, Questions and ScopeDiscussion of VariablesResearch Structure
2 General Theoretical SectionCorporate Social Responsibility Corporate Financial performanceCorporate Governance Grounding of the Corporate Social Responsibility
and Financial Performance RelationshipCSR and FP relationship in Corporate
Governance
3 Specific Empirical SectionDesign, LimitationsDescriptive Statistics and Regression Results
4 Conclusion 5 Recommendation for Future Research
Direction
Answers to Research QuestionsDiscussion in the Context of Existing Literature
33
In the course of the literature review, results of the positive, neutral and
negative CSR and FP relationship, within the context of large corporations and
established key indicators were also cited. Aspects of Corporate Governance
that could be explained using the CSR and Financial Performance dimensions
were discussed. Statements of general understanding for each major topic were
articulated based on the normative standpoints. Finally, a synthesis of the
literature closes this part of the discussion and becomes the take-off point
leading to the empirical section.
The Specific Empirical Sections pieced together the research design and
the statistical treatment made. The limitations that were identified at the onset
of the research were enumerated. The statistical treatment and the merits
behind its use were discussed. The correlation results were explained which
were supplemented by the descriptive statistics. The discussion was largely
strengthened by citing information taken from publicly available annual
reports, sustainability reports, disclosure documents, the results of previous
studies and write-ups that were organized and presented for comparison and
summarization. These documents were further supplemented by the
researcher’s insights on CSR activities specifically done by companies in her
home country, the Philippines and her general appreciation of CSR activities in
the region. A discussion to tighten the connection of the theories and the other
literature that were cited closes this section.
The last section presented some highlights and lowlights on the research
made, from which conclusions were drawn. The study was concluded with
some final notes and recommendation for further research direction.
34
2 GENERAL THEORETICAL SECTIONS
Corporate Social Responsibility and Financial Performance are two
different and valuable indicators of business sustainability. Although
determined in very distinct ways, the situation of one affects the other and vice
versa. Such is the case when a financially performing business entity has the
resources to involve itself in societal-enhancing activities and a socially good
company attracts greater market acceptability, viability and therefore returns.
To better understand this relationship there is a need to revisit the existing
literature and find common grounds by which to further explain the CSR and
FP relationship. In the same construct, theories and research literature that
describes the role of a positive CSR and FP relationship as a way to enhance
some aspects of good Corporate Governance has to be presented as well
(Vaidyanathan, 2008). Taken together, CSR and FP could provide an
explanation of a distinctive regional flavor in the current description of some
aspects of good corporate governance. Figure 2 indicates how this section will
progress.
Figure 2: Schematic Flow of General Theoretical Section
All About CSR (Definition, Importance, Arguments, Metrics and Summary of Topic) All About Financial Performance (Definition, Importance, Arguments, Metrics and Summary of Topic) Corporate Governance (Definition, Theories on CSR and FP component of Good Corporate Governance) CSR and FP Relationship Revisited GCG and its CSR and FP Relationship Synthesis Take-off Point of the Empirical Section
35
Hence, this section would answer the following questions based on
normative theories and results of previous studies.
1. How was Corporate Social Responsibility generally understood?
2. How is Corporate Social Responsibility measured in previous studies?
3. How was Financial Performance generally understood?
4. How is Financial Performance measured in previous studies?
5. How do the concepts of Corporate Social Responsibility and Financial
Performance conform to the tenets of Good Corporate Governance?
6. How do previous studies explain the relationship between Corporate
Social Responsibility and Financial Performance?
7. How does financially performing companies in Southeast Asia practice
Corporate Social Responsibility?
The answers to the foregoing questions would ground the empirical
thrust of this research. Generally, this paper was anchored on the Financial
Performance and Corporate Social Responsibility link, which was already the
subject of steady investigation for almost four decades (Margolis and Walsh,
2003) and the object of both documented and undocumented debates in the
business and community circles since the Industrial Revolution (Boatright,
2007). Several reviews which analyzed this relationship have been published
in different years following the renewed attention it received as an area of
corporate enhancement, financial and otherwise (Aldag and Bartol, 1978;
Arlow and Gannon, 1982; Aupperle, Carroll and Hatfield, 1985;Cochran and
Wood, 1984; DeBakker, Groenewegen and den Hond, 2005;Griffin and
Mahon, 1997; Margolis and Walsh, 2001, 2003;Orlitzky, Schmidt and Rynes,
2003;Pava and Krausz, 1996; Preston and O’Bannon, 1997; Richardson,
Welker and Hutchinson, 1999; Roman, Hayibor and Agle, 1999; Wokutch and
McKinney, 1991; Wood and Jones, 1995).
A great number of literatures pointed out the effect of profitability to
Corporate Social Responsibility, called the “Slack Resources Theory” (Seifert,
36
Morris and Bartkus, 2004; Useem and Kutner, 1986; Waddock and Graves,
1997), while others discussed whether resources spent on Corporate Social
Responsibility contributed to or reduced profitability (Bowman and Haire,
1975). The pervading question continued to be about the relationship between
Corporate Social Responsibility, also understood as Corporate Social
Performance or CSR; and Financial Performance, also Corporate Financial
Performance or FP. The way to answer this is to look at the number of studies
made in this nature, which showed results that was, positive, negative or
inconclusive (Griffin and Mahon, 1997; McWilliams and Siegel, 2001; Roman
et al, 1999). Probably, the most crucial reason for the somehow varying
patterns of relationships, if any, is the difference by which both items were
measured.
Determined in a variety of ways, Corporate Social Responsibility has
been assessed using a number of reputation rankings, disclosure data, reports,
agreements and standards. On the other hand, Financial Performance of
corporations has been measured in either accounting measures, market
measures or a combination of both. This irregularity in basis resulted to a
somewhat questionable reliability and validity (Margolis and Walsh, 2001).
Parallel to this is the lack of measure that took into account the contextual
differences in which Corporate Social Responsibility was performed.
Although under-studied, the obvious variation in CSR practices could
be attributed to the unique societal make-up where companies operated.
Another questionable area is the industry-specific nature of CSR practices, as
well as the industry’s common earnings and investments. Studies done were
mostly in a cross-section of industries, which overshadowed the other factors
that may have driven CSR and Financial Performance apart from each other.
Although there were international standards that served as basis to determine
how companies performed in the social responsibility barometer vis-à-vis its
financial records, the same basis could not be relevant in absolute terms in a
heterogeneous society and varying business conditions.
37
The summary of findings of empirical studies pertaining to CSP and
CFP by Margolis and Walsh (2003), shown in Table 1 below affirms the
attempts made at establishing the positive, negative, neutral or non-existent
relationship of corporate social and financial performance. Likewise, it
amplifies the peculiarities in every CSR and FP relationship. The differences in
the type of relationship between these two variables were borne out of the
varying factors that were incorporated in those previous studies made. It also
took into account the different result when a representative data is introduced
to stand for the both CSR factors and normal financial ratios. The difference in
CSR focus and the type of financial measurement may have also caused the
varied results in the CSR and FP relationship.
Table 1 Summary of Margolis and Walsh’ Empirical Studies on CSP-FP Relationships
1. Number of Empirical Studies on the topic 1970s = 17 studies 1980s = 30 studies 1990s = 68 studies
1972-2002 = 127 studies 2. Studies Assessing the Impact of CSP on CFP (109 studies or 85.8%) • 54 (49.5 % of 109) studies report a positive statistically significant relationship • 7 (6.4% of 109) studies report negative statistically significant relationship • 28 (25.7% of 109) studies report non-significant relationship • 20 (18.3% of 109) studies report mixed findings 3. Studies Predicting the Impact of CFP on CSP (22 studies or 17.3%)
• 16 (72.7% of 22) studies report a positive relationship Source: Margolis and Walsh, 2003
At this point in the discussion, it would be helpful to trace the theory
and concept grounding of both CSR and Financial Performance even before
further exploration on their relationship is done. It must be underscored that
although CSR is no longer a matter of choice in today’s business practice, the
various past and present arguments for and against it are still noteworthy of
review. On the other hand, while Financial Performance remained to be the
38
most concrete and investor-relevant basis of firm performance, it could not be
denied that business sustainability is influenced by the extent to which other
stakeholders view business to be good.
It should be noted that that while there exists substantial articles on the
study of CSR as corporate social performance and financial performance,
either taken together or as compared to other variables, it is still necessary to
understand the basis of this link. After all, majority of the papers written on
this relationship dealt primarily with western corporations and indicators that
were not very reflective of business situations other than that of Europe and
America. Meanwhile, the aspect of good corporate governance must be
mentioned in any financial and CSR interaction. As a tool to create positive
multi-stakeholder appreciation of companies, a positive financial performance
and enhanced business-society relations are the hallmarks of good corporate
governance. The foregoing discussion deals with the crucial points of CSR, of
Financial Performance, of Corporate Governance and of the evidences of CSR
and FP relationship as an aspect of good Corporate Governance from the
standpoints of normative literature.
2.1 Corporate Social Responsibility
How is Corporate Social Responsibility generally understood?
Significant amounts of literature have emerged long before the use of what is
now known as the concept of Corporate Social Responsibility. The successor
of Corporate Social Responsibility is called Corporate Social Performance, and
both concepts may find a previous basis on Corporate Giving or Philanthropy.
In the foregoing discussion, and throughout the context of this research, it must
be underscored that corporate social performance is understood as CSR. While
more managers saw the need to do socially significant activities, a more urgent
call to corporations was to find ways to integrate corporate goodwill to the
39
company’s core mission and strategy. Much later, CSR was known as the
business organization’s configuration of the tenets of social responsibility, the
process of social responsiveness and the observable outcomes of company
actions, relative to stakeholders and the natural environment (Fauzi, Rahman,
Hussain and Adnan, 2009)
Practitioners of CSR who recognize the potent power of business as a
social institution could make good use of that power to alter the condition of
society. As a social institution, a corporation exists and operates in a vast
network of similar institutions. CSR is the way by which businesses could
measure the effectiveness of their processes and practices in the light of their
social presence. Accordingly, it amplifies that the focus of firms is not limited
to ensuring shareholder wealth, but also to regulate their actions. Corporate
Social Responsibility is good corporate governance manifested in concrete
societal involvement.
2.1.1 Definition of Corporate Social Responsibility: The
Beginning of a Concept
If sustainability is the emerging term for CSR performance, charitable
giving was its past reference. Woven in the greater definition of CSR, social
giving by corporations was debated on the issue of profits for the shareholders
and benefits for other stakeholders. Philanthropy was rationalized as a
competitive advantage for companies and a cost-effective means for business
to improve its broad competitive context. In terms of strategic alignment,
scholars argued that unless corporate giving was within the thrust of corporate
competencies, it would not be able to create a sustainable social impact. As an
area of study, philanthropy was in serious need of empirical grounding since it
was only discussed in literature in the form of anecdotal references in
presenting best practices or best business models.
40
CSR was alternatively used with corporate citizenship, corporate social
performance, corporate social responsiveness, business-society relations,
corporate philanthropy and was present in decades-result of writing and theory
according to Carroll (1999).
CSR in Circa ‘50s – ‘60s
H.R Bowen was identified to have established CSR (1953) through his
works that were reprinted in 1999. It was Bowen whom Carroll described as
the Father of Corporate Social Responsibility (1999). It is without doubt that
the contribution of Bowen in the formative years of CSR understanding is what
grounded the use of this concept incurrent corporate milieu. Bowen’s 1953
book Social Responsibilities of the Businessman mentioned in the study of
Carroll in 1999 articulated the role of business in society and discussed the
social responsibility of businesses. This clarification became the marching
orders for the larger social role of businesses.
In the same context as Bowen’s writings about CSR and its explanation
is that of Walton’s book entitled Corporate Social Responsibilities (1967). It
was in this book that Walton expressed his views on CSR as he defined the
modern and progressive role of corporations. Walton articulated that the
modern understanding of CSR underscores the close relationship that must
exist between the corporation and the society. This relationship must be
sustained in order that both parties could sustain their existence and realize
their respective goals. Walton also ventured on explaining the meaning of
volunteerism in CSR agenda (Carroll, 1999). Indeed, the early years provided
the stimulus to understand corporations in a whole new light.
CSR in Circa ‘70s – ‘80s
The definition of the concept evolved further to the ‘70s with
Friedman’s contribution and in what was to become the minimalist
underpinning of CSR (Thomas and Nowak, 2006). Friedman emphasized the
consistent rules of the game of businesses, which was to gain profit in an open
41
and free economy without deception or fraud (Friedman, 1970). Even if not so
many thinkers agree on this highly profit-oriented motivation of corporations
(Oketch, 2004), Friedman seemed to have hinted on CSR and its business
sustainability relevance. Thereafter, business has lost a reason to escape the
snowballing interest of society over their actions.
Carroll further expounded that the understanding of CSR made
milestones when initiatives to cement its definition and theory grounding
consequently made waves (Carroll, 1979). Prominent among its contributors
was Davis through the writings he made in books and published essays. It is in
one of these publications where a definition of CSR appeared, largely
explained as the corporate individual’s initiative that is partly larger than its
economic and technical interest (Davis, 1973). Davis further asserted that
society-benefitting business decisions consequently resulted in a sustainable
business gain, proving that a virtuous cycle resulted when business performed
something good for the society (1973).
Then, there is the Committee for Economic Development (CED), which
noted the changing tide in public expectations for businesses to be more than
mere providers of goods and services. Rather it also talks about the need for
business to exhibit good behavior in the form of sponsoring social projects and
making similar forms of contributions (CED, 1971). This important scenario
magnifies the reality that the continued existence of business would now
depend on how society would view them in the aspects of human resource
management and safety, consumer rights protection,environmental protection
and involvement in other issues of the time (CED, 1971). It was also around
the ‘70s when facets of corporate behavior composed of social obligation, of
social responsibility and of social responsiveness were identified. This time,
established corporate social performance meant a bigger ideal than the older
notion of Corporate Social Responsibility (Sethi, 1975).
42
Towards the latter part of the ‘70s Carroll put forward the idea that
Corporate Social Responsibility covered the entire gamut of responsibilities
that business has over the general public. Carroll stressed that the
responsibilities of business over society is flexible and without clear
implementation guidelines. Carroll concluded that the social responsibilities of
business include expectations of the society that are by nature, political,
economic, ethical, legal and discretionary (Carroll, 1979). The various studies
that emerged in the ‘80s did not give a new definition of Corporate Social
Responsibility but solidified its very nature of planting corporate as a way to
promote business continuity.
The spotlight shifted to studies that connect CSR with other disciplines
such as Ethics, Strategic Management, Marketing, Supply Chain Management,
and International Business and sometime later with Corporate Governance. In
fact, Peter Drucker, Austrian-born American management consultant and guru
added to the wealth of existing CSR positions when he emphasized the value
of corporations in various fronts (Drucker, 2001) even if he previously
declared that the primary role of a corporation is to provide service to its
customers and not just to gain profit. Moreover, he declared that the essentials
of profitability are business continuity and sustainability (Drucker, 1984).
Drucker pointed out how corporate breakthroughs can happen when
social ills are addressed by businesses within the context of their core function
(1984). Corporation now sees the unprecedented importance of a positive
effect of social responsibility to the overall business situation and
sustainability. From then on, there was no more stopping in the way CSR was
to influence how managers, corporate leaders and owners will made their good
value as their unique business proposition and basis for their strategic decision-
making.
In the book Business and Society by Frederick, Davis and Post
published in 1989, the requisites to business existence were formulated.
43
Business was viewed as an entity with more than economic and legal
obligations but social responsibilities as well (McGuire, Schneeweis and
Branch, 1990). This definition became the backdrop of later scholarly works
when the question of CSR was brought about (Wood, 1991). In the same vein,
Frederick’s contribution to CSR understanding amplified the correct posture
which corporations must take in ensuring that its resources serve a broader
purpose (Frederick, 2006).
CSR in Circa ’90s – Present
Laying the groundwork for corporate social performance, Carroll
underscored a more appropriate term of measurable performance as opposed to
responsibility (Wood and Jones, 1995). Wartick and Cochran meanwhile
expanded Carroll’s previous definition to become broader and coherent when
they included principles, processes and policies to the framework of corporate
social responsibilities, corporate social responsiveness and social issues
(Wartick and Cochran, 1985). This became the outline of the corporation’s
social contract and ethical dimension in relating to society.
The responsiveness of business was in its performance of initiatives that
sought to answer issues and challenges within the society. Business policies
became business reactions and pro-action to an otherwise purely social event.
Carroll validated that ethics and business responsibility overlapped and in
effect positively positioned a company and its reputation to a level that is likely
accepted by society. Accordingly, his studies confirmed that CSR was initiated
with the primary objective of achieving desired organizational outcomes on
areas that are meant to create positive effects to critical stakeholders (Carroll,
1999).
The ‘90’s added to the robustness of CSR understanding with new
themes and directions added to it in the form of Stakeholder Theory, Business
Ethics Theory and Good Management Theory (Carroll, 1999). Paramount to
these contributions were those of Wood and Jones’s (1995) and Wartick and
44
Cochran’s (1985) who made specific rationalization about the intricate tasks of
corporate leaders in relation to their society (Wood and Jones, 1995). Finally
Swanson (1999) brought together the positions Wood and Jones as well as the
ideas of Wartick and Cochran ideas to adhere to the next crucial step of CSR,
which was decision-making (Swanson, 1999). Business decisions were no
longer confined to financial decisions in its purest form. Business decisions
were now mindful of how corporations will take shape beyond profit.
The plethora of argument to have a single CSR definition became
secondary to the more critical situation that seemed to engulf companies that
committed ethical misdemeanor. The governance debacles that followed
reiterated the value of CSR to the life of any business and further echoed the
felt need to link theory to practice. In recent years it was inferred that corporate
sustainability shares in some salient elements of sustainable development,
corporate social responsibility, in theories pertaining to stakeholders and about
corporate accountability. The World Business Council for Sustainable
Development11 defined CSR as the pervasive commitment by business entities
to pursue ethical behaviors even as they take up their respective economic
advancement towards personal and societal welfare (World Business Council
for Sustainable Development as cited in Asongu, 2007). Finally, McWilliams
and Siegel (2000, 2000 and 2001) amplified the beyond the law and beyond
firm interest application of CSR.
In looking at the CSR initiatives that were done in the region and the
rest of the world, a continuum rather than a choice option seems to be evident.
As companies were able to identify the value of CSR in their long-term
business survival and given their steady economic gain, their respective CSR
performances showed progression in delivery, in responsibility and in
11The World Business Council for Sustainable Development is a CEO-led organization of progressive companies that cooperates with the international business community to create a sustainable future for business, society and the environment. Its council membership applies its strong leadership and staunch advocacy to create laudable and innovative solutions, as well as take common initiatives to make business continuously relevant and responsive to the changing times.
45
creativity. CSR was identified to exist in periods and was wrapped in phases.
CSR was identified to have drivers to champion its cause and has
corresponding policy instruments that ensure its wider enactment and
coverage. Table 2 highlights this continuum.
Table 2 Continuum of CSR Progression
CSR Periods
Phases of CSR CSR Drivers CSR Policy Instruments
1950���s – 1960’s
Corporate Social Stewardship, Corporate Philanthropy-actsof charity, Managers as public trustee-stewards, Balancing social pressures
Executives Conscience Company Image/Reputation
Philanthropic funding Public Relations
1960’s - 1970’s
Corporate Social Responsiveness, Social-impact Analysis, Strategic priority for social response, Organizational redesign and training for responsiveness Stakeholder mapping and implementation
Social Unrest/Protest Repeated Corporate Misbehavior Public Policy/ Government Regulation Stakeholder Pressures Think-tank Policy Papers
Stakeholder Strategy Regulatory Compliance Social Audits Public Affairs Function Governance Reform Political Lobbying
1980’s– 1990’s
Corporate/Business Ethics Foster an ethical corporate culture, Establishingan ethical organizational climate, Recognizecommon ethical principles
Religious/Ethnic Beliefs Technology-driven Value Changes Human Rights Pressures Codeof Ethics Ethics Committee/Officers/Audits Ethics Training Stakeholder Negotiations
Mission/Vision/Values Statements CEO leadership ethics
1990’s – 2000s
Corporate/Global Citizenship Stakeholder Partnerships Integrate financial, social and environmental performance Identify globalization impacts Sustainability of company and environment
Globaleconomic trade/investment High-tech communications network Geo-politicalshifts/competition Ecological awareness/concern NGO pressures
Intergovernmental compacts Global Audit Standards NGO dialogue Sustainability Audits/Reports
Source: Interpretation of CSR information from the CEO Perspectives on Corporate Social Responsibility published by the League of Corporate Foundations in the Philippines, Manila, Philippines in 2006 (http://www.lcf.org.ph), the World Business Council for Sustainable Development (http://www.wbcsd.org) and from Promoting a European Framework for Corporate Social Responsibility published by the Commission of the European Communities in 2001 (http://europa.eu.int/eurlex/en/comgpr/2011/com2001_0366en01.pdf).
CSR Expressed in Corporate Social Performance
Corollary to this array of definitions is the understanding of CSR in this
research. CSR as a discipline is concretized through an array of corporate
social performance expressions. CSR is understood as a willingness to do and
is measured through social performance index of good and correct practices.
The reach of social performance is perhaps bigger and wider but it will always
be anchored on the standpoint of CSR. While both critics and supporters
46
against and for CSR continue to increase, the concept and practice of social
responsibility is here to stay. Lengthy articulation of this crucial concept only
heightened its unparalleled importance and the attention that it will
continuously receive. As newer and more focused definition of CSR is
identified, a greater interest will surround its practice. In the course of global
business interaction of a more interested society and participative stakeholders,
new corporate social performance barometer and applications will emerge.
Eventually, CSR will bemore than a mere motivationto do what is right but
would become a calculated and quantifiable business action of corporate social
performance.
Table 3 Corporate Social Performance Model Extensions
Principles Process Policies Corporate Social Responsibilities
Corporate Social Responsiveness
Social Process Management
(1) (2) Economic
(1) (2) (1) Reactive
(1) Issues Identification
(3) Legal (2) Defensive (2) Issues Analysis (4) Ethical (3) Accommodative (3) Response
Development (5) Discretionary (4) Proactive
Directed at
Directed at
Directed at
(1) The Social Contract of Business
(1) (1) The Capacity to Respond to (2) Changing Societal (3) Conditions
(1) Minimizing “Surprises”
(2) Business as a Moral Agent (2) Managerial Approaches to Developing Responses
(2) Determining Effective Corporate Social Policies
Philosophical Orientation
Institutional Orientation
Organizational Orientation
Source: Wartick and Cochran, 1985
Corporate Social Responsibility is synonymous to corporate social
performance. In Table 3, Wartick and Cochran (1985) identified the principles,
process and policies of social performance, which underscored relevant
dimensions and gave directions on how the same will translate to
47
understandable corporate policies. It verifies that CSR is not a concept in a
vacuum but a crucial component of mainstream management decision and
company operations.
Indeed CSR has taken a life of its own and will continue to assert its
prominence in the major strategies and decision-making practices of future
business generations. Its evolution is as dynamic as the environment where
entities for profit exist. The extension model of Wartick and Cochran is not a
prescription of how things should be done but a prognosis of what will become
of CSR, a potent ingredient to make sustainable corporations a reality.
2.1.2 Importance of Corporate Social Responsibility: The
Business Case of CSR
A relevant CSR is something performed within the context of corporate
success. Corporate philanthropy should go beyond dole outs and should
progress globally in scope. It should focus on activities that would enhance the
core business. CSR movement should be able to reach out to those that are not
covered by an economy’s geographical boundaries, while allowing domestic
firms to be creative when they implement their part. While corporate giving
creates positive ripple effects in employee hiring and retention, in consumer
education and welfare, in governance and management, in productivity and
quality, in transparency and accountability and in environmental
consciousness, a clear measure of impact is still needed. Certainly, corporate
success is hinged on a thriving and contented society, which must be
developed for the survival of the same business.
Corporate Social Responsibility is beyond Philanthropy
Corporate Social Responsibility in the form of corporate giving is good
for the company because it reinforces its positive reputation. Corporate giving
48
boosts the firm’s reputation, which in return serves as an insurance of society’s
permission for the business to continue. Philanthropic activities also indicate a
firm’s credibility to afford social spending because it shows that it earns.
However, the same credibility comes into question when giving is tainted with
suspicion and is doubted for its sincerity. In the United States, corporate
giving shows steady increase over the years despite negative business trends
affecting some of its corporate investments in the Southeast Asian region.
Comparing 2011 to 2014, charitable donations from Giving USA continue to
rise despite natural and man-made events that have adversely affected
philanthropic initiatives. Table 4 shows the value of charitable works as
compiled by Giving USATM.
Table 4 Giving USA Data on Charitable Giving Givers
2011 amount in US dollars (percentage)
2014 amount in US dollars (percentage)
Individuals 229.03 (74.8) 258.51 (72.13) Corporations 15.69 (5.1) 17.77 (4.96) Foundations 38.52 (12.6) 53.97 (15.06) Bequests 23.15 (7.6) 28.13 (7.85)
Source: Giving USA Foundation TM, Giving USA
The same 2014 data also indicates that religion topped the list of
charitable donation recipients at 32.59%, followed by education at 15.49%, by
foundations at 11.74% and human services at 11.94%. Other recipients include
health, which received 8.61 % of the funds, public society benefit with 7.45 %,
arts, culture and humanities with 4.88 %, international affairs with 4.28% and
environment including animal rights groups with 2.97%. The increase in
donations made by corporate America was a way to counteract the negative
publicity, which resulted from scandals in the boardroom. Perhaps it was also
an assurance communicated to the general public that the bad apples have not
affected the entire corporate fruit basket.
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The advent of legislations that reduced the tax on corporate donations
resulted to a growing interest to extend monetary contribution, with sentiments
favoring the need for businessmen to help the community beyond the
requirements of the law (Sharfman, 1994). However, corporate philanthropy
was not expected to yield immediate and noticeable effects on company
performance but rather an investment for long-term sustainability. After all
simple donations could be sporadic, uncoordinated and lacking in criteria
(Vaidyanathan, 2008). Therefore, its expression was not in direct giving but in
immersing the corporation in the ways of society through staff volunteer work,
consultancy and advisory, technical outreach and environmental watch.
The act of corporate social responsibility is more than a mere altruistic
response to an obvious social challenge. From regular philanthropy, social
giving became more focused, deliberate and strategic. Seen as a reputational
tool, philanthropy became the shortest way to put a compassionate human face
to corporations (Fombrun, 1996; Jackson, 2004). This new type of
philanthropy later on gave birth to corporate social responsibility and its
barometer, corporate social performance (Buchholz, Amason and Rutherford,
1999; Smith, 1996; Werbel and Wortman, 2000) even if studies noted that this
practice was insufficient and weak (Brammer, Millington and Pavelin, 2006;
Campbell, 2007; Foohey, 2004; Porter and Kramer, 2002; and Saiia, Carroll
and Buchholz, 2003).
The story behind the value orientation of corporate boards that either
inhibited or drove their respective companies to make philanthropic
contributions because they have done well financially is still a factor worth
exploring. The inclination of corporations to make decisions beyond earning
rests in their overall synergy of strategies, internal structure and the control
framework (Gupta and Govindarajan, 1982; Govindarajan, 1988). Therefore it
is safe to say that the overall corporate giving was shaped by certain realities
such as macro and micro business environment, value orientation of owners,
personal motivation of the leaders, the corporate size, the type of company, the
50
environmental consequences of business operation, even the ownership
structure of the company.
Mere corporate giving eventually lost its reputation-enhancing effect as
business owners began to look for the long-term value of their contributions to
society. It was no longer enough that checks of donations were written for a
beneficiary community or group. Corporate players are more interested to dip
their hands in the social work that could be done in the context of their
respective companies.
Corporate Social Responsibility is a Business Decision
Corporate Social Responsibility agenda drove corporate sustainability in
ways that were permissible to a wider group of stakeholders. The resource
capability of a business ranged from its raw materials, to its workforce down to
its customers and shareholders and was all enhanced by the environment,
society and governance paradigms of CSR. The future has become more
exciting as far as the business relevance of CSR is concerned. This excitement
seemed to be sustained as thinkers and decision makers in various fronts
continue to search for explainable value of corporations in promoting
employee protection, environmental management, financial transparency,
management accountability as well as civic partnerships.
The avenues where CSR was associated with business could be found in
the condition of declining government presence and involvement and in the
demand for greater and voluntary disclosure. CSR can also be related in the
heightened consumer awareness and in keener investor pressure. CSR can also
be connected in more open labor markets and in strategic supply chains. The
increase in CSR spending is aimed to result to an improved financial
performance. Further, a positive CSR image may consequently redound to a
reduced operating costs, better brand reputation, intensified sales, enhanced
customer loyalty, multiplied productivity, heightened quality, greater ability to
recruit talents, a chance at retaining talented and productive employees,
51
minimized regulatory oversight, greater access to capital source, inclusiveness
and diversity of workforce, enhanced product features pertaining to safety and
in the reduction of liability.12
The performance of Corporate Social Responsibility is an ethical and
good business decision. A dearth in CSR activity is like putting a life sentence
to a corporation. As corporate roles continue to evolve, the extent and novelty
of practice of CSR practice will persist and continue to develop. Management’s
choice is no longer about having or not having a CSR agenda but about the
scope and limitation of performing it. This was enough to convince business
owners and corporate leaders that their role is not just to steer enterprises to
continued profitability but to create society value that has far-reaching effects.
Ultimately, corporations have realized that it is generally profitable to
be good. The words strategic, focused, directed, measurable, sustainable,
contextualized would have to be attached to the larger activity of corporate
social responsibility. The new job titles such as sustainability directors or
sustainability managers would echo the importance of having CSR activities
that are well-functioning in the business operations.
Corporate Social Responsibility Must Be Strategic
The dynamic and peculiar consumer preferences require that business
continue to find ways by which to positively evolve. Strategic society
partnership is one possibility. It is not just philanthropy but strategic
partnership through the extension and differentiated expression of the
company’s core business. The buying public is interested if the raw materials
behind the product that they consume were obtained without causing undue
harm to the environment. Progressive and talented employees would require a
certainty that their employers would treat them with dignity in the form of
favorable work environment with reasonable and competitive compensation
and benefits. 12International Institute for Sustainable Development (2002) IISD’s Business and Sustainable Development : A Global Guide (http://www.iisd.org/business/issues/sr.aspx; access date 6/20/2014).
52
Suppliers would be concerned with maintaining a relationship with
clients who possess a positive market image because it would only mean
continued business for them. Investors will not dispense a huge amount of
money for a business that will taint their reputation, squander their resources or
both. The general society will not chose to associate with companies who are
known to be tax evaders, environment destroyers, run by unscrupulous
managers, or one which creates deceitful products and performs corrupt
practices. Doing so would be a violation of personal moral standards, a primary
basis for human decision-making and actions.
The strategic approach to philanthropy paved the way for the new thrust
of CSR beyond mere dole out while it was formerly based on personal
decisions of managers it now requires the collegial agreement among various
stakeholders. The approach to corporate social responsibility is a balance
between market and competence orientation that uses the various approaches
of corporate philanthropy. It is not known or established whether current
practices of socially responsible business could be sustained in the long run.
Meanwhile, the requirement to the economic entities by the various
stakeholder groups has become increasingly pronounced, directed and
specified.
Performing CSR denotes spending. But spending on CSR is playing
one’s card well. It means putting investment where one can get the most
opportunity to perpetuate profit generation. In this argument, CSR is likened to
a Marketing and Advertising instrument that creates a strong marketing
communication tool. It can also be likened to investing in new green product
development, innovating on environmentally safe production materials and
processes. It could also be about prudent and intelligent spending. All these
ideas justify the business benefit of performing Corporate Social
Responsibility bearing in mind the firm’s financial condition. This is the
business case of CSR.
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2.1.3 Arguments Against and In Support of Corporate Social
Responsibility: The CSR Ambivalence
Discussions and debates on corporate giving were embroiled in the CSR
issue that echoed in the caveat of Friedman when he said that business should
steer away from social issues altogether (Friedman, 1970). This was on top of
the criticism that corporate giving is nothing but a sweet face for public
relations and legitimization of business. While others believed that business
should be hardcore in their commitment as citizens to the broader society,
others contradicted that such is only an illusion since the very foundations to
which corporations were created was one tainted with moral questions and
arguments (Vaidyanathan, 2008). Others however insisted that there was no
necessary conflict in this because for as long as philanthropic activities were
harmonized with the core competenciesof the company, the firm should be able
to make more efficient and sustainable contributions to social issues even
while creating profitability (Porter and Kramer, 2002).
In understanding the terrain of this literature, Table 5 itemizes the four
main approaches to understanding CSR as instrumental, political, integrative
and ethical (Garriga and Mele’ 2004).
Table 5 Approaches to Corporate Philanthropy in the CSR Literature
CSR theory Approach to Corporate Philanthropy
Characteristic texts
Instrumental Strategic Philanthropy Porter and Kramer (2002)
Political Corporate Citizenship Smith (1996), Carroll (1999)
Integrative Corporate Social Performance
Carroll (1979,1999)
Ethical Normative Stakeholder Theory
Freeman (1994)
Source: Adopted from Garriga and Mele’, 2004
54
In another model, a systems approach to understand CSP was provided
to include; a) Principles of Corporate Social Responsibility, which asserts the
inherent relationship between a company and other business entities, the
company and the entities that placed their trust in it and the company
leadership; b) Process of Corporate Social Responsiveness, which are largely-
encompassing behaviors which serve as vehicles by which companies link
social responsibility values to actions. Primary responsive processes
includeenvironmental assessment, stakeholder management and issues; and c)
Outcomes of corporate operations which is comprised of the economic,
social and natural environment impact, positing the virtuous cycle that
connects the company’s principles and practices and the corresponding
benefits and dangers to the various stakeholders (Garriga and Mele’, 2004).
CSR is an overarching concept that described the other value-adding work of a
corporation, while allowing the rest of society to partake in it. It is for this
reason that CSR was sometimes looked with suspicion as an effort towards
image and reputation buildingfor the companies. For this reason, Social
Responsibility became one of the most visible and concrete demonstrations of
corporate ethics.
Practitioners of CSR argued that this is the new business order, the new
business imperative, and that companies either subscribe to it or lose their
legitimacy to exist. CSR advocates even go as far as arguing that businesses
were only as good as how the society views them to beand that their existence
would be determined by their stakeholders more than their shareholders.
Business existed at the pleasure of its various stakeholders, each one with their
legitimate claim in the economic performance of the business.
A socially responsible corporation follows a value system, knows how
to recognize stellar performance of employees, does not stop at aiming to be
successful in monetary terms, and aspires to be known, respected and loved.
Accordingly, a good corporation will continue to have an unwavering
55
commitment to create outstanding products, deliver outstanding services,
generate outstanding profits, and contribute outstandingly to society. The
absence of strong foundation of CSR principles would result in the inability of
companies to sustain their existence, and may find its death in the
uncompromising hands of the society it seeks to serve. Similarly, those
companies that were able to maintain their active and integral role in the
community would get a greater space in the society’s favor and would be able
to endure beyond the most difficult of economic conditions (Margolis and
Walsh, 2001).
Another CSR model shown in Table 6 further states that CSR
encompasses the various areas of social expectations over. The same assertion
views CSR as a society requirement, an indispensable aspect of company
existence and is concretized in ways that are immediately felt by the public.
Source: Business and Society, Ethics and Stakeholder Management. 5E. Carroll & Buchholz, 2003.
Can corporation create wealth while maintaining harmony with the
society? The desire to have the best of both worlds is actually the same for all
economic citizens (Morrisey, 1989 cited in Margolis, Elfenbeinand Walsh,
2007). Waddock and Graves affirmed this belief way before (1997), when they
said that the cycle of goodness resonates when companies desire more than just
the economic pay-off of doing business. Now more than ever the direction that
Table 6 Carroll’s 4-Part CSR Model Social Responsibility Societal
Expectations Example
Economic Given Profitability
Legal Given Compliance Ethical Bare Minimum Acceptable
Philanthropic Given/Bare Minimum
Donations
56
business must take is to perform socially desirable activities so that society
would find their operation anything less than legitimate. CSR would pervade
the mainstream of business activities as more and more innovations are made
in CSR delivery.
This will come in the form of creating value as a socially responsible
company that would be the institution of choice by the best and the brightest of
work force, companies that would engage in environmentally safe and clean
production operations and companies that would adhere to good financial
governance. Carroll strategized the nature of CSR in Figure 3, in that while it
may seem to be just about corporate giving, it is also a guarantee for
shareholders against legal impediments and an assurance of economic gains
(Wood, 1995).
Corporate Social Responsibility integrates economic concerns into a social performance framework
Figure 3. Modified CSP Model of Carroll Source: Carroll, 1999
The arrival of Business Ethics as a field of study in the 1980s put forth
the systemization of the issue of CSR (Buchholz and Rosenthal, 1999; and
Waddock et al, 2000). Reiterated by Carroll, the first definition of corporate
social responsibility was postulated in 1953 by H.R. Bowen. It was Bowen
who argued that the role of business is to engage in actions that were beneficial
Philosophy of Social Responsiveness
Social Responsibility
Categories
Social Issues Involved
57
to its shareholders and its society (Carroll, 1999). Meanwhile, the 1990
presented a basic framework for what is desirable business practice came into
being (Van der Putten, 2005). The major components of corporate social
responsibility were thought to be economic, social and environmental or
people, planet and profit. This concept gained a wide acceptance among
various interest groups and several attempts were made to further identify what
is responsible business practice in the social and environmental sphere (Garriga
and Mele’, 2004).
While there seems to be a lot of talk on CSR, we cannot dare say that
the scientific inquiry on the subject matter was already exhausted at this time.
Moves to look at corporate social responsibility and its concrete manifestation
through corporate performance have been hampered by a lack of adequate
means to operationalize and to do measurement of social responsibility
(Blackburn, Doran and Shrader, 1994). So far, universal rights and sustainable
development movements have created a social standard for companies based
on the minimum requirements of documents like the Universal Declaration of
Human Rights and the ILO conventions (Desjardins, 1999). In fact, guidelines
for businesses were often derived from these legal documents, which were
mainly intended to assist governments in policy creation instead of being a tool
for business strategy formulation.
Many corporate codes of conduct could actually find its roots from these
international codes (Leipziger and Kaufmann, 2003). The growing interest in
identifying the dimensions and consequences of corporate social responsibility
is now evident. Another view to ascertain what is desirable for the society lies
in the confluence of agreements between the company and its various
stakeholders. Likewise, the available literature varied in the indicator to
identify positive corporate social performance.
The current robust appreciation of Corporate Social Responsibility is
not that much different in the past. Milton Friedman in his famous article
58
explained succinctly what companies should be, creating profit within the
boundaries of the laws and the norms of the society (Friedman, 1970 as cited in
Waddock and Graves, 1997). As an economic entity, business organizations
must operate within the framework of law while efficiently operating in an
open market and creating profit for its stockholders. Being in business is like
being in a game, where the aim is to make as much profit as possible while
staying within the rules of engagement, which are mainly set by the
government (Hill, 2002).
This view only amplifies that the firm may choose to practice ethics and
observe certain ethical standards but still within the objective of making profit.
In recent years more and more companies devoted their resources and
managerial attention to cultivating their own ways of socially responsible
business practices. In the S&P 500 alone, companies that have set up a
committee to specialize in corporate social responsibility on its board had
almost doubled (Moon, 2004). Even large pension and mutual funds invested
only in companies that meet positive social performance criteria. If a company
failed to meet the social screening standard, these funds will be divested in the
company’s stock and the share prices may suffer.
Arguments against CSR
Probably the most well known argument that seems to be against the
focus on Corporate Social Responsibility is the one by economist Milton
Friedman. Friedman considered maximization of shareholder wealth as the sole
objective and responsibility of the business (Friedman, 1970). Friedman
bluntly and categorically emphasized that the notion of corporate social
responsibility is irrelevant to business operations (Friedman, 1970). He
followed the theory of economics on self-interest in his generalization. In
essence, this perspective placed corporate activity as a zero-sum game, in that
resources that were expended in the interests of social responsibility came at
the expense of shareholders (Wartick and Cochran, 1985). It also appeared that
59
the interests of stockholders and other stakeholders were conflicting and
mutually exclusive. As the individual is defined as the totality of his existence,
interdependence is shunned. Cooperation was not at all significant unless
benefit to oneself came from it (Reilly and Myron, 1994).
Further, it was stressed that people in business continue to exist because
this was the role assigned to them by the society, and that the means to obtain
profit is blurred so as long as the shareholders get the return of their investment
(Friedman, 1970). Clearly, any avenue to use corporate funds is acceptable so
long as it will eventually result to greater economic gain.
On another realm is the argument that indeed corporations tend to pass
to the society the hidden costs of performing socially responsible activities.
Thus it is only taking back in other ways what society thought corporations
have freely given to them (Levis, 2005). More expensive but environmentally
safer products would mean higher product prices. Following tax regulations
for some will mean lower salary for the employees. Higher cost of production
may result to lower dividends paid off to stockholders. It is even said that if
the society would knew of these hidden costs of social performance, they
would not insist that corporations take on this role at all.
Still another viewpoint that refutes CSR value is the argument that
professional managers and business practitioners are not equipped with the
different skills that were required to heal society’s ills. While they may have
mastered Production, Marketing, Finance, Accounting or even Information
Technology, nothing in the business practice has trained them to solve
problems recurring in society such as malnutrition, pollution, lack of quality
education or even extension of micro financing for the poor and the
marginalized. Very few companies who have developed a CSR strategy have
made significant progress in implementing the same strategy in their own
companies (Lawrence and Weber, 2008). Business people, unlike public
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officials were not elected by the majority and therefore do not have the
mandate to solve what are essentially public issues.
CSR was criticized for causing additional burden to the corporations
amidst their primary role of ensuring profit to shareholders. It was implied that
in the light of environmental concerns, a highly visible company, one that is in
extracting industries perhaps, could attract more attention and therefore has a
greater chance to be criticized by the public. Business principles advocate the
maximization of self-interest and the people who practiced business were
expected to pursue these interests for the firm (Boswell, 1980). Agency theory
and shareholder interests were defined as the responsibilities of decision
makers to maximize corporate interests (Eisenhardt, 2004). The theory itself
affirms to the agent-executive that there is no other interest, which needs to be
satisfied other than that of the shareholders, other stakeholders notwithstanding
(Oviatt, 1988).
The basic theory of economics and free enterprise is dominated by the
exclusive emphasis and importance given to the individual, whether this is an
individual person or an individual corporation. It placed aside the concern for
society. This emphasis on the individual is rationality concretized, where self-
interest, efficiency and self-maximization became the driving principle behind
human action (Eisenhardt, 2004). In Economic theories individual freedom
became a construct, which is far from the ideas of social relationships and
responsibility (Boswell, 1980). The freedom of the individual to compete
became society’s norm. The human person, thus became the economic person,
in whose own interest, all other interests became secondary (Friedman, 1970).
Still according to another argument, any corporation that used its
resources for purposes other than directly increasing profit is adding to
inefficiency. This may find clarity when a corporation refuses to close an
unproductive factory for fear of dislocating human resources from their earning
source. This can also be seen in their desire to protect a community when they
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decide not to fully exploit cheap raw materials abundant in the area. Needless
to say, actions such as these lower the chance to gain incremental profit as
these actions involve lost opportunity for the firm. Business is business, as
economists would firmly say. Thus, when all economic activities are
consummated, only the efficient firms will survive.
Choosing to be socially responsible would require a greater production
cost to a firm. It would diminish what could have otherwise been a cost
differentiation, a clear competitive advantage. For instance, to standardize
human resource payments in all country where a multinational corporation
operates even without the requirement of differing country laws and standards
would create more costly operation. Imagine if one astute manager will only
keep operations in a relatively cheap human resource haven, where product
quality may be strictly controlled just as well (Levis, 2005).
Table 7
Summary of Arguments Against Corporate Social Responsibility
- Restricts the free market goal of profit maximization
- Business is not equipped to handle social responsibilities
- CSR dilutes the primary aim of business
- Lowers economic efficiency and profit
- Places responsibility on business rather than on individuals
- - Increases thepower of corporations - - Puts the government at bay in providing
social services to its people - -Limits the ability to compete in the global
marketplace - -Imposes unequal costs among competitors
Source: Researcher’s Compilation
Critics of CSR argued that the whole idea of social responsibility of
business is misguided since only individuals and not legal entities may be held
accountable for the problems and issues of society. After all it is the individual
who makes the decision and not the organization. Thus, the entire organization
may not be held accountable for public misdeeds, only the people behind those
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failed action and decisions. Just as these critics find it wrong for individuals to
channel corporate money to philanthropic activities, they argued that the
individuals who decided to contribute their personal money to charitable
causes would be an entirely different story. Table 7 showed the summary of
arguments against CSR.
Arguments in support of CSR
The practice of CSR has its common dangers, no matter how good its
intentions may be. The challenge is to create a balance by which profit
motives come in harmony, at least in a general sense with the desire of
companies to do good. By and large, critics of CSR say that doing so has
excessive costs. The idea to do good for others did not come overnight.
However, the hastened and heightened interest undeniably came about after
widely reported corporate scandals committed by people in power and their
equally powerful entities (Levis, 2005). Almost instantaneously, even the
world’s largest asset managers are publicly demonstrating their commitment in
investing in companies that are deemed socially, morally and environmentally
responsible. How did CSR come into being?
According to Paine in 1994, contradicting that CSR has arrived and is
here to stay is an attempt at altering its history that was both long and
venerable. Historically, churches have been among the first institutional
investors to advocate CSR. O’Rourke (2003) cited the immense power of
business in the United States which has also penetrated the church setting. This
initiative led to the use of various and unconventional ways to perform socially
significant actions (O’Rourke, 2003). The curiosity, which sectoral investors
have developed for CSR procedure is the product of a wider movement,
described as a clash of culture (Madden, 2011). After all, business entities
were primarily created for profit.
In the past decades the corporate realm has witnessed a rising awareness
and varied application of the term responsibility in the practice of business.
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Beyond its original context of being a for profit entity, corporations have now
embraced the new reality of their existence (Turban and Greening, 1997).
From a purely financial measure of performance, society has now redefined
what matters most in the bid for a business entity’s long-term sustainability.
Similarly, advances in technology, flattening of the globe, sharper competition,
changing demographics, and a shift to values resulted to a broader definition of
the concept of a corporation (Paine, 2002).
From a legal perspective, a corporation is a legal entity separated from
the persons that formed it. It existed as a product of a corporate law and its
rules balanced the interest of the shareholders who invested their capital and
the employees who contributed their labor. From the Mercantilist’s view of an
institutional existence that can be both beneficial and brutal, corporations have
survived the changing tides of interests and concerns that beset it through the
years.
The various manifestations of CSR work became widespread with the
examination of profitability in CSR activities and its repercussion to companies
(Vogel, 2006) examined the profitability of CSR and its general impact on
companies. In today’s global economy, the ability of companies to demonstrate
responsible business practice has become increasingly crucial in the aftermath
of escalating business downtrends and operating challenges. It is
acknowledged that company performance is influenced by both market and
non-market strategies (Aldag, Bagnoli and Watts, 2003). Corporate
compliance, a vague concept in the past is now seen as an inevitable avenue
that businesses must traverse. It is evident in the management and stakeholder
relationship that a firm and its profit orientation simply do not exist in isolation
but has an equally prominent presence in the interplay of the larger stakeholder
drama.
Many business executives believe that CSR practice is a good idea. A
global survey of business executives conducted by McKinsey on 2005 and
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published on 2006 found that more than eighty percent of business executives
concur the necessary balance between motivation for higher returns and
contribution to social good (McKinsey Quarterly, January 2006).13 Several
groups who worked to protect consumers, preserved environment, safeguarded
the health and safety of employees, prevented job discrimination, opposed
invasion of privacy through the use of Internet, and maintained a strong return
in their investment would stress the importance of social responsibility by
businesses. Government officials likewise encouraged and enforced corporate
compliance, with laws and regulations that protected the general public from
abusive business practices (Lawrence and Weber, 2008).
Source: Researcher’s compilation
Probably the most important argument in support of CSR practice is its
value to promote long-term profit for the business. A cost at current time,
expensive as it may often be, CSR may be positively viewed as an investment
in the proper direction. Goodwill created through strategic donations may
cement the good name and reputation of a firm. Reputation being a valuable,
intangible asset is as difficult to build, as it is easy to tarnish. Potential
manpower who can offer more talent and skill can be attracted by a highly
13McKinsey & Company provides quarterly business reviews that allows management and business decion makers to take stock of relevant and objective information to create good decisions. The McKinsey Quarterly is such publication platform. Details of the company and its public resources can be accessed at http://www.mckinsey.com
Table 8 Summary of Arguments in Support of Corporate Social Responsibility - Addresses social issues which business caused and allows business to be part of the solution.
- Protects the self-interest of the business
- Limits future government intervention
- Corrects social problems caused by business
- Addresses issues by using business resources and expertise
- Addresses issues by being proactive - Balancespower with responsibility - Ensures long term profits for the business
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reputable company name, one that is known for its sensitivity to the needs and
safety of its consumers or one that is known to take better care of its
employees. CSR practices can correct the problems caused by business through
counter measures and safety nets. These actions are valuable as a way to
mitigate graver damages if left neglected by the firms. Through CSR practices,
businesses can be made aware that it is far more efficient to avoid causing
problems rather than to correct them. CSR involvement reminds business that
being proactive is a less costly posture to take when dealing with society and
environmental concerns. Table 8 provided the summary of arguments in
support of CSR.
On hindsight, both arguments against and in support of CSR practice
have their merits and values. It is of interest to the corporation to balance
economic, legal and social responsibilities should it desire to continue efficient
and reputable existence in a growing, critical and demanding society. Granting
that CSR is already an accepted business reality, corporations must therefore
need to balance their profit motivation with a significant environmental, social
and governance role towards society. Just like any use of funds, CSR must be a
case of strategic investment. The effect of CSR in influencing future economic
gains is something of interest the company. However, the way to measure these
contributions remains a challenge.
How does one measure the level of motivation to perform good deeds to
society? What is the standard societal contribution? When is corporation’s
footprint to society enough to create an impact? How is CSR measured? This
study attempted to create a contribution in its own measurement basis for CSR
performance. Although the researcher could not fully assert that the CSR
measurement used for this study was solid as rock, the said measurement basis
could be developed to encompass more factors and investigate other
parameters of CSR performance.
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2.1.4 Metrics of Corporate Social Responsibility: In Search of a
Corporate Social Performance Identity
How was Corporate Social Responsibility measured in previous
studies? While a definition that will exact what CSR is for all people is non-
existent, attempts at refining what it is for in practice has gradually taken shape
over the years. Margolis and Walsh (2001), indicated that of the ninety-five
studies undertaken and assessed utilizing twenty-seven different data sources
for reviewing corporate social responsibility, criteria was taken from varied
forms that include organizational programs, disclosures, charitable
contributions, and others. Corporate Social Responsibility has evolved from a
single issue evaluation into one that is broader and multi-faceted.
The new way of looking at CSR and its valuation was made possible
with the ability of more researchers to have access on newer and more reliable
data. Generally, two techniques have been identified to evaluate CSR
performance, the content analysis and the use of third party identified indexes
(Cochran and Wood, 1984). The first technique involved the mechanical
counting of the frequency of appearance of words, terminologies and concepts
of CSR in annual reports and sustainability disclosure documents. This method
required commonality of documents per company. It also necessitated an
objective determination of criteria or factors to look for in the documents. The
differences in industry and legal country context of the identified companies
made the classification quite difficult. In addition, the self-reporting made by
the companies may pose certain biases since it is assumed that no companies
would like to be written about negatively. There is a huge possibility that the
reports read would be made to appear better than the real situation.
The other method for determining CSR performance is the use of third
party indexes. Also known as reputational index, a third party observer rated
the companies based on identified criteria. The criteria used were based on the
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focus and differentiation of the third party rater. These criteria are consistent
for all types of firm, which created a certain degree of objectivity. However,
sample sizes used by each reputation ranking differ and may have affected the
reliability of the data generated. Beyond concerns on measurement and
indicators considered, third party ratings were still the common barometers
when relationships between financial performance and CSR performance were
determined (Cochran and Wood, 1984).
Codes of conduct, management standards, labels, reporting and socially
responsible investment were identified by the European Commission (2004) as
the main instruments of CSR. Accordingly, these were classified as either
socially responsible management, socially responsible consumption or at best,
socially responsible investment (Iamandi and Filip, 2008). Socially responsible
management included those instruments that aimed to identify and lay down
company directives that pertained to the act of doing responsible business and
may take the form of company sustainability reports, ethics principles and
management codes. Socially responsible consumption was company-initiated
and consumer-centered. This might take the form of labels or packaging layout
that assured the public that the product they were buying was created by a
socially responsible business. Socially responsible investment was an
amalgamation of devices, reports and methodologies that were brought to
responsible investors such as social, green and ethical funds, pension funds,
screening and shareholder engagement and sustainability indexes (Iamandi and
Filip, 2008).
In looking for a basic CSR measurement, a company has its Code of
Conduct as its primary tool. Code of Conduct formalized in writing the
standards that a company must adhere to when faced with issues such as
human rights, labor practice, bribery, corruption, health and sanitation, safety
and environment. Codes of Conduct were voluntarily written to communicate
the values and ethics of a company to their client, their suppliers, their
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investors and the general public in the event that there were issues that would
require them to make a stand.
Management standards on the other hand provided the corporate toolkit
that summarized how the organization assimilated its claimed values to its
daily operation and practice. Previously, the European Commission (2004)
identified five focal points in this field namely, workplace standard, quality
management standards and other frameworks, environmental management
standards, national standards and sector standards. Some of the better-known
standards are:
Global Audit Standards
Global Audit Standards, which have been developed by a number of
organizations and has grown in acceptance since it began. Each standard has its
own set of focus area, economic benefits for the firm and stakeholders.
Companies that have committed themselves to these standards have made their
reports on-line for the public to see besides their usual stakeholders. Though
generally voluntary, many companies have incorporated these standards in
their strategic plans, which resulted to greater stakeholder expectations for
their continued adherence.
Triple-Bottom Line by Elkington (1994)
This is one approach to measure Corporate Social Performance and is
commonly called TBL. The “Triple bottom line” refers to the figure at the end
of the company’s financial statements summarizing earnings after expenses.
The triple bottom line denotes the reports to stakeholders beyond the money
matters. More than the traditional report, this includes the company’s
cumulative social, financial and environmental impacts.
Balanced Scorecard
Another metric that is used by companies is the one based on the
principle of Balanced Scorecard. The system emerged in 1992 after professors
Robert Kaplan and David Norton introduced this key set of financial and non-
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financial indicators, with four quadrants or perspectives – people and
knowledge, internal, customer and financial. In this case, the balance does not
mean an equal situation, rather, it is a tool to encourage managers to develop
and use performance measurements that could take all aspects of company
performance.
For Kaplan and Norton (1992), however necessary, traditional financial
measures are not the entire way in assessing a company. As traditional
measures tell the history of the company, they do not completely capture the
direction to which the strategic future of the company will emerge. This
strategic future needs to articulate the forward-looking value of the company in
terms of investment in customers, suppliers, employees, technology,
innovation and processes.14 Therefore, this concept in corporate performance
measurement defined a multi-dimensional and multi-disciplinary perspective
about an organization. Market share, change in intangible assets, product
innovation, customer satisfaction, quality, productivity and stakeholder views
are added to the traditional finance effectiveness normally used as a looking
glass for corporations.
Labels
Labels are marks that a company keeps to assure the buying public that
standards are kept in social, ecological, fair trade and environmental areas. The
European Commission identified the three relevant initiatives in this area to be
fair trade organization and labels, social labels and environment labels (2004).
Corporate sustainability reporting
Corporate sustainability reporting configures the company’s compliance
to the triple bottom line. As a predominantly voluntary action, it is an
expanded version of the code of conduct and management standard to include
international requirements on disclosure and accounting. Alongside national
public initiatives, the more common sustainability reporting tools are Global
14www.balancedscorecard.org.
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Reporting Initiative (GRI), Accountability Assurance Standards (AA 1000s)
and Business in the Community Corporate Impact (Iamandi and Filip, 2008).
Socially responsible investment
This is either consumer or retailer type or institutional type. The
consumer or retailer type referred to investment decisions that were based on
individual values and personal preferences. The institutional type referred to
investments that were based on corporate SRI framework such as foundations,
banks, assets management and insurance companies. This paper utilized a form
of SRI to serve as its CSR variable.
Reputation ranking was introduced in 1971 by the Council on Economic
Priorities15 and ranked twenty-four pulp and paper organizations on
environmental criteria particularly on pollution control programs. At that time
CEP asserted that its role as a public service research organization was merely
to present an accurate and impartial analysis of the social and environment
records of corporations.16 As an institution, CEP is based in London and New
York but is actively partnering with countries such as Japan, England, France,
Australia, Sweden, Canada, Belgium, India, Switzerland and Germany. CEP’s
commitment was to make available to consumers, policy makers, investors,
businesses and other stakeholders such valuable information on corporate
social responsibility focused on the area of environment. Later, researchers
utilized the CEP in their respective studies. Some of the more common SRIs
are:
Fortune Reputation Ranking (as it appeared in Margolis and Walsh, 2001)
The Fortune reputation rankings became the most utilized measure of
CSP. Second to environmental impact assessment, Fortune reputation rankings
were used in important CSP studies since it was able to cover a wide range of
factors that were indicative and reinforcing of social performance. This rating
15The Council on Economic Priorities was the lead accreditation agency of SA8000. It was founded by Alice Tepper Marlin in 1969. It published annual reports on corporate social performance, recognizes companies through awards on an annual basis is in the realm of CSR and provides research topics for investors. 16For the full description of CEP initiatives, see http://sourcewatch.org/index.php?title=Council_on_Economic_Priorities
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platform emphasized the many facets of corporate America that has to be
considered by the public other than financial performance at a time when
corporate concerns over ecological protection was still a nascent idea. On the
other hand, the Fortune Most Admired Companies, which were used in sixteen
percent of the studies made on CSP (Margolis and Walsh, 2001), have
executives, outside directors and corporate analysts evaluating companies
annually on eight attributes. Fortune ranking identified companies that were
most admired by their peers for social responsibility in their America’s Most
Admired. These were the companies that have embodied some of the best
corporate citizenship practice in a time when companies were called to put into
action their commitment for environment and social responsibility.
Vigeo Rating17
The Vigeo corporate social responsibility scores were used in order to
investigate the sustainability of a company. Vigeo is an independent corporate
social responsibility agency that screened European quoted companies on CSR.
The scores of Vigeo contained information in the six dimensions of corporate
social responsibility that include human resources, environment, customers and
suppliers, community and society, human rights and corporate governance. For
each dimension, Vigeo assessed the corporate social performance with a
sustainability score. The Vigeo scores have been available since 2000 for a
representative sample of companies in the euro zone. Companies that changed
status due to mergers or acquisitions were excluded from the list for the year
when the event took place.
Domini 400 Social Index18
This social responsibility rating is the market cap weighted stock index
of four hundred companies that were publicly traded and which in the process 17Vigeo, a leading European agency in detrmining responsibility level of companies offers ESG ratings on more than 2,000 companies and manages the eight indices that comprise the Euronext Vigeo Indices and two Ethibel Sustainability Indices. It was founded in 2002 and measures the performances and risks of corporation in the six areas of corporate social responsibility. More information can be obtained at http://www.ratesustainability.org 18Founded by Amy Domini in 1980 as Domini Social Investments, it is an SEC-registered investment advisory platform that rates exclusively in socially responsible investing. It serve individuals and investors who seek the competitive financial benefits side by side with a positive social impact. http://www.domini.com
72
of their operation were able to meet specific standards of social and
environmental distinction. The companies that were considered to form part of
this index would have shown a consistency in their good records as regard
employee and human relations, product safety, environmental safety, and
corporate governance. Companies that were in the production and service
provision of socially sensitive outputs were excluded from this index. These
include the business of alcohol, tobacco, firearms, nuclear power and military
weapons production as well as the service of gambling or casino operation.
This index was designed to help socially conscious investors to evaluate
the social and environmental consciousness and commitment of their
investment choices. The Domini 400 Social Index identified strengths and
weakness for each of the following eight broad categories. These are
community, corporate governance, diversity, employee relations, environment,
human rights, product quality and controversial business issues.
KLD Index19
The KLD or Kinder, Lyndenberg, Domini Index was also another
assessment that has been used in researches. It utilized eighty indicators
spanning seven areas. KLD index evaluated companies on the criteria namely
community, diversity, employee relations, natural environment, human rights,
product safety and quality and corporate governance (Waddock and Graves,
1997). The score system used 0 or 1 on the presence and absence of item
description that pertains to the seven factors. Due to the situation around that
time, three more criteria were presented in assessing CSR performance of
companies. These were military contracting, nuclear power and involvement in
South Africa but the same were met with various controversies (Waddock and
Graves, 1997).
In 2006, academic scholars teamed upwith KLD Research and Analysis
to assess and score businesses’ stakeholder relations to create a list of the 100
19For information on the manner and methodology by which KLD rating was conducted, see KLD Research 2007.
73
Best Corporate Citizens. In that year, Green Mountain Coffee, Hewlett-
Packard, Advanced Micro Devices, Motorola and Agilent Technologies
obtained the highest scores. On the other hand, the companies that have been
consistently in the list since it began in 2000 were as follows: Brady
Corporation, Cisco Systems, Cummins Engine, Ecolab, Graco, Herman Miller,
Hewlett-Packard, Intel, Modine Manufacturing, Pitney Bowes, Procter and
Gamble, St. Paul Travelers Cos., Southwest Airlines, Starbucks, Timberland
and Whirlpool.20 KLD utilized quantitative data such as annual reports and
proxy statements as well as qualitative data such as business and general
publications in its rating (Waddock and Graves, 1997).
Asian Sustainability Rating21
The ASR 2009 as an environment, social and governance benchmarking
tool was developed by Responsible Research and CSR Asia and was launched
in 2009 after examining publicly available documents of the leading listed
Asian companies and to provide investors, other researchers, companies and
similar stakeholders with a perspective of the strategic sustainability of these
companies performed in year 2008. The financial crisis that heavily affected
the Asian region brought forth a renewed interest and emphasis on risk
management, corporate governance, board remuneration and similar systems
and transparency in financial data. The environment, social and governance
(ESG) reporting were seen as representation of data for investors and other
stakeholders to look at. This was for the purpose of managing their portfolio
and in selecting partnership and business associations.
The Protocol of the Asian Sustainability Rating of 2009 indicated that it
utilized a 2-step approach in the selection of companies. The first step is the
creation of an initial shortlist of companies extracted from a universe of three
thousand listed companies in Asia including Japan and Australia. The top 500 20Business Ethics, Spring 2006 pp. 20-28 and Accenture Institute for Higher Performance Business. http://www.accenture.com/us-en/research/institute-high-performance/Pages/index.aspx 21 Details of the Asian Sustainability Rating can be found at the report prepared by Read-Brown, A., Bardy, F. & Lewis, R. 2010. Sustainability in Asia ESG Reporting Uncovered 2010. Asia Sustainability Rating, Responsible Research. www.asiansr.com.
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companies, based on their free float weighted market capitalization were
selected for inclusion. The second step involved having the initial list
examined and cross-referenced with the Fortune 500 Global 2009 list to ensure
that key Asian companies were included. The ASR 2009 represents the largest
and most important companies that are based in the Asian region. However, its
initial report excluded Indonesia, which is now an important country in the
preference for investment and projection of regional growth. Likewise, the
companies that were considered to represent the Philippines included
multinationals, which were operating on a different context and were unlikely
to create a socially engaging initiative on the domestic front in those earlier
years.
FTSE4Good Index22
The FTSE4 Good Index has been designed to measure the performance
of companies that met globally recognized corporate responsibility standards.
This basis of corporate performance facilitated the attraction and choice of
investments in these companies. This index is a reinforcement of other
environment, social and governance performance barometer of companies.
This is the reason why its scoring basis is not far from the factors that were
previously associated with other rating entities.
As a metric of corporate social responsibility FTSE4 Good Index is
useful for research, investment decisions, benchmarking and reference. It
provided investment makers an opportunity to evaluate share values based on a
more comprehensive take of corporate performance. It gave decision makers
another alternative to gauge the value and risk of their investment choices
beyond the aspect of finance.
22FTSE4Good Index Series was designed to measure the performance of companies which were known to have demonstrated a strong environmental, social and governance practice. Details of the FTSE4 Good Index methodology can be found at www.ftse.com/products/indices/FTSE4Good
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Dow Jones Sustainability Indexes23
The Dow Jones Sustainability Indexes Group (DJSI) is a global equity
index that covered more than 4,500 firms and represented 95% of the world’s
free float equity market. Started in 1999, DJSI was a prominent index that
sought to track the performance of leading firms on the area of sustainability
on a global basis. DJSI was created to provide the objective rating for the stock
market performance of the top ten percent of the leading companies and
provide the liquid basis for all financial products.
It assessed five main areas of corporate sustainability, which are
strategy financial ability, customer relationship management and product and
service innovation, corporate governance and stakeholder reporting and finally,
human resources. Strategy assessed the firm’s ability to integrate long-term
economic, environmental, and social strategies into their business planswhile
maintaining global competitiveness and brand reputation. Financial Ability,
talked about the ability of the firm to lead its respective industry in meeting the
shareholders’ demand for sound financial returns, long-term economic growth,
open communication and transparent financial accounting.
Meanwhile, Customer Relationship Management and Product and
Service Innovation, would be the activity that developed loyalty using
financial, natural and social resources in an efficient, effective and economic
manner. Further, Corporate Governance and Stakeholder Management would
include corporate codes of conduct and public reporting. Lastly, there is
Human Resource, which assessed companies on how they developed worker
capability and employee satisfaction.
A major strength of the DJSI is that it is one of the few Sustainability
Rating Indexes to be fully checked and verified by an independent auditor
(Bello, 2005). The DJSI also satisfied the inherent qualities of a suitable SRI
23 Details of the DJSI methodology can be found at http://www.sustainability-indices.com/review/review-history.jsp and at http://www.djsi
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benchmark in that it is comprehensive, consistently applied, flexible and a
channel for investment. This measure should not be confused with similar CSP
indexes since it is more akin to an ethical or moral index than a sustainability
rating. Receiving major attention in recent years, the DJSI became a foremost
choice in studies relating CSR and financial performance (Lopez, Garcia and
Rodriguez, 2007).
Should a firm become interested to take part in this global survey, a
number of criteria must be met first on the areas of economics, environmental
and social on an industry–specific and long-term performance spectrum. It
should be noted that companies that were by default problematic in the area of
social performance due to the very nature of their operations such as alcohol,
gambling, firearms manufacturing and adult-type entertainment were excluded
in this reputation index. The qualification under DJSI World was an active
listing in the DJ Global Total Stock Market Index within the ten percent of the
largest firms based on capitalization. The criteria used were the SAM’s
Sustainable Asset Management Corporate Sustainability Assessment, which is
identified by SAM Institute and Robeco, now known as RobecoSAM.
The assessment criteria were identified as general, one that is applicable
to all industries, and specific, one that was only applicable to certain sectors.
Under the general criteria were: corporate governance, human capital
development, risk and crisis management, talent retention and labor practices.
Whereas, in the specific criteria, one finds the following: economic trends,
environmental challenges and other social factors that were clearly industry
contextualized. The general criteria accounted for forty percent of the
assessment and the specific criteria accounted for the remaining sixty percent.
It is noteworthy to mention that the mechanical nature of document analysis
was utilized in this assessment but was made robust by the direct contact of
RobecoSAM researchers to company’s sustainability managers and those with
direct knowledge of CSR.
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All the information gathered from the direct contact with companies
being assessed were verified with the submitted documents and with an
objectively administered and accomplished online survey forms in addition to
the review of publicly available publications. External auditors were contracted
to monitor the proceedings and ensure the quality, objectivity, reliability and
accuracy of all data gathered. The criteria for the economic dimension of DJSI
were Corporate Governance, Risk and Crisis Management, Codes of Conduct,
Compliance, Corruption and Bribery and Industry-specific item. Corporate
Governance was assessed with sub-criteria namely: board structure, non-
executive chairman or lead director, responsibilities and committees, corporate
governance policy, audit conflict of interest, gender diversity, board
effectiveness, board effectiveness, entrenchment provisions and senior
management remuneration.
Risk and Crisis Management were assessed with factors namely: risk
governance, risk optimization, risk map, risk review and risk strategy. For
Code of Conduct and similar items, the criteria included: focus, systems and
procedures, scope of policy, report on breaches and business relationships that
dispel corruption and bribery. Brand management, customer relationship
management, innovation management, grid parity, among others made up the
industry-specific segment of criteria.
Under the environment dimension were: environmental reporting made
up of assurance, coverage and reporting of qualitative and quantitative data;
and industry-specific factors such as the presence of environmental
management systems, climate strategy, biodiversity structures, product
stewardship, eco-efficiency, among others. Within the social dimension were:
human capital development that include human resource skills mapping and
development process, human capital performance indicators and personal and
organizational learning and development; talent attraction and retention that
comprised performance appraisal process, related compensation for each
employee, balance of variable compensation based on corporate and individual
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performance, communication and trend of employee satisfaction; labor practice
indicators included grievance resolution and labor key performance indicators.
Finally, there are Corporate Citizenship and Philanthropy, Social
Reporting, and still other industry-specific factors. A pre-defined weight
allowed for the proper scoring of each criterion, the total score of which was
the DJ Sustainability Index. As an on-going assessment, the DJSI World
continuously monitors the performance of the cohort companies on
sustainability performance in the economic, environment and social realms. In
fact, DJSI has taken major specific country and regional economies as separate
groups for the assessments that it conducts. This kind of evaluation on social
performance is more focused and can distinguish area nuances to explain
divergent results.
In research, the social performance of large corporation could be
explained in three dimensions. These were corporate philanthropy, corporate
responsibility and corporate policy. Corporate philanthropy included charitable
efforts undertaken by a firm that were not directly related to its normal
business activities. Corporate responsibility referred to the way in which a
corporation behaved while it is pursuing its goal of making profits. The final
dimension, corporate policy encompassed the position of a firm on issues of
public policy that affected both business and society as a whole. Some of the
previously utilized CSR measurements were as follows:
Moskowitz’s Criteria
In 1972, Milton Moskowitz rated organizations as outstanding,
honorable mention or worst (Moskowitz, 1972) in a study he made relating
CSR to financial performance. He listed the following criteria for evaluating
corporate social performance. They are pollution control, equal employment
opportunity, minority and female representation on the board of directors,
support of minority enterprise, responsible and irresponsible advertising,
charitable contributions, community relations, product quality, plant safety,
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illegal politicking, disclosure of information, employee benefits, respect for
privacy, support for cultural programs, responsiveness to consumer complaints
and fair dealings with customers. The index, which Moskowitz developed,
became the basis for latter studies performed by Sturdivant and Ginter (1977)
and Vance (1975). Overall, the studies made show an overwhelming emphasis
on the following important points; CSR does not entail cost for the company,
rather CSR pays; strong evidence existed that Corporate Social Responsibility
indeed has an impact on Financial Performance; and many studies supported
the view that corporate social investing is good for the company (Moskowitz,
1972).
Principles of Corporate Citizenship According to Davenport and Prusak
The principles of corporate citizenship (Davenport and Prusak, 1998)
included first, Ethical Business Behavior that involved engaging in fair and
honest business practices in the relationship with stakeholders; setting of high
standards of behavior for all employees; and exercising ethical oversight at the
executive and board level. Second is Stakeholder Commitment which meant
striving to manage the company for the benefit of all stakeholders; initiating
and engaging in genuine dialogue with stakeholders; and values and
implements dialogue. The third area is Community, and is articulated as
fostering a reciprocal relationship between the corporation and the community;
and investing in the communities where the corporation operates. The fourth
area pertains to Consumers and is defined as respect for the rights of
consumers; offering of quality products and services, and providing
information that is truthful and useful.
The fifth area is about Employees, and meant the provision of a family-
friendly work environment; engagingin responsible human-resource
management; provision of an equitable reward and wage system for
employees; engagingin open and flexible communication with employees; and
investing in employee development. The sixth area pertained to investors as
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companies strive for a competitive return on investment. The seventh area
considered the Suppliers, as companies engage with fair trading practices with
suppliers. The eight area of the dimension is about Environmental
Commitment in the way that companies demonstrated a commitment to the
environment; and must demonstrate a commitment to sustainable development.
Wartick and Cochran’s Corporate Social Performance Extensions
Steven L.Wartick and Philip L. Cochran in 1985 accounted for the
principles, processes and policies inherent in the Corporate Social
Responsibility activities that could be adopted by business, as elucidated on the
dimensions posited by Carroll (Carroll, 1999). There were CSR measures that
took into account the current issue at the time of its conceptualization. In the
1970s Apartheid and pollution were made part of CSP studies and measures
reflecting corporate involvement or non-involvement in these issues were
compared to determine corporate social performance (Carroll, 1999).
These overarching components of CSR were hitherto required by
society in measuring the extent of CSR practices performed by corporations.
They have been greatly improved in terms of creative implementation but the
basic principle remained intact. Over the years, there appeared a number of
audit standards, which showed that the adherence to do good business beyond
profit is here to stay. The various forms by which CSR was measured
presented the factor to which social performance ratings reliability was
questioned. Response biases, inter-industry differences, company-specific
situations, even heterogeneity of societal contexts were seen as unchecked
areas in research studies.
If CSR reports should progress as mainstream sustainability reporting,
experts should continue to commit to its improvement. If sustainability reports
will become an inalienable part of any corporate public report, improvements
must be introduced. In 2010-2011, Global Reporting Initiative, popularly
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known as GRI24 launched the updates to its reporting guidelines and has started
its work on the next generation of reporting procedures. It updated its
guidelines on gender, human rights and local communities. Likewise, it paved
the way for the creation of linkage documents that would allow companies to
synergize their high quality report guidelines in a detailed and pragmatic way.
It is of interest that GRI’s new performance indicators on the area of
local communities cover items that are true for multinational companies that
are operating in developing countries such as negative impacts on
communities, mitigation and local community engagement. In looking at the
effects of these corporations to communities, concerns such as population
displacement and loss of community identity can be counter balanced with
positive situations such as the creation of vibrant local economy and the
increased access of community members to basic utilities, health care,
education and social services. This new guidelines over arch both positive and
negative sustainability information, which are good sources of future
improvements on content and measurement parameters.
It was then natural that GRI and ISO 2600025 must be linked. Published
in November 2010 as the first ever ISO standard guidelines on social
responsibility, it emphasizes the value of public reporting on social
responsibility performance to internal and external stakeholders such as
employees, local communities, regulators and investors. This development
aligns the thrust of GRI which indicates that disclosure on economic,
environmental, social and governance performance must become part of
regular corporate practices. As part of the developments in sustainability
reporting, new sector specific supplements were added to the regular
guidelines of GRI. In 2010, the International Council on Mining and Metals
24Global Reporting Initiative 2011. A New Phase: The Growth of Sustainability Reporting, GRI’s Year in Review 2010/11. GRI was founded in 1997 in Boston, USA. Its role is to create and disseminate sustainability guidelines for corporate use. 25 Using similar methods as GRI, ISO 26000is the international standard that was created to asssist organizations in assessing their social responsibility initiatives as an integrative part of their mission and vision, their processes and operations in a manner that is acceptable to their various stakeholders.
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reported their sustainability performance guided by the Mining and Metals
Sector Supplement part of the report. Likewise, in June 2011 the Airport
Operators Sector Supplement became the additional guide for the sector that
was heavy not only on emission, effluents and waste but also on business
planning and emergency preparedness.
There is no single, definitive, reliable basis for measurement of
corporate social responsibility, yet even the shortcoming of document analysis
was still better over none at all. Meanwhile, any one of these metrics still
reveals to a particular extent the CSR involvement of companies. The years to
come witnessed the introduction of other means of measuring CSR. All said
and done, any metric of CSR should underscore the principles of corporate
citizenship and more. Good corporate citizens strove to conduct all business
dealings in an ethical manner, made a concerted effort to balance the needs of
all stakeholders, and worked to protect the environment. There were also
presentations of CSR performance in the form of socially responsible
investments, which simultaneously considers the investors’ financial
motivation and their sense of responsibility to society (Frederick, 2006).
Table 9
Summary of Metrics Used to Represent CSR Performance in Similar CSR-FP Studies
Study CSR Performance Variables Used Johansson, Karlsson and Hagberg, 2015 KLD Index Gruener, Gutsche and Schulz, 2014 Quality of CSR Report Mallin, Farag and Ow-Yong, 2014 CSR Disclosure Reports Lee, Singal and Kang, 2013 Type of CSR activities as to core or non-core business Tang, Hull and Rothenberg, 2012 KLD Index Inoue and Lee, 2011 CSR Dimensions Karagiorgos, 2010 Voluntary Disclosures Cochran and Wood, 1984 Moskowitz’s 1972 and 1975 Reputational Scale Ingram and Frazier, 1980 and 1983 Computerized content analysis of annual reports Kedia and Kuntz, 1981 Existence of Social Responsibility Programs in 5 Areas Chen and Metcalf, 1980
CEP Pollution Performance Index
Source: Researcher’s compilation and modified from Capon, Farley and Hoenig, 1990 and Ullmann, 1985
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The complexity and expanse of indicators that must be considered when
measuring CSR performance were the challenges of any CSR-related research.
Table 9 shows the variety of metrics used to represent Corporate Social
Performance in similar CSR and financial performance relationship studies. A
possible alternative available is the one used by KLD, which evaluated firms
on eight factors that were universally accepted components of corporate social
performance and rated on a 5-point scale of -2 as major weaknesses up to +2 as
major strengths. 26 The presence or absence of a factor was evaluated as major
strength, strength, indifferent, weakness or major weakness. The KLD method
created a set of component factors such as community relations, environmental
consideration, product quality and liability, women and minority issues,
investment in South Africa, involvement in nuclear power and association with
military contracting that determined corporate social performance.
For the purpose of determining CSR performance in this study, each
year represented a CSR factor assignment that was given a maximum
equivalent weight of 100 points. The factors were identified as sufficient and
representative indicators of CSR performance during the given year. Similarly
the methodology used for the factor selectionof CSR in this research was based
on commonly identified component but without the merits of Hierarchy
Modeling.27 This study used the following factors on a yearly basis: type of
company ownership, the environmental impact of the company, the giving or
philanthropic activity performed by the company, the presence of a Code of
Conduct in the company as indicated in their publicly available documents, the
status of the company in the Global Reporting Initiative, the status of the
company in the Global Compact, the presence of a Good Corporate
Governance guide in its publicly available communications, the presence of
CSR framework in the company, the status of the company as far as 26Sharfman (1994) pointed out the significant strength of this rating system because it reflects the multi-dimensional nature of Corporate Social Performance. 27The Analytical Hierarchy Process or AHP by Thomas Saaty (1980) was a modeling technique used in other researches to judge the relative importance of elements in each level of the hierarchy in comparison to an element of the next higher level.
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submission of Sustainability Reports is concerned and the CSR-related awards,
locally or internationally which the company has received.
This methodology of identifying a CSR score for the year is similar to
prose counting of the number of disclosure reports and the existence of social
responsibility programs which were done in previous studies.28 This modality
can cover other features of the company that may contribute to its CSR- related
decisions and characteristics. With specific descriptions of environment, social
and governance performance already covered in sustainability reports, this
study will add value in CSR measurement by considering business ownership,
donations and awards recognition as valuable CSR indicators as well.
2.1.5 Summary: CSR Performance in Relation to Financial
Performance
As part of the global wave of adapting CSR in both its normative and
fundamental importance, many institutions are beginning to chart their own
standards and audit instruments for assessing Corporate Social Performance.
This did not happen overnight. Over the years, corporations in Southeast Asia,
borne out of their felt need and unsurprisingly influenced by the rest of the
world decided to no longer keep their CSR work in obscurity. The companies
in the Asian region, is one case in point. Hardly written, the CSR agenda in
the region began dates back thousands of years (Visser and Macintosh, 1998)
and forwards itself with more vigor and creativity, encompassing not just the
large corporations but have now included small and medium scale enterprises.
The varied theories and approaches of the construct further explained
the value of CSR in the measurement of firm performance as corollary to
financial performance. These were Utilitarian Theory, Relational Theory,
28 As compiled by Ullmann, 1985.
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Managerial Theory, Instrumental Theory, Integrative theory, Political Theories
and Ethical Theory. These theories further alluded the beyond profit purpose of
a firm as well as the sustainability consequence when a firm performed beyond
the motivation of money. Utilitarian Theory looked at CSR and its function to
enhance the image of corporations. Managerial Theory looked at CSR as a
necessary component of standards and reports to capture the entirety of firm
condition.
Relational Theory looked at CSR as a tool to underscore the symbiotic
relationship that existed between business and society as providers and patrons
of business. Instrumental Theory adhered to the positive usefulness of CSR in
maximizing shareholder value through an encompassing and good business
strategy. Political Theory assumed the power of the firm to influence society
decisions, being a corporate citizen itself that continuously interacted with
government and state policies. Integrative Theory posited the balance that is
needed to exist between pure management concerns and public responsibility.
As connected entities, both corporations and society stakeholders need to find a
voice in issues that commonly confronts them. Ethical Theory overarched both
social responsibility dimension and financial performance situation.
The metrics used to represent CSR performance in studies done as early
as the eighties were diverse. It include pollution performance index (Chen and
Metcalfe, 1980), existence of social responsibility programs in five identified
areas that included, content analysis of annual reports, reputational scales and
quality and quantity of pollution disclosures (Kedia and Kuntz, 1981). There
was also an attempt to measure CSR using a computerized system that
analyzes the contents of corporate annual reports (Ingram and Frazier, 1983).
Another study that used a different CSR metrics was the one that revisited the
1972 and 1975 reputational scale developed by Moskowitz (Cochran and
Wood, 1984). CSR was also measured based on the quality and quantity of
pollution disclosure (Freedman and Jaggi, 1982; Freedman and Jaggi, 1986). It
is important to see that the CSR representation was not yet reflective of other
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factors that are worth considering in social performance assessment (Capon,
Farley and Hoenig, 1990; Ullmann, 1985). The ethical orientation to keep
society’ welfare in check and the moral obligation that company managers
have over the resources of its stakeholders is a reality that required no further
argument or explanation. CSR is part of the financial goals of a corporation.
CSR is a cause and effect of the overall economic performance of the firm.
When institutions invest in a company, their main purpose is to grow their
money. Managers should respond by making sure that the objective of
investors is attained.
What comes around goes around. Like a virtuous cycle, the financial
success allows management to extend the rewards of business through social
involvement. Meanwhile, the strong social involvement added value to the
reputation of the business and increased its financial returns. The increase in
profitability spurred greater investor interest to infuse more resources to the
business. Financial performance was a catalyst for corporate social
responsibility, and improved social performance hastened the creation ofa
better financial performance. This was the position of this research. Investors
were most likely to invest in companies that have strong social performance.
Institutions will find it incentivizing to purchase stocks of companies that
showed improvement in their social performance (Waddock and Graves,
1997).
2.2 Financial Performance
How is Financial Performance generally understood? A company’s
financial performance forms the backbone by which a profit seeking entity
would want to exist. Financial performance is the overall measure of a
company’s ability to maximize its cost of operations, efficiently use its assets
and maximize shareholder value. Numerous ways were enumerated to explain
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corporate performance in the earlier part of this study. The explanations
amplified the position that financial performance alone is insufficient to
explain neither the overall health of companies nor their prospects for the
future. However, the performance of a company in financial terms remains to
be the most logical and easily understood barometer of the economic status of
a firm. Normally expressed and better understood in ratios, a company’s
financial condition serves as the basis for future actions and aids in its strategic
decision making. In previous studies that looked into CSR and financial
performance relationship, no other metrics were identified to perfectly
substitutes for ratios, when assessing a firm’s economic condition.
As early as the eighties, when CSR and FP relationship was explored, it
has always been variables such as Return on Assets and Return on Equity that
were proven to be useful (Chen and Metcalf, 1980; Freedman and Jaggi, 1982;
Freedman and Jaggi, 1986). Financial performance variables were at one time
determined through the use of income before security gains less losses and
taxes over total assets (Kedia and Kuntz, 1981). Alternately, financial
performance was derived from the factor analysis of forty-eight accounting
ratios (Ingram and Frazier, 1980; and Ingram and Frazier, 1983). Additionally,
market-valuation ratios were also used (Cochran and Wood, 1984).
Meanwhile, a review of the same set of studies shows that financial
performance was also measured using total risk and other coefficients that
were also ratio-based. Indeed, Accounting ratios have significantly accounted
for the comparison that was made to find out if there is a likelihood of positive
association between social and financial performance (Capon, Farley and
Hoenig, 1990; Ullmann, 1985).
In studies that focused on the effects and relationship of financial
performance with CSR, income before securities and tax deductions were also
used. This bias in use can be explained by the relative availability of the data
and the straightforward interpretation of its results. As key measures of
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management efficiency and stakeholder returns, both ratios emphasized the
inherent value of financial condition in any discussion of firm performance.
In other studies that were made, economic performance was understood
to be synonymous with financial performance. Economic performance took
Accounting or Market-based ratios as variable representatives. While there was
no clear-cut distinction of arrivingat a better result when Accounting measure
was used instead of a Market-based measure and vice versa, by computation
and basis, both were assumed valid and acceptable metrics of financial
performance. Financial performance, for all intent and purposes ultimately
mirrored the condition of a company and its predisposition to engage in CSR
activities.
While ratios and other financial metrics seem to be the best fit for
determining firm performance, it is still valuable to find another measure that
will substantiate this claim. Seemingly, challenges will continue to pervade
studies that seek to strengthen the positive CSR and Financial Performance
relationship assertion. This challenge comes from the changing business
landscape. This relationship will be challenged by diverse metrics, by different
industry context and by the basic argument of the purpose by which CSR
should be done. But CSR and FP will remain to be intertwined, particularly in
the context of good Corporate Governance. Hence, there is wisdom in
revisiting the CSR-FP relationship using other variables.
2.2.1 Definition of Financial Performance: There is Definitely
More to Numbers
Financial ratios or more commonly referred to as Accounting ratios,
have always played a significant importance as representatives of a company’s
financial condition. The enterprise’s financial statements, namely the Balance
Sheet and the Income Statement indicated the best and worst of a company’s
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situation. Often used in fiscal and calendar Accounting reports, there were
many other standard ratios that could be used in order to evaluate the general
financial status of the firm, as well as to render some user-relevant
determination of an organization’s situation.
The analysis of financial statements in the form of ratio computation
leads one to the identification ofactions that would result to improvement in
firm performance. The most commonly used ratios can be classified into five
groups; liquidity ratios, asset management ratios, debt management ratios,
profitability ratios and market value ratios (Brigham and Houston, 2014).
Each of this ratio classification focuses on a specific financial statement and
results that managers, analysts and investors consider for an array of decision-
making requirements. While each ratio corresponds to a specific purpose,
significance and trend relevance, each one only acts as guide and its high or
low value does not necessarily denote a good or bad financial future. However,
extreme values of ratios can be a bad sign for a company.
In studies made where financial performance was measured, the more
common ratios used for representation were ROA, ROE and EPS. However
when taken in a different country context or when related with a different CSR
performance variable, the effect of financial performance representation often
yields varying results. It is on this premise that this paper asserts the use of an
expanded financial performance metrics through ratios other than ROA, ROE
and EPS to relate to CSR performance.
Ratios are calculated by dividing one number with another, such as total
sales with the number of employees. Ratios enable business owners to examine
the relationship between items and measure that relationship (Brigham and
Houston, 2014). Ratios are simpler to calculate, easier to use and has the
fundamental ability to address the owner’s need to have an insight on what is
happening within the business. For the outsiders, ratios are important in
determining the soundness of their business interests in more concrete terms,
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something that is not readily apparent when looking only at the financial
statements.
Source: Adapted from Fundamentals of Financial Management. 14th (ed). Brigham, E. and Houston, J. 2014. Cengage Learning Asia
Table 10 Common Financial Ratios and their Importance
Financial Ratio Importance Financial Ratio Importance 1. Return on Assets It is the ratio that
measures how well the assets have been employed by management.
6. Earnings per Share This is the ratio that tends to have an effect on the market price per share, as reflected in the Price-earnings ratio.
2. Return on Equity It is the ratio that measures the extent to which financial leverage is working for or against common stockholders.
7. Price/Earnings Ratio
This is the ratio that showshow much investors are willing to pay per unit of earnings.
3. Return on Capital Employed
It is the ratio that measures how well the company is able to utilize its investments.
8. Price/Cash Flow Ratio
This is the ratio of a stock's price to its cash flow per share, an indicator of a stock's valuation.
4. Gross Profit Margin
It is a ratio that indicates the broad measure of company profitability.
9. Price/Book Value Ratio
It the ratio that helps to determine low valued stocks that has been neglected by investors. It is a deterrent to attract investments if this ratio is low. The common result of a low P/BV ratio is a market that may do a downward correction causing eventual negative returns.
5. Net Profit Margin This is the ratio that measures the company’s operating profitability as a percentage of its total revenue.
10. Dividend Yield This is the ratio that shows whether a company pays out most of its earnings in dividends or reinvests the earnings internally.
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Financial ratios are useful for the managers, to current as well as to
potential shareholders and to its creditors. Ratios are also valuable tools to
security analysts when they compare the strengths and weaknesses of the
stocks of various companies. This study further underscored the importance of
financial ratios and their relevance as a metric for firm performance.
Table 10 shows the financial ratios that were used for the purpose of this
study. Some of them have been predominantly used more than the others and
were consistently valuable representation of the economic performance of the
company (Margolis And Walsh, 2007). The addition of ratios in this CSR-FP
study is an attempt to find similar financial metrics that may help reinforce the
posited CSR and Financial Performance relationship that is consistent with
previous studies. Likewise, other ratios may reveal a different type of
significant relationship with CSR when taken separately from the other types
of ratios.
The general significance of the ratios used for the purpose of this study
was identified to show the best fit of these metrics as representatives of the
firm’s financial performance. Ratios were calculated using historic financial
data. However, their value is in the prediction of the firm’s future situation, and
as a tool to create informed decisions. Ratios are guideposts in the future
direction of the firm and part of the roadmap of their actions to achieve greater
economic gains. As to its specific significance when matched with the firm’s
CSR performance is another angle that will be explored in the succeeding
discussions.
2.2.2 Importance of Financial Performance: The Business Case
of Financial Performance
There seemed to be an obsession to justify the other roles of
corporations apart from its financial dictates. The Corporate Social
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Responsibility movement has gained steady momentum and this may be in part
the reason for the new focus on corporate roles. This is not unique given the
wave of new and more encompassing roles attributed to corporations.
However, the use of financial performance to assess company viability has
been on steady ground as that of the existence of a corporation in the economic
landscape.
Financial ratios are the metrics that provide small business owners and
corporate managers with a valuable tool with which to measure their business
progress against predetermined internal targets, against competition or in
relation to the macro industry. For start-ups, tracking of various ratios over a
period of time is a potent means of identifying trends and flaws in the early
stage of their firm’s life. Bankers, investors and business analysts use financial
ratios to diagnose concerns or to assess their situation before making any
financial decision.
Financial Performance in the form of ratios is a critical tool that is only
made more relevant and valuable with financial management experience.
Reading ratios and tracking them over time will make any manager better. In
assessing the financial aspect of firm performance, previous studies have used
either Accounting-based measures of growth such as Return on Assets (ROA),
Return on Sales (ROS), Return on Equity (ROE), or stock market-based
measures like Tobin’s Q and market return (Combs et al, 2005; Hoskisson, et
al, 1994; Hult, Ketchen, Griffith, Chabowski, Hamman, Dykes, Pollitte and
Cavusgil, 2008, as mentioned in Gentry and Wei, 2010).
Of equal importance is the practical value of financial ratios when
financial data is difficult to understand from the perspective of the uninitiated.
As the need for transparency became more pronounced, ratios allowed the
readability of financial performance and the safe presumption of future market
price of the firm. The value of ratios in the CSR and Financial performance
relationship should not be underestimated. The various basis used to assess
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firm performance have been made simpler by ratios that could tell the firm’s
size, the firm’s level of risk, the firm’s investor attractiveness, even the
remaining value of the firm when all of a sudden it becomes bankrupt.
Financial ratios are easier obtained because it is based solely from the two
major information sources known as Balance Sheet and Income Statement,
which are basic corporate documents. In the final analysis, a firm may be
assessed on various bases but none compared to the information that could be
derived from financial ratios.
2.2.3 Arguments Against and In Support of Financial
Performance: Understanding the Value of a Company
The choice of a performance metric is based on the situation being
studied. In the case of corporate performance however, finance is still the main
barometer that would gauge the extent of effectiveness of management
decisions and the efficiency of its resource utilization. Usually, performance
could be a past or previous concept, the value of which are in terms of the
quality of management actions that will be taken in some future time. As a
contextual concept, performance metrics varied from situations to situations
and is only associated with either a good or a bad performance. In the case of
economic rewards, it is financial performance that serves as the compass for
investment directions. It is what shareholders periodically review. It is also the
fuel for further strategic management actions. However, financial performance
is incomplete as a measure of firm performance.
As an entity that exists for a larger public, firms are also reviewed in
other performance barometer besides financial statements. The foregoing
discussion clarifies some of the arguments against and in support of financial
performance as an indicator of a company’s well being.
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Arguments against Financial Performance
Financial performance is not the sole measure of a company’s
effectiveness (Capon, Farley and Hoenig, 1990; Kaplan and Norton, 1992;
Murphy, Trailer and Hill, 1996 and Steers, 1975). Company performance is a
multi-faceted construct, although decisions are still largely hinged on the
financial condition of the company (Cameron, 1986; Chakravarthy,
1986;Venkatraman and Ramanujam, 1987; Kaplan and Norton, 1992 and
Murphy, Trailer and Hill, 1996). Corporate social performance is a
performance metric worth considering as well. As previously mentioned in this
research, the value of a company in the long run is similarly determined by
both financial and non-financial factors.
Depending on the type of industry, immediate financial performance
may fail to factor in opportunities for economic gain that are not readily
ascertained in present time. Capital-intensive manufacturing business is a
classic example. Enormous amount of funds are poured into a new economic
activity that is yet to see sales and profitability. The situational nature of
financial performance that can be seen when one compares the low but steady
growth of sales of mature products to the rapid and extensive sales of an
expensive and unrivalled new product is also another case (Stiglitz, 2008).
Financial performance is by far too multi-dimensional to be the primary
basis of corporate performance (Cameron, 1986; Dess and Robinson, 1984;
Murphy, et al, 1996 and Steers, 1975). Though obtained from the same
financial statements, the salient computations and exact results created
conflicting reactions depending on the sector that would read it. Take the case
of profitability and assets acquisition. When assets are acquired, cash payments
are made and profitability is sacrificed. On the other hand, assets acquisition
could have been the avenue to generate more business. In the same vein, a high
level of cash is not always good when the same idle cash could have been
channeled to profit-generating activities. Meanwhile, a valid reaction is a stock
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price that went up when earnings were declining and vice versa, which
affirmed the varying dimension of the same financial variable. Table 11
itemizes the arguments against the use of financial performance as the sole
measure company effectiveness.
Source: Researcher’s compilation
Financial values representing financial performance can also be in
danger of manipulation. This can happen when unethical practices enter the
picture, and in the desire to attract investors, financial statements are dressed
up and polished. The implication of this kind of assessment is alarming when
one considers the cyclical nature of business. Meanwhile, the structural
deficiency in reporting can also play a critical role in protecting the integrity of
financial statements as a basis of a company’s financial performance.
Likewise, huge financial figures do not always mean sustainable business in
the long run.
In addition, financial performance value is time-sensitive and may not
consider artificial economic situations that may impede the company’s
capacity to achieve financial gain. Financial Performance is more than positive
numbers. Organizational context determines the standards by which financial
performance is measured. If financial performance was to be made
synonymous with value creation, then it must be underscored that value
Table 11 Summary of Arguments Against Financial Performance
- Financial performance is not able to show a complete picture of firm performance
- Financial performance is complicated due to its situational nature
- Financial performance is complicated due to its multi-dimensional nature
- Financial values can be subject to manipulation and improper reporting
- Financial performance is contradicted due to the varying appreciation it can receive
- Financial performance value depends on the time element
- Financial performance is too practical and simplistic to define an organization’s total value
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creation could be both situational and multi-dimensional, that it could be a
matter of taste and is bounded by time. From this simplification, it could also
be said that if financial performance was situational, it could not be the sole
basis for deciding the efficiency of institutions. Take the case of hybrid
organizations, which although expected to be self-sustaining, are not required
to amass great profits for continued existence. The same is true for social-
entrepreneurial organizations whose purpose was to answer to a social concern
while allowing itself to remain profitable as an enterprise.
In the case of large corporations, staggering increases in financial
performance after years of operational stagnation even decay was hardly the
expectation. Likewise a high level of financial performance, which was
followed by a negative profit due to an economic slump, was forgivable.
Financial performance as an indicator of firm performance is also matter of
taste. Depending on the user’s perspective, the value of financial performance
was an angle too many to explore. For instance, passive investors have
different ideals than active investors. While creditors would opt for a good
cash flow, equity investors would go for cash purchases that would eventually
increase the future value of the business. Financial performance can also be
considered as time-bound. The value of money in the past and its prospective
value in the future were entirely different.
Arguments in support of Financial Performance
Profitability is the most important aspect affecting a firm’s growth and
survival. It would seem highly superfluous that corporations would spend
shareholders’ funds without providing some kind of returns. Most researchers
consider increasing the importance placed to financial performance as the key
motivator for firms to become better year in and year out. Performance in a
practical sense denotes that productive assets should be utilized with an
expectation of a return that is acceptable for all (Alchian and Demsetz, 1972;
Barney and Hesterley, 2008; Jensen and Meckling, 1976; Simon, 1976). After
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all, owners of assets are more than willing to use their resources so long as the
reward outweighs the benefits when those assets were used elsewhere.
Consequently, performance was all about value creation, and for corporations
no other value would champion performance results other than financial
performance.
Financial Performance remains to be the single most important practical
measure of a company’s efficient use of resources that were entrusted to them
by people of similar interests. Other sectors might raise an eyebrow in this
highly profit-motivated performance measure but this is the basic truth. In
looking at financial and non-financial measures of firm performance, a
common denominator is value creation. However, value creation or positive
performance is an output that is highly dependent on the provider of resources,
his motivation and his personal standards. Performance could be tangible or
intangible, financial or non-financial, operational or image-based, long-term or
short-term, even upright and celebrated or downright controversial. Table 12
identifies the arguments in support of financial performance as a fair measure
of firm performance.
Table 12 Summary of Arguments in Support of Financial Performance
- Financial performance is an objective measure of a company’s economic well -being
- Financial performance determination can be simplified with the use of ratio analysis
- Financial performance maybe multi-dimensional but it generally comes from only two types of financial statements
- Financial performance serves as the driver for funding other activities that are beyond the core business operation
- Financial performance in the current state is valuable for future economic opportunities
- Financial values are harder to manipulate in the light of current corporate governance requirements
Source: Researcher’s compilation
Ideally, a good financial performance must take into account both the
previous value of money and what the same money could be worth in some
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future period. However, the future value of money was only a prediction based
on current values, and would be tempered by political, economic, legal,
environmental, socio-cultural and technological events that were yet to happen.
Similarly, periods of economic prosperity and economic downturn required a
different set of financial metrics. Depending on the commodities created, some
companies may prefer liquidity over profitability and growth depending on the
period considered. Hence, it could be argued that there are merits and demerits
for using financial performance as the exclusive determinant of firm
performance, both in current and future standpoints.
2.2.4 Metrics of Financial Performance: What Works Well With
Corporate Social Responsibility Relationships
The tool for measuring financial performance seems to have significant
value on the comparability and reliability of CSR-FP results. Of the fifty-one
papers that empirically considered the relations between CSR and Financial
Performance published prior to 1995, there have been eighty different
measuresfor financial performance used, and fifty-seven of these were used by
only one researcher (Griffin and Mahon, 1997). This inconsistency has caused
comparability issues, which has resulted in weaknessin the case of a CSR-FP
relationship (Cochran and Wood, 1984).
Financial Performance by its very nature is more objective and is easier
to measure. It does not have the sampling problems, the culture sensitive
factors or the response biases that are the shortfalls in measuring CSR. It is an
actual account of the financial status of the firm as submitted to government
bodies and presented to shareholder assemblies. It is the reliable information
sought by analysts and investors to justify their advice and decisions. It is the
figure that market will seek to see to inquire about their economic interests on
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a company. It is also the government’s gauge to measure the economic
activities and production velocity of the nation.
Source: Adopted from Margolis and Walsh, 2003
In the study made by Margolis and Walsh in 2001, shown in Table 13,
different measures for assessing Corporate Financial Performance were used.
Evident was the use of two major finance measures, Accounting measures and
Market-based measures. Although other categories of performance measures
such as operational, survival and economic value creation exist, the same are
not used thus far in a CSR-FP relationship study (Carton, 2004; Hofer, 1983).
In as much as measuring financial performance was the simpler task to perform
in a study of this nature, it also presented some meaningful contradictions and
therefore, concerns. The measures, which was either Accounting or Market-
29This was derived from the formula: Return on firm i in period t = R-beta R of i + betaR (McGuire, Sundgren and Schneeweis, 1988) 30Beta is Covance (RiRm) over Variance Rm (McGuire, Sundgren and Schneeweis, 1988)
Table 13 Common FP Indicators according to Margolis and Walsh
Accounting Measures (As an indicator of past performance)
Market Measures (as indicator of future performance)
Measure # of studies where used
Measure # of studies where used
Return of Equity (ROE)
31 Alpha (Return in excess of that due to general market movements)29
8
Return on Assets (ROA)
28 Beta (covariance of the firm’s stock-market returnrelative to the return of the stock market, standardizedby stock market return variance derived from the market model equation)30
8
Return on Sales (ROS) 13 Cumulative Annual Returns
7
Debt / Equity (e.g. Risk)
6 P/E Ratio 7
Current Ration (e.g. Risk)
4 Total Returns 6
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based both presented different theoretical underpinnings and appreciation
biases that led to the use of either metrics a matter of taste for the researchers.
Various studies took into account the relationship of CSR and Financial
Performance using the Accounting metrics (Graves and Waddock, 1994;
Graves and Waddock, 2000; Cochran and Wood, 1984) whereas others used
the Market-based metrics (Vance, 1975). Still a few adopted both metrics in
their studies (McGuire, et al 1988). Studies that utilized more than the most
commonly used measures for financial performance (Griffin and Mahon, 1997,
Hillman and Keim, 2001;McGuirre et al, 1988) was therefore hoped to provide
the most comparable results.
It must be emphasized at this point that Accounting measures were at its
best when mirroring corporations’ past performances. However, it should not
be discounted that in an imperfect world these same measures could be
subjected to management manipulations (McGuire et al, 1990). On the other,
Market-based metrics looked into the company’s future performance. It was a
relevant measure for investors since it predicted the firm’s ability to generate
future income, all other things constant (McGuire et al, 1988). Although not
freed of impediments, Market-based measures give the indication that a
valuable firm on the point of view of investors is a firm that performed well in
previous accounting periods (McGuire et al 1988; and Ullmann, 1985).
In theory, Accounting measures reflect the past and short-term financial
performance of the company while market-based measures reflect the future or
long-term financial performance of a company (Hoskisson et al., 1994; Keats
and Hitt, 1988 as mentioned in Gentry and Wei, 2010). Accounting and
market-based measures were justifiable basis of a company’s financial
performance. This was to be the case despite the presence of debates about the
conflicting relations exhibited in a number management research, specifically
in looking at degree of relations (Chakravarthy, 1986; Combs et al., 2005;
Keats, 1988; Murphy, Trailer and Hill, 1996; Richard et al., 2009; Rowe and
Morrow, 1999 as mentioned in Gentry and Wei, 2010).
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Some metrics that were used to represent the economic performance of
firms in similar CSR and financial performance relationship studies is
presented in Table 14.
Table 14 Summary of Ratios Used to Represent Financial Performance in CSR-FP Studies
Study Financial Performance Variables Used 80’s Chen and Metcalf, 1980 Return on Equity, Price to earnings ratio, total
risk and beta Kedia and Kuntz, 1981 Income before security gains/losses and
taxes/total assets Freedman and Jaggi, 1982 and 1986 Return on Assets, Return on Equity, Cash
Flow/Assets, Cash Flow/Equity, EBIT/Assets and EBIT/Equity
Ingram and Frazier, 1980 and 1983 Factor analysis of forty eight Accounting Ratios Cochran and Wood, 1984 Earnings/Sales, Earnings/Assets and Excess
Market Valuation 90’s Roberts, 1992 Return on Equity, Beta coefficient, Debt to
Equity Johnson and Greening, 1994 Return on Equity Blackburn, Doran and Shrader, 1994 Return on Assets, Earnings per Share, Excess
Market Return Waddock and Graves, 1997 Return on Assets, Return on Equity, earnings per
Share Berman, Wicks, Kotha and Jones, 1999 Return on Assets 2000’s Orlitzky, Schmidt and Rynes, 2003 Return on Assets, Return on Equity and Earnings
per Share Brine, Brown and Hackett, 2006
Return on Assets, Return on Equity, Return on Sales
Montabon, Sroufe and Narasimhan, 2007 Return on Investment and Sales Growth Chih, Shen and Kang, 2008 EBITDA Lin, Yang and Liou, 2009 Return on Assets 2010’s Karagiorgos, 2010 Stock Returns and Tobin’s Q Kang, Lee and Huh, 2010 Return on Equity, Return on Assets, Price to
Earnings Ratio and Tobin’s Q Inoue and Lee, 2011 Profitability Ratios Tang, Hull and Rothenberg, 2012 Return on Assets and R&D costs Wu and Shen, 2013 Return on Assets, Return on Equity, Gross Profit
Margin and Net Profit Margin Gruener, Gutsche and Schulz, 2014 Stock Returns Johansson, Karlsson and Hagberg, 2015 Return on Assets and Tobin’s Q Khan, F., Rahman, M. M., Ullah, W. M. and Tanu, T. M., 2016
Return on Assets, Return on Equity, Earnings per Share
Source: Researcher’s updated compilation and modified from Capon, Farley and Hoenig, 1990 and Ullmann, 1985
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In an article that expounded on accounting and market-based measures
as signs of the financial performance of a firm, a non-relational indication was
implied due to the metrics’ conflict in achieving short-term and long-term
economic targets (Venkatraman and Ramanajun, 1987). Meanwhile, there was
also a doubt that both measures could be treated as equivalent and
interchangeable given an insufficiently low level of relationship (Combs et al.,
2005; Richard et al., 2009; Johnson and Greening, 1999). Initially, researchers
focused on the relative strengths and weaknesses of each group of measure.
When market measures were first used, the attention of finance theorists were
called in order to consider the underlying assumption of stock market
efficiency. Technically, the firm’s stock price is not necessarily based on its
fundamental value because it is still predisposed from the information that
managers choose to share with its investors (Thomas, 2001; Gentry and Wei,
2010).
However, this research does not delve on this disconnect as it took both
accounting and market valuation measures as the computable and determinable
value of financial performance. Specifically, the financial metrics that were
used in this study were ten ratios that show profitability and market value of
the companies. These relevant ratios were reviewed and compared, while
considering the industry type of business, the size of the business and other
specific information that may be noteworthy to consider in the light of a CSR
and Financial Performance relationship study.
For the purpose of this segment of the study, only the financial basis of
corporate performance will be expounded, that is, Accounting and Market-
based. Under Accounting measures, discussion will revolve around common
profitability ratios, management efficiency ratios, growth ratios and valuation
ratios. There are various types of financial ratios and they vary in purpose.
Financial ratios quantified many aspects of a business and are integral part of
financial statement analysis. Likewise, financial ratios are categorized
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according to the financial aspect of the business that the ratio measures
(Brigham and Houston, 2014).
By and large, Accounting textbooks identify the following ratio
classification and types as: a) Profitability Ratios, i.e. Gross Profit Margin,
Operating Margin or Return on Sales, Net Profit Margin, Return in Equity,
Return on Equity Du Pont, Return on Assets, Return on Assets Du Pont,
Return on Capital, Return on Capital Employed, Risk Adjusted Return on
Capital, Return on Invested Capital, Cash Flow Return in Investment,
Efficiency Ratio, Net Gearing and Basic Earnings Power Ratio; b) Liquidity
Ratios i.e. Current Ratio, Acid Test Ratio, Cash Ratio and Operation Cash
Flow Ration; c) Asset Management/Activity or Efficiency Ratios i.e. Average
Collection Period, Degree of Operating Leverage, DSO Ratio, Average
Payment Period, Asset Turnover Ratio, Stock Turnover Ratio, Receivables
Turnover, Inventory Conversion Ratio and Period, Receivables Conversion
Period, Payables Conversion Period and Cash Conversion Cycle; d) Debt
Management or Leveraging Ratios i.e. Debt Ratio, Debt to Equity, Long-term
Debt to Equity, Times Interest Earned and Debt Service Coverage Ratio; and
finally, e) Market Valuation Ratios i.e. Earnings per Share, Payout Ratio,
Dividend Cover, Price/Earnings Ratio, Dividend Yield Ratio, Price to Cash
Flow Ratio, Price to Book Value Ratio, Price to Sales Ratio, Price Earnings
Growth Ratio, as well as Enterprise Value to EBITDA, Enterprise Value to Net
Sales and Cost to Income Ratios. In addition are Enterprise Value to Capacity
and Enterprise Value to Output, both sector-specific ratios.31
Meanwhile, presented in foregoing discussion are the types of
commonly used ratios and their corresponding importance. This research limits
itself to the use of ten ratios that shows a company’s performance in
profitability and market valuation as a measure financial performance. These
31 Fundamentals of Financial Management, 14th ed. By Brigham, E. and Houston J. 2014. Philippines, Cengage Learning Asia (Publisher) and Cornett, M.M., Adair, Jr. T.A. & Nofsinger, J. 2015. Finance Applications and Theory. (3rd ed.) New York, NY: McGraw-Hill Education.
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ratios were defined, given its formula and explained as regards its relevance in
the CSR and FP relationship in this research.
Profitability Ratios
Profitability ratios indicated how well the company was able to funnel
back resources that were utilized in the course of business operation. Equally
valuable as information for decisions in small businesses, profitability ratios
nonetheless remains to be the general measure for overall firm performance.
This study utilized Return on Assets, Return on Equity, Return on Capital
Employed, Gross Profit Margin, Net Profit Margin and Earnings Per Share for
the ratios that provided profitability status.
Return on Assets indicates how effectively the company was in
deploying its assets. ROA, which was widely used by market analysts as a
measure of firm performance and measured how well management have
employed its assets. This ratio spells the efficiency of assets in producing
income. A high ROA is usually indicative of sound management. However,
this can be distorted by depreciation or by any other unusual expense. ROA as
an indicator of whatever earnings were achieved from the use of invested
capital vary substantially on the type of company and could be also dependent
on the type of industry.
It is of value therefore if the ROA of the companies in the sample will
be clustered per industry to verify such variation, and its corresponding
relationship with CSR as a financial performance indicator. Likewise, if ROA
can be distorted by Depreciation, then a company that does not keep as much
of fixed assets as they want as a matter of business operation like the case of a
financial company, and yet be able to perform greater social interaction as a
service provider. This would result to a different ROA effect on CSR when a
relationship between the two is considered. Fundamentally, ROA tells the
returns a company gets for every amount of assets that was invested (Palepu et
al., 2010).
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As an indicator of the profits made by the company with the investors’
funds, Return on Equity is a good measure to create contra comparison with
other industry situations. As a financial performance measure used in relation
to CSR, ROE can be an indicator of how well a company is living up to its
shareholder responsibility, an aspect of good corporate governance practice. In
addition, ROE provides flexibility of measure to aid investor decision-making.
This would balance off extreme situation in a company’s fiscal-long operation.
A two-period shareholder’s equity could be used to compare the change in
profitability over time. This is a more valuable data for investors to consider.
High growth companies are deemed to have higher ROEs and are
therefore more likely to have invested in reputation capital in the past.
Likewise, it would have the willingness to sustain its financial competence by
spending for CSR in subsequent years. As a financial metric that may relate
positively with CSR, ROE could indicate the inclination of a company or an
industry for that matter to continue showing its strong presence and
involvement in ESG initiatives.
Return on Capital Employed or ROCE identifies the level of company
efficiency for profit generation and in allocating the capital that is placed under
its disposal. Since it accounts for long-term financial figures, it is a better
indicator of profitability than Return on Equity. However, it is difficult to
ascertain to whom returns could be attributed to since these returns may come
from either a windfall in foreign currency earnings or from a one-time
transaction that is highly profitable. As a metric of financial performance
positively related to CSR, a high ROCE can come from a huge project that
created so much social acceptance and with hardly a guarantee of continuity or
replication. Studying the specific industry-affecting scenario might explain
why high ROCE could be exhibited by some sectors more than the others.
Gross Profit Margin, a metric to determine a firm’s financial soundness,
bares the proportion of money that is left over from revenues after imputing the
cost of goods sold. It is utilized to pay for additional expenses and to be used
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as buffer for future savings. Gross Profit Margin would be the source of funds
for prospective company build-up. Gross Profit Margin is not expected to
fluctuate from period to period. However, it but could be affected if the
company is present in an industry that is in extreme situation that may induce
change in pricing policies or in the cost of goods sold.
It is therefore valuable to look at Gross Profit Margin as a financial
performance indicator in highly volatile industries and if the company is
operating in an economy that is undergoing unusual economic situation.
Highly competitive companies have high Gross Profit Margins, and can
therefore afford to spend on CSR work to remain its market advantage.
Likewise, if related to CSR performance, it is hardly expected that a company,
which could not pay its operating expenses would still insist on building its
future through expenses in reputation capital.
Net Profitability Margin shows management effectiveness in ensuring
operating profitability. This financial metric allows investor to have a clearer
perspective about the core profitability of the company. Since a higher Net
Profit Margin indicates that operating expenses do not take the profit prospect
out of the revenue, it is a good indicator of resources available for future CSR
funding needs. A profitable situation can be sustained when management
decided to spend subsequently on reputation-enhancing and therefore sales-
increasing activities.
Market valuation ratios
These ratios take into account the view of investor confidence based on
the company’s propensity to earn. For the purpose of this research, the metrics
that would be looked into are as follows: Price/Earnings Ratio, Price/Book
ValueRatio, Earnings Per Share, Price/Cash Flow Ratio and Dividend Yield.
Price to Earnings Ratio or P/E computed as Market Value per Share
over Earnings per Share valuated the ratio of earnings or price multiple.
Generally, a high P/E is indicative of the projection of investors of higher
earnings. When compared in an intra-industry situation, this ratio would be
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valuable in determining why some investors are more attracted to invest in one
company compared to others. As a metric of financial performance to
positively relate with CSR, a high price to earnings ratio could be an indicator
that the firm is not losing money. With this as the case, the company has the
capability to invest in socially responsible undertakings in the future, if it has
not yet done so. Moreover, a high price to earnings ratio showed investor
confidence in the company. Since it was based on Accounting figures, which
could be manipulated, a substantial degree of integrity in the declared earnings
must be required.
Price to Book Value Ratio or P/B Ratio is also known as price-equity
ratio. It is determined by current closing price of the stock divided by the latest
quarter’s book value per share. Fundamentally, it compares a stock’s market
value to its book value. As an indicator of investor situation, it signifies the
point when more was paid than what the value of the stocks would be if the
company declares immediate bankruptcy. Varying from industry to industry, a
lower P/B ratio meant that a stock is undervalued, or something is
fundamentally wrong with the company. As a financial performance metric
that could be positively related to CSR, a high price to book value ratio
indicated strong investor confidence and buying attraction of company stocks.
This meant good prospects for the company’s planned and current CSR
programs, the success of which will further push the value of stock prices.
Earnings Per Share or EPS denotes the part of the company’s profit
that is allocated to each outstanding share of common stock. It is computed as
Net Income less Dividends on Preferred Stock over Average Outstanding
Shares and indicates the company’s profitability. As a profitability measure
positively related to CSR performance, EPS would be a good indicator of the
value of the share price that pertained to the efficiency of the company. This
efficiency would allow the company to engage in profitable undertaking for the
benefit of its stakeholders. A high EPS must be sustained over a longer period
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of time. This could only be done with continuing commitment to the needs and
expectations of the various sectors that lay claim to the company’s success.
Price to Cash Flow ratio, which is computed as Share Price divided by
Cash Flow per Share, indicates the value of the stocks. It gives a picture of a
stock’s overvaluation or undervaluation considering that some stocks have
positive cash flow but was not profitable due to large non-cash charges. This
ratio shows the difference between the positions of a new but high growth
company and a stable but slow growth company. The former gets a higher
valuation than the latter. This information shows the level of maturity of a
company or an industry.
As a financial performance metric that could be positively related to
CSR, a high Price to Cash Flow ratio reiterates the potential of a young,
dynamic and high growth company to start early in the strategic CSR process.
Having more interested investors, the higher valuation these investors gave
could be a reflection of their trust on the sustainability efforts that the company
can perform. When started earlier, these sustainability efforts would result in
the early pursuits of CSR steps that would be taken in the right direction.
Dividends Yield is a financial ratio that shows the company’s pay off on
its dividends on a yearly basis relative to its share price. It is the return on
investment for a stock in the absence of any capital gain and computed as
Annual Dividends per Share/Price per Share. As a financial measure that
shows the earnings of investors in the form of dividends, this ratio when
positively related to CSR underscores the importance of overall corporate
performance in predicting future stock value. A high dividend yield would
attract more investors. One reason for a high dividends yield is the good image
that was created when a company became more reputable in the perspective of
society. As a corporate governance indicator, a good dividends yield denotes
the company’s persistent drive to attain the satisfaction of investors and other
stakeholders.
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In summary, each of the ten financial metrics has a valuable role in
explaining the previously posited positive relationship of Financial
Performance with CSR performance. All the selected ratios could explain to a
certain degree the profitability and valuation pattern of a company. This pattern
could be true in the industry where the companies belong, or in the general
situation of a country or the region. The ratios were computed using financial
statement items that accounted for the cost of doing sustainable business
actions in the environment, society and governance parameters of an efficiently
operating business.
Superficially, ratios could also appear as mere reinforcement of results
in either profitability or stock valuation. However, with an in-depth
examination, ratios could individually reveal an industry-specific
distinctiveness. This area of distinctiveness might affect the positive relations
between financial performance and social responsibility. The specific industry
characteristics might explain the difference between the success and the
struggle in some of the CSR activities of the companies being studied.
Therefore, these results might create a strengthened explanation about some
aspects of good corporate governance in the region.
2.2.5 Summary: Financial Performance in Relation to CSR
Performance
Financial performance could no longer exist in a vacuum. The argument
is that companies that reported financial performance properly would earn the
trust and confidence of the public. Likewise, a company that reported its CSR
performance will experience increased profits. Those companies that do not
report any CSR activity would suffer adverse effects on financial performance.
It is viewed that by showing more information, a company is showing
investorsand the general public that they are trustworthy. Proper accounting
and financial reporting denotes that a company has nothing to hide, and is
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comfortable explaining where their problems are. Ethical investments thus
follow.
This would mean proper investing in environmentally sound practices or
investing in areas that will boost human capital productivity may ensue. CSR
work may be argued as something driven by financial motivation but CSR
cannot exist without funds to fuel it. The beginning of extended social
involvement took place when the capacity of a firm to earn from the products
and services it created came as a result of sustained public patronage.
Results of decades of CSR and FP relationship studies provide insights
on the direction that new researches should take. It shows that the common
CSR representation is still the CEP index, Carroll’s construct and Moskowitz’
criteria and KLD Index. It underscores that reputational rating made by third
parties are reliable and objective measures of social performance. Financial
ratios used were inclined on Return on Assets, Return on Equity, Return on
Sales, Earnings Per Share, and with a few on abnormal returns.
Table 15 clarifies this assertion in more detail. In this summary, one can
see that results of significant relationship vary from positive, to neutral,
negative and mixed. Out of the more than twenty studies compiled in close to
five decades of search of a CSR and Financial performance relationship, more
than fifty percent revealed positive relationship. This proves the extent of
variable agreement that CSR and financial performance tends to reinforce each
other. It also indicates to a certain extent that CSR can be a cause for a good
financial performance, or that a good financial performance is a driver of
extensive CSR performance. Finally, these results strengthen the initially
posited view that in the understanding of good Corporate Governance, both
performance measures are valuable and relevant.
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Table 15 Compilation of Empirical Studies on CSR-FP Relationship in Decades
Researchers/Year CSR Representation FP Representation Type of Significant
Relationship 70’s Bragdon and Marlin (1972); Bowman and Haire (1975); Fogler and Nutt (1975); Sturdivant and Ginter (1977); Alexander and Buchholz (1978); Spicer (1978); Conine and Madden (1978)
CEP Index (3x); CSR construct of Carroll and CEP Index; Moskowitz’s Reputation Index; Erdo’s and Morgan’s corporate reputation survey
Earnings per Share Growth (2x); ROE (2x), Return on Capital; Price/Earnings Ratio; Market return on security
(+)=6 N = l
80’s Cochran and Wood (1984); Aupperle, Carroll and Hatfield (1985); McGuire, Sundgren and Schneeweis (1988); Freedman and Jaggi (1982); Freedman and Jaggi (1986)
Moskowitz’s Reputation Index; Carroll’s CSR construct; Fortune Index; Pollution Disclosure Index
Abnormal return; ROA (3x) Perceptual survey; ROE; Sales Growth and Assets Growth
(+) = 3 (-) = 1 M = 1
90’s Fombrun and Shanley (1990); Blackburn, Doran and Shrader (1994); Preston and O’Bannon (1997); Waddock and Graves (1997); Boyle, Higgins and Rhee (1997); Berman, Wicks, Kotha and Jones (1999); Teoh, Welch and Wazzan (1999)
Pollution Disclosure index; Charitable contributions, Fortune Index; Divestment from South Africa; CEP Index; Event Study; Fortune Magazine Ratings; KLD Index (twice)
Return on Invested Capital and Market to Book Ratio; Abnormal Returns (2x); ROA (2x); ROE; ROS; Earnings Per Share; COMPUSTAT ratios
(+)=4 (-)=1 N=2
2000’s McWilliams and Siegel (2000); Simpson and Kohers (2002); Orlitzky, Schmidt and Rynes (2003); Tsoutsoura (2004); Fauzi and Idris (2009)
KLD Index (2x); Domini Index; Community Reinvestment and Compliance; Jantzi Research Inc. Results;
ROA (5x); Ratio of loan assets to total loans; ROE (3x); ROS (2x);
(+)= 3 M= 1 N= 1
2010’s Yang, Lin and Chang (2010); Karagiorgos (2010); Inoue and Lee (2011); Tang, Hull and Rothenberg (2012); Lee, Singal and Kang (2013); Mallin, Farag and Ow-Yong (2014); Gruener, Gutsche and Schulz (2014); Johansson, Karlsson and Hagberg (2015)
ARESE method of France; GRI Guidelines; Voluntary Disclosure (2x); CSR Dimension; Quality of CSR Report; KLD Index (2x)
Company size using total assets; Stock Returns (2x); Profitability Ratios (2x); Consumer Spending; Supervisory Board Size; Stock Returns
(+) = 4 (-) = 1 M= 3
Legend: (+) = # pertains to number of positive relationship (-) = # pertains to number of negative relationship M = # pertains to number of mixed relationship N = # pertains to number of neutral relationship Source: Researcher’s Compilation
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To emphasize this argument further, a total of eighty companies were
studied for this research. These are the companies that consistently appeared in
the highest twenty slots in each country’s top 100 corporations for the 10-year
period that was considered. Although the companies belong to diverse industry
types, they were purposely categorized only as either services or
manufacturing for ease of data administration. In this study, two different types
of firm performance measures were used namely Corporate Social
Responsibility performance and Financial Performance.
This paper seeks to posit the 1997 work of Preston and O’Bannon called
Positive Synergy32 between Financial Performance and Corporate Social
Responsibility, represented by ten ratios and ten CSR scores respectively.
Corporate Social Responsibility (y) = f (Financial Performance x) and
Financial Performance (y) = f (Corporate Social Responsibility x). The same
positive relationship is assumed when CSR performance is driven by good
financial performance. Most of the researches that were previously conducted
have used regression analysis and Granger causation. This research followed
the same empirical methodology used in the more recent work of Tsoutsoura
(2004).
Justification of financial performance indicators used with Corporate Social
Responsibility
The financial data was derived from an access permit to Thomson One
Banker Analytics. 33Assuming its accuracy as a platform to obtain a data
backed rating for informed investment decisions, the ratios provided in this
database were no longer manually checked by the researcher. The choice of
financial ratios used in this study was in cognizance of some of the variables
used in previous researches in the area of finance and social performance
32 The Positive Synergy proposition was previously established in the works of Preston and O’ Bannon (1997). 33Thomson One Banker Analytics on-line access was obtained through a university library-permitted access. This access provided the researcher with the financial ratios used for the study. Thomson One Banker Analytics provides ratios for more than 38,000 companies worldwide. The website for Thomson One Banker Analytics for any normal information can be found at http//www.thomsononeim.com/
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relationships. It should be emphasized that this study does not aim to find a
new ratio by which to establish a stronger relationship between CSR and FP.
Rather, it only seeks to strengthen the rationalization for the use of profitability
and market valuation ratios, this time however on companies that were
performing well in the Southeast Asian region. The ratios that were used in this
study have already made substantial coverage in researches that revealed how
financial performance is linked to a company’s commitment to ethics
(Verschoor, 1998), how the careful management of risks and returns can lead
to further financial growth (Fama and French, 1993), how value and long term
growth are interrelated (Fama and French, 1998) and how stock values are
enhanced whenever social responsibility is not put on the sidelines of corporate
motivations (Fogler and Nutt, 1975).
The use of ratios as measure of financial performance was considered
with both its limitations and practicality. It should be reiterated that only
profitability and market valuation ratios were used for this study. Liquidity,
debt management and asset management ratios were not considered as
financial performance variables in this study. Likewise, this study does not
take into account the compatibility of accounting measures with market
valuation measures as determinant of financial performance. This paper does
not suggest that these two classifications of measures were interchangeable or
even equivalent. Nor thus this paper suggests that these measures could be
treated as a single dimension construct of firm performance (Combs, Crook
and Shook, 2005; Keats, 1988; Richard, Devinney, Yip and Johnson, 2009;
Rowe and Morrow, 1999 as mentioned in Gentry and Wei, 2010). It should be
underscored that the ratios were chosen as metrics of financial performance for
uniformity of basis and ease of comparison. Financial statements considered in
the derivation of ratios were expressed in the country’s local currency.
The companies considered in this study have presented their financial
statements within the requirements of the International Accounting Standard
that used both presentation and functional currencies. In understanding the
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definition, relevance and functionality of presentation and functional
currencies, a simplification of measurement is achieved. Although it is normal
to have financial statements in the form of functional currency, ease of use is
achieved when the presentation currency or the currency in which the financial
statements are presented is utilized instead.
Justification of Corporate Social Responsibility performance indicators used
with financial performance
Corporate Social Responsibility meant many things to different sectors
and industry players. Globalization has underscored the multidimensionality by
which CSR can be performed, rated and evaluated (Boatright, 2000). Records
show that more than half of the companies in Global 1000 produced an
environmental, social or sustainability report starting 2003.34 Moreover,
majority of company websites contained presentations on specific activities
related to CSR and sustainability. The scoring used in this study to determine
CSR performance was also cognizant of techniques recently used in researches
to measure CSR. It also took into account the regularly asked questions
regarding CSR activities, characteristics, regulation conformities, statutory
components and recognition characteristics, based on the example made in the
Philippines by the League of Corporate Foundations when it published the
work entitled CEO Perspectives on Corporate Social Responsibility in2006.35
This study helped in the determination of the differences in the companies’
CSR performance in component representation over a period of ten years.
The yearly CSR data considered for this study was determined using
content analysis of available public documents, media releases, corporate
websites, business environment updates and responses of company
representatives in web-based surveys and interviews that were analyzed to 34The World’s Biggest Public Companies, 2015. Forbes List, http://www.forbes.com was also the publisher of Global 1000. 35The difficulty in obtaining a single source and the differences in CSR score determination of available sources resulted in the assumptions made by the researcher to determine the CSR score of the companies in Southeast Asia that were used in this study. CEO Perspectives on Corporate Social Responsibility published by the League of Corporate Foundations in 2006 provided a helpful framework for the web-based data gathering performed by the researcher for this study. http://www.lcf.org.ph
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validate their responses. The sensitivity of public interpretation to the results of
third party assessment of CSR performance made on corporation was a good
reason for the researcher to determine corporate social performance as a
disinterested entity using the contents of the companies’ voluntary and
compliance documents (Wolfe, 1991). The careful analysis of corporate
documents when done within the acceptable and guided parameter is an
objective way by which to identify the state of affairs of the business in both
social and financial standpoint. Table 16 shows the articulation of the specific
CSR indicators used in this study.
Table 16 Corporate Social Responsibility Performance Measures
Year Representation Data Type 1 – 2006 Ownership type 2 – 2007 Environmental effect 3 – 2008 Corporate Philanthropy 4 – 2009 Presence or Absence of a Code of Conduct 5 – 2010 Status in the Global Reporting Initiative 6 – 2011 Status in the UN Global Compact 7 – 2012 Discussion of Good Corporate Governance 8 – 2013 Discussion of Corporate Social Responsibility 9- 2014 Publication of a Sustainability Report
10 – 2015 Received CSR or GCG Awards/Recognition Source: Based on researchers’ articulation of various CSR performance indicators from the viewpoint of Philippine CEOs, the World Business Council for Sustainable Development and the Commission of the European Communities.
The components of CSR were determined through a scoring modality
similar to the 5-point Likert-type scale developed by Ruf et al in 2001 that
assigned equivalency scores between 2 and -2, denoting major strength,
strength, indifferent, weakness and major weakness. For the purpose of this
study, scores were assigned as percentage equivalent of the degree of presence
or absence of the factor, ranging from 20 to 100 points. This was made by
assigning scores to denote, an absence, a slight presence, a moderate presence,
a high presence or a very high presence of pre-determined CSR indicator
during the year. The identification of the CSR indicators was based on the
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results of the survey conducted among the CEOs in the Philippines as regards
their perspectives on Corporate Social Responsibility and the highlights of the
mandate of both the World Business Council for Sustainable Development and
the Commission of European Communities.
The Corporate Social Responsibility performance of year 1 or 2006 was
made through the determination of a company’s ownership structure. The
company’s culture of stakeholder interaction is influenced by the owner’s
culture and the extent of their organizational control and motivations
(Astrachan, Klein and Smyrnios, 2002). The distinguishing factor was whether
the company was majority family-owned and/or controlled with the score of
60 or highly publicly owned with the score of 100. Publicly owned firm has a
wider stakeholder group, hence has more expansive CSR requirements and
expected CSR work and responsibilities. Given that social performance in
Southeast Asia is not clearly measured prior to this research, the initial basis is
the type of business ownership (Smyrnios, Tanewski and Romano, 1998).
Corporate Social Responsibility responses could be presumed to be
higher among companies that are family-owned. This presumption comes
when one considers the risk involved for the family name that will be put on
the line whenever a negative event involving their company hits the news.
However, highly publicly owned firms are also presumed to be under greater
public scrutiny. It cannot hide its negative situation from the prying eyes of its
various stakeholders. It is therefore more compelled to perform far better than
family-owned companies in both social and environmental terms.
The Corporate Social Responsibility performance of year 2 or 2007 was
determined by examining whether the companies being studied have direct or
indirect environmental effect. A company that exhibits a direct environmental
effect is given a minimum score of 20 and a maximum of 100. The risk on the
environment is true for extracting companies. Based on the nature of its
business operations and processes as shown in corporate publications, the
researcher was able to assign scores reflecting minimal or maximum effect on
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the environmental each sample company exhibited. This rating is consistent
with the earlier study of Bowman and Haire where an inclination to measure
corporate social performance simply on quantity or quality of pollution
disclosure or pollution performance was already taking place (1975). This
factor for CSR performance was included in response to the seeming
insufficiency of attention given to the environmental disclosure as indicated in
corporate annual reports (Wiseman, 1982)
The Corporate Social Responsibility performance of year 3 or 2008 was
made through the determination of performed corporate philanthropic
activities. The extent of corporate philanthropy outlines the CSR direction of
a company. It serves as the catalyst for further initiatives that will affect the
society besides the pursuit of the organization’s core business (Seifert, Morris
and Bartkus, 2003and Seifert, Morris and Bartkus, 2004). From a score of 100
depending on the number of reported donation and donation-related activities
to a score of 20 for those that did not report any donation as a CSR-related
activity. It is assumed that this determination was a valid basis for CSR
performance given that corporate giving is the beginning of CSR practice.
The Corporate Social Responsibility performance of year 4 or 2009 was
the presence or absence of a identified conventions such as Code of Conduct
or Code of Ethics as indicated in the company’s website. A score of 100 is
given for a company that has its Code of Conduct or Code of Ethics clearly
articulated in its web publication or a score of 20 when there is no mention at
all of this item. This manner of scoring is done in the assumption that even
before Corporate Social Responsibility could be performed it is imperative
that the company was able to communicate the owner’s values and principles
when it outlined the big picture of business operation (Gil Estallo, Giner- De
la Fuente and Griful-Miquela, 2007). This is corollary to the CSR performance
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method applied in the earlier studies made by Fry and Hock in 1976 on
disclosure or non-disclosure.36
The Corporate Social Responsibility performance of year 5 or 2010 was
determined through the identification of a company’s adherence to the Global
Reporting Initiative or GRI. The universality of GRI and the diversity of the
factors considered in its rating make it a good indicator of CSR performance
(Kramer, Pfitzer, and Lee, 2005). Using the company reports of 2010, a score
of either 100 or 20 is given when the company has reported or has not reported
in the GRI. This is assumed to be a fair basis of scoring and a measure of a
company’s CSR performance since the GRI index is known to have universal
applicability.37
The Corporate Social Responsibility performance of year 6 or 2011 was
determined through the company’s status in the United Nations Global
Compact. A score of either 100 is given when a company has applied or has
claimed to use the standards identified in the UN GC or a score of 20 when a
company has not made mention at all of any corporate activity that aimed to
adhere to the parameters of the UN GC. The United Nations Global Compact
is the largest voluntary reporting plan. Human rights, labor, environment and
anti-corruption performance of corporations are integrated in the reports
submitted by corporations. These reports are tantamount to adhering to the
mandate of the United Nations to transform business as an agent to pursue
societal good.38
The Corporate Social Responsibility performance of year 7 or 2012 was
determined with an identification of a discussion on Good Corporate
Governance in the company’s website. The CSR Monitor published by the 36As a new region of study, it is best that the ascertaining of CSR performance in Southeast Asia begins with the determination of salient CSR features in its program and frameworks. 37The GRI rating made in 2010 already included Indonesian companies, a practice that was not yet made in 2008 when data collection for the Asian Sustainability Rating was started. The GRI was formed by the US-based CERES with the support of the United Nations Environment Programme in 1997. It released the Sustainability Reporting Guidelines in 1999 with its first full version in 2000. The second version was released at the World Summit for Sustainable Development in South Africa. Although independent, GRI maintains collaboration with UNEP and cooperates closely with the United Nations Global Compact. http://www.globalreporting.org 38The 30th year of UN Global Compact which was succesfully celebrated in June 2015 at the United Nations HQ in New York is a testament of the initiative’s impact in the way corporations are being run in the current milieu.
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Business and Sustainable Development in 2001 reiterates the importance of
promoting a financial and CSR performance balance. The overall stock
performance of a company as a financial measure being affected by its CSR
work is a valuable justification of including the good corporate governance
principles of a company in the assessment of their performance (Fogler and
Nutt, 1975). A score of 100 is given when a company explicitly discussed
Good Corporate Governance in its website. A score of 20 is given when its
website has no mention at all of good corporate governance practice. A score
of either 40 or 60 is given when there is presence yet limited communication
of good corporate governance practices. This scoring was made in the
assumption that every company strives to show integrity in its business
dealings. The presence of good corporate governance practices in the
company’s public literature is a necessary step towards greater transparency
and a measure of accountability to stakeholders.
The Corporate Social Responsibility performance of year 8 or 2013 is
through the determination of the presence of a direct discussion on
sustainability in the company’s website. Business drill presupposes the need
to attain satisfaction by all of the company’s stakeholders. As early as the
seventies when the role of a corporation was given a concrete definition, the
other function of this entity has already include the performance of activities
that promotes the general welfare of the society where it operates (Eilbirt and
Parket, 1973). The overall economic importance of a company is significantly
affected by its exercise of CSR practices. In effect, CSR is a factor that
contributes to the value of a company to all of its stakeholders (Mittal, Singa
and Singh, 2008). A score of either 100 is given when there is extensive
mention of CSR in the company’s website. Meanwhile a score of 20 is given
to a company when there is no mention at all of anything that has to do with
CSR in its web publication. This scoring process was assumed to be fair since
it is the company’s website which is the most available document to
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communicate a company’s CSR framework. The website is also an important
tool for rating entities to validate or negate a company’ CSR claims.
The Corporate Social Responsibility performance of year 9 or 2014 was
determined though the identification of a published Sustainability Report by
the company. It should be noted that this is made distinct from the Global
Reporting Initiative or GRI, which gives a fairly similar report on economic,
environmental, social and governance status of a company (Maignan and
Ferell, 2003). The inclusion of this factor amplifies the value of sustainability
reports in the creation of an inclusive barometer for determining a company’s
performance. Not all the companies in the region utilizes the GRI platform for
their reports, however, they post their own version and style of sustainability
report in their websites. A score of 100 versus 20 is given when there is a
presence or absence of a company issued Sustainability Report. This scoring is
assumed to be fair because the publication of a Sustainability Report is already
prevalent in the large corporations, which was generally the coverage of this
study.
The Corporate Social Responsibility performance of year 10 or 2015
was determined through the identification of a recognition received by the
company pertaining to outstanding achievements in either CSR performance
or good corporate governance practice. Although there are critics of
sustainability awards, the validation provided to the good work of a firm by a
multi-sector awards jury is something worthy of consideration too. The
scoring for this component of CSR performance does not differentiate a local
regional from an international nature of an award. Nor thus this component of
CSR qualifies if the company applied for the award or if the award was
bestowed to the company through a third party nomination. A score from 20 to
100, depending on the number of national or international award received by
the company becomes the basis of this scoring. This scoring is assumed to be
fair since to be given an award by a third party is an affirmation of the
company’ performance in CSR and good Corporate Governance. The
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adherence of companies to quality standards, which eventually gave them the
recognition, is a positive sustainability statement particularly in service
industries (Robson and Mitchell, 2007).
The use of a Likert-type scale and converted to have a scoring basis
follow the methodology of corporate social performance variable screening
conducted to create the KLD or Kinder, Lydenberg and Domini rating39 as
early as the time when CSR performance became an aid in investor decision-
making (Waddock, Graves and Gorski, 2000). Denoting a CSR presence or
absence, data is derived from third party surveys and articles about the
companies found in popular publications, academic journals, official websites
and government reports. However, a caveat should be mentioned that the
presence of an indicator during a non-corresponding year was not considered,
such as becoming part of the UN Global Compact in 2011 since this indicator
was considered for 2013 CSR measure, nor a media release of corporate giving
performed in 2006 when philanthropic activities was used as an indicator for
CSR year 2008. The multi-dimensional approach in determining CSR score
was intentionally done to achieve a comprehensive view of a company’s CSR
performance. This study underscored the modification in previous uni-
dimensional CSR measurement which previous studies have considered such
as pollution control or social disclosure only (Waddock and Graves, 1997;
Margolis and Walsh, 2001).
Justification of other variables used in the relationship study between CSR and
Financial Performance
Meanwhile, other variables were also considered in the conduct of this
study. These are company size and risk. The basis for the measure of size of
company is the ratio of Enterprise Value over Earnings before Interest, Taxes
and Amortization was used. This was done to factor in the effect of resource
capability as a capacity to perform well in the area of CSR. A bigger company
39KLD uses a combination of reports in assessing corporate social performance. This rating style integrates financial reports, press releases about the company, academic articles and government reports.
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may indicate a low level of CSR performance compared to other strategically
performed improvements in its product or business operation (Waddock and
Graves, 1997).
Risk was identified by way of Total Debt to Equity ratio. This was
resorted to in order to factor in the effect of risk as a measure of stakeholder
confidence or ambivalence on a company’s financial performance (Fama and
MacBeth, 1973; Fama and French, 1993; Fama and French, 1998). This
confidence or ambivalence on the company’s economic situation has an effect
in the capacity and resource capability of a company to engage in CSR
initiatives as mentioned by McGuire, Sundgren and Schneeweis in their 1988
study.
Industries by their very nature may account for the financial situation of
a specific company. Industry type could be identified through the industry
index where the company is classified. The country context itself is identified
as a possible driver or inhibitor of better CSR performance. However, these
components were no longer included as a statistical variable for the regional
context of this study. In the presentation summary, only two classifications of
company types were used, manufacturing and services. Country was defined as
any of the economic location of the referred sample. Differences in country
situation were no longer factored in to ascertain the economic uniqueness and
status that would be exhibited by one country more than the other. Although
country situations may affect both financial and non-financial performance of
companies, this research has not made reference to this factor.
It is imperative to reiterate the reasons behind the choice of the
Southeast Asian region as the area of study. The region is cited for its
phenomenal business development and its promise of greater achievements in
the years to come. Despite the political situation that continues to put the
region in controversial situations, its economic resilience could not be
downplayed. Even with the environmental calamities that recently affected its
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economy and destroyed its infrastructures, coupled with tensioned relationship
with its neighbors, the region is still poised for progress.40
Meanwhile, the four-country locations of the companies are considered
as good representation of the region. More than the reasons that were
previously stated, Indonesia, Malaysia, Philippines and Thailand were selected
because of the perceived relevance of the results of any study regarding them
in adding to the dearth of knowledge on CSR and Financial performance
research in the region. The period covered in the study was chosen for CSR
relevance and financial accuracy. An earlier period of study than the one
currently taken may already fail to present the new developments in CSR
engagement. Consequently, the accuracy of financial data has become more
evident in recent reports where the full spectrum of company health is
presented in response to the required transparency and in the light of
accountability initiatives of many companies.
2.3 Corporate Governance: The Dynamics of Company
Existence
Corporate Governance was considered as the system created internally
in the company that accounted for efficient interaction of people, practices,
processes and policies. As a system, the purpose of a company is to serve the
needs of its various stakeholders through the provision of direction and control
parameters for management to follow with much objectivity, accountability
and integrity. Much of the early understanding of and attention given to
Corporate Governance came from the reforms in the US following the cases of
Enron, WorldCom and Global Crossing and how these companies maintained
questionable close associations with their auditors (Barnett and Salomon,
40Building Inclusive Economies. APEC Summit 2015. Manila, Philippines. http://www.apec2015ph or http://www.thesummitexpress.com/2015
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2006). In the aftermath of these scandals came the signing into law of the
Sarbanes-Oxley Act in 2012, a revision of the US Securities Law of 1930 and
the revision of the UK Combined Code of 2003 (Barnett, 2007). Regulatory
bodies became necessary particularly in highly diluted ownership structures
where too many shareholders found little incentive to monitor their
investments and their Boards left their companies’ day-to- day operations to
the care of their managers (Blair and Stout, 2006).
In the continuum of Corporate Governance there exists two extremes of
limited and encompassing relationships. On one end is the relationship
between the company and the shareholder expressed as the limited field. On
the other end is the relationship between the company and its various
stakeholders expressed as the encompassing field. It is expected in the practice
of good Corporate Governance that companies should have good financial
performance. This is the limited field of good corporate governance.
Meanwhile, the encompassing spectrum of good corporate governance practice
underscores the importance of Corporate Social Responsibility. This spectrum
of good corporate governance rationalizes the understanding of corporate
motivation, which emphasized that corporate accountability, must be beyond
finance and ownership.
The OECD Principles of Corporate Governance41asserts six areas of
focus that defines the framework. These include ensuring the basis for an
effective corporate governance framework, the rights of shareholders and key
ownership functions, the equitable treatment of shareholders, the role of
stakeholders in corporate governance, disclosure and transparency and the
responsibilities of the board. The first item identifies the importance of the
framework in promoting transparency, in aligning corporate mission with the
rule of law and in articulating the delineation of responsibilities of the board,
the regulatory bodies and the enforcement authorities. The second item
41G20/OECD Principles of Corporate Governance was published by the Overseas Economic Cooperation and Development and its Principles was updated in September 2015 in Ankara, Turkey.
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identifies the importance of the framework in protecting the rights of the
shareholders and in ensuring the exercise of those rights. The third item
identifies the importance of the framework in promoting the equitable
treatment of all types of shareholders. This is regardless of minority and
foreign whose rights will be equally protected in appropriate mechanisms.
The fourth item identifies the importance of the framework in
recognizing the rights of the stakeholders which were established under a legal
system and which promotes the active interface and collaboration of all parties
for the sustainable existence of profitable businesses. The fifth item identifies
the importance of the framework in safeguarding the timely and accurate
submission of reports that informs the public of the corporation’s performance,
ownership and over-all governance status. The sixth and last item identifies the
importance of the framework in guaranteeing the strategic direction of the
company, the sound management of the enterprise by its board and the
accountability of this board to the shareholders.
It is the fourth item that holds the value of CSR responsibility and
financial performance relationship within the corporate governance framework.
The cooperation among the various corporate stakeholders to ensure continued
wealth creation and the promotion of sustainable partnerships with the different
communities outlines the existence of an enterprise. This basis of corporate
sustainability is grounded on a company’s sound finance and societal image.
Research literature pointed out to Agency Theory as the leading voice in
the understanding of Corporate Governance. This position has developed into
two inclinations, the Positivist Agency Theory and the Principal-Agent Theory
(Eisenhardt, 2004). Even at this time, challenges still remain regarding the full
understanding of the optimal contract between the principal and the agent
(Shleifer and Vishny, 1997; Fama and Jensen, 1983). However, beyond the
conflicts and issues in corporate governance understanding, application and
measurement, the practice has not departed from its original role of providing a
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framework for proper corporate existence. The principles embedded in
Corporate Governance amplified the inalienable role of corporation to satisfy
shareholders, creditors, employees, customers, suppliers through compliance
with legal and regulatory directive as well as to fulfill the environment and
local community requirements.
2.3.1 Definition of Corporate Governance: Putting Corporate
Social Responsibility and Financial Performance Relationship in
the Picture
How does Corporate Social Responsibility and Financial Performance
relationship conforms to the tenets of good Corporate Governance? Modern
Corporate Governance understanding can find its roots in the renewed thrust of
corporations to operate ethically and fair to all its stakeholders. The de facto
role of corporations has expanded to denote an appreciation and mindfulness of
the interests of other groups beyond its owners. This truth is emphasized in the
added interest in corporate governance that continued in researches, business
circle discussions and government policy-making even to this day. This belief
expounded on the reality that to understand corporate governance is to
understand that corporations operate within a series of contracts with various
stakeholders.
The rise of multi-nationals after the World War II introduced the
business milieu to ideas that relate to Corporate Governance that include
Organizational Behavior, Entrepreneurship and Organizational Behavior,
among others. This thorough examination of corporate behavior in business
studies raised the concern over the professional managers’ accountability to the
real source of business resources. The years that followed the war increased the
interest of owners to maximize their returns by improving the value of their
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shares through the efficient management of their corporate interests.
Eventually issues of CEO dismissals came about. The need to abate the
possible abuses, which were committed by conniving CEOs and board of
directors were exposed.
Much closer to home, the financial crisis which was experienced in
Southeast Asia revealed the dismal conditions of corporate governance in
Thailand, Indonesia, Malaysia and even in the Philippine. This came about
after effects were felt in the aftermath of the exodus of highly glorified foreign
capital. The apparent absence of corporate governance framework in these
countries at that time took government institutions by surprise. It bared the
weaknesses and flaws of an unprepared institution. Comparable to the calm
before the storm, the events, which took place in the region, became almost
insignificant when compared to the downfall of one corporation. The
combinedcorporate and government interests in corporate governance found
meaning and answers with the enactment of the Sarbanes-Oxley Act of 200242.
Corporate governance found value not only in ensuring sustained
shareholder profits but also in the ripple effects that led to the economic and
social transformation of a country. When corporations continuously work to
increase owners’ returns, they do so with the interests of their workers,
suppliers and customers in mind. It became apparent that better services and
outstanding products created by motivated and properly compensated
employees redound to greater financial bottom line.
Parties to Corporate Governance
The CEO, the Board of Directors, the shareholders, suppliers, creditors,
customers and the general community played equally significant and yet
different roles in the pursuit of good corporate governance practices. Each
party to the corporate governance setting has the responsibility to perform, an
interest to uphold and a reward to expect. There were identified roles that must 42The reference to SOX was derived from the readings in the book Sarbanes-Oxley and the New Internal Auditing Rules by Robert Moeller, 2004.
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be efficiently played and rarely interchanged. Jobs must be kept, positions
must be maintained and money’s worth must be fulfilled. Employees, directors
and managers receive compensation, benefits and other intrinsic pay offs.
Shareholders receive their returns, customers get products and services,
suppliers get their payments and as a result the whole community was better
off with the ripple effects of corporate presence.
Principles of Corporate Governance
Corporate governance was founded on the principles of independence,
rights and duties, the original power to decide, on loyalty, on long-term
sustainability, on fairness, on transparency, on accountability, on ethics and on
social responsibility (Dima, Safieddine and Rabbath, 2008). It was important
that all stakeholders have a basic understanding of these principles so that
institutions could be strengthened and expectations would be realized. The
usefulness and relevance of corporate governance framework and principles do
not end with the Board of Directors, the CEO and the rest of the people in the
top management. It is as useful and relevant to everyone else in the
organization. In effect, it is commitment, compliance and enforcement that
determine the success or failure of a management framework. Each individual
in the organization and everyone else who has a stake in the organization is
deemed to have a working knowledge and involvement in any corporate
governance initiative.
Integrity, freedom and sustainability is ensured if everyone in the
organization respects and follows the corporate governance principles set forth
by the organization. The capacity to make good choices, firm decisions and
moral execution of actions reinforced the principles of corporate governance.
The enduring desire to create value by the organization through the production
of goods and provision of services that could result on greater shareholder
returns hinged on the tenets of good corporate governance. Consequently, good
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corporate governance would only be good if it ran parallel with corporate
social responsibility.
Concerns on Corporate Governance
The positive presence of Corporate Governance guidelines for
corporations does not come without a price. The need to update information
and make them available when interested parties so require them could be
draining for compliance officers and the people involved in their preparation.
The public expectation that reports were properly done and bearing solid
evidences would continue to stretch corporations to their limits. Small
businesses, which have no resources perhaps to do the same type of reporting,
would simply rely heavily on the scenarios painted by large corporations with
all the unnecessary nuances not typical in its operation and size.
Monitoring and reporting is not without costs in both the intrinsic and
extrinsic sense. However, a corporation would continue to outdo itself in the
direction of efficient and transparent reporting to sustain its presence in the
business world. A reputation rating might not be a permanent score.
Therefore, it must be lived up to and maintained. Finally, the supply of
Accounting information must be timely and accurate to ensure a steady flow of
corporate governance basis for both policy and decision – making.
Financial Performance and Corporate Governance
The reliance on accounting measurement to determine financial
performance is an important tool in the exercise of and approach to good
corporate governance direction. This tool was utilized as a true source of
concrete and credible information when the question of corporate governance
was raised. As Accounting encompasses enforceable contracts and objective
data, it became the valuable tool to gauge management efficiency, employee
compensation, returns to shareholders and the value of the company. The
Accounting computation serves as the guide in decision- making since all
actions made by and for a company bore a great amount of financial
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implications. In a similar manner, Accounting tools guided investors, third
party analysts, prospective CEOs and other interested players when the pulse
and the overall health of the company were considered. The accuracy,
transparency and timely reporting of accounting data configured the direction
of the Corporate Governance thrust of any organization.
Corporate Social Responsibility in Good Corporate Governance
As a vital and vibrant area of business, Corporate Governance denotes
the emphasis on the direction that must be taken by a company (Hilb, 2008).43
While Corporate Governance may be as specific as defining the relationship
between corporations and their stockholders, it is also important to say that
companies have relationship with their society and the various players of it. In
the post mortem of corporate failures, the critical role of corporate governance
in ensuring financial success must also be evident in making contribution to
promote society’s welfare.
Corporate social responsibility is a performance metric in the whole
range of corporate governance framework. The gauge of company success was
no longer within the aspect of profit and size. The responsibility of the
stakeholders does not end in creating profit and jobs. The responsibility of the
different stakeholders is to ensure the continued economic success of the
company while at the same time promote the positive community image of an
enterprise.
The aspect of CSR and Financial Performance relationship within the
Corporate Governance study has received quite an attention as reflected in
existing literature (Hill, Aincought, Shank and Manullang, 2007). The search
for the basisand extent of CSR and Financial Performance relationship has
been explored in various forms of writingand will continue to be an interest to
researchers even after the meta-analysis of 167 studies revealed a positive but
small relationship between the two variables mentioned (Margolis, Elfenbein 43The book of Prof. Martin Hilb issued in 2008 emphasized the new direction of Corporate Governance that placed premium on the human resource management aspect instead of just the financial status of the firm.
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and Walsh, 2007). However, it could also be argued that a relationship that was
filled with questions on metrics, methods and models would also pose a
question on reliability, relevance and rationality. Further, the practice of and
the progressing definition of CSR and the company’s financial motivation that
may vary from country to country, industry to industry, and in proportion to
company size and level of risk could be a good area of study that may
contribute to the existing literature.
Changing economic, social, political, environmental, technological and
legal landscape may alter CSR practices, financial reporting, even Corporate
Governance description specifically and corporate sustainability in larger terms
(Yang, Lin and Chang, 2010). Therefore, it is of academic value that future
researches should lead to determining new and unexplored variables as well as
in identification of other peculiar relationship trends between CSR and
Financial Performance. After all, good corporate governance should not be
limited to the iron clad financial set-up and operational direction of a company.
It should integrate the overall good of all interested parties that has in mind the
efficient performance and sustainable presence of a company in the business
and society environment.
Likened to a citizen, the role of a corporation to meet the social,
environment and management demands of a society is critical. In as much as
shareholders maintained their pre-eminent objective in the establishment of a
corporation, it is without denying that the existence of companies would
always be within its acceptable co-existence with the society where it operated.
Needless to say, the value of financial performance and corporate social
responsibility within the context of good corporate governance would remain
relevant and in place.
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2.3.2 Theories in Corporate Governance that Embrace the CSR-
FP Relationship: A Revisit
How do previous studies explain the relationship between Corporate
Social Responsibility and Financial Performance? Researches on the causality
between financial performance and corporate social responsibility – sometimes
referred as the ‘virtuous cycle’ revealed the two to be directly related.
Increased practice of responsible business behavior leads toenhanced financial
performance and vice versa (Waddock and Graves, 1997; Hillman and Keim,
2001). Using the top one hundred best corporate citizens, it was found out that
firms with strong social values and practices also exhibited superior financial
performance (Verschoor and Murphy, 2002). Meanwhile, it was found out that
the prior year’s stock returns and accounting-based performance measures
were related to current measures of corporate social practices, but that a past
record of good social performance does not necessarily affect the current
financial performance of a firm (McGuire, et al, 1988).
The CSR and Financial performance link was one classic case of the
cause or effect conflict. Corporate Social Responsibility performance
andfinancial performance was related. However, but the bigger question was,
whether positive corporate social responsibility performance rating leads to
good financial performance rating. Consequently, whether good financial
performance rating provide for more resources to effect corporate social
responsibility activities. In similar vein, it raises the question of whether good
financial performance rating relate to good rating in the area of Corporate
Social Responsibility. It debunks the idea that corporate financial performance
is the only impetus and determinant of CSR activities of companies.
Various studies conducted revealed how huge companies differed from
their smaller and less successful peers. There were also studies, which have
evaluated the citizenship efforts, as well as profitability of companies over a
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period of time. Over time, companies were asked about the possible alignment
of their CSR activities with their business operations. Studies also inquired
about the existence of any demonstrable measures of the impact of their CSR
activities, which were critical to their success. Accordingly, studies revealed
that high performing companies were more aligned and strategic in their
citizenship efforts and that they were more transparent (Veleva, 2008). Prior to
this time, it was pointed out that there was no statistically significant
performance difference between traditional and sound investments (Dilts,
1999).
Corporate environmental performance affected corporate financial
performance to a lesser degree than the various other measures of corporate
social performance like corporate reputations for hiring of minorities, or issues
that are more felt in other regions compared to the rest of the world.
Accordingly, corporate social performance correlated more strongly with
corporate financial performance when using accounting measures for analysis
rather than market-based measures. It was also revealed that there is a virtuous
cycle between Corporate Financial Performance and Corporate Social
Responsibility performance. A strong CSR performance led to strong financial
performance. However, a strong financial performance allowed companies to
afford spending on social responsibility measures, which in turn might lead to
increase social performance rating, and so on and so forth. The relevance of
this relationship, though implicit to corporate managers is just too strong not to
be considered. Further, the study indicated that managers were not penalized
when they invested in socially desirable programs, thus it is well worth for
them to be socially responsible.
A meta-analysis of CSR and FP relationship studies showed more than a
hundred contradicting effects in the relationship between social performance
and financial performance (Margolis, Elfenbein and Walsh, 2007). Analyzed in
nine categories of corporate social performance, it was found out that the
strongest association was in the dimensions pertaining to charitable
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contributions, corporate misdeeds and the area that identified environmental
hazards. Likewise, studies revealed that an association of corporate social and
financial performance was evident when the former was assessed through
observer perceptions and voluntary self-surveys. The studies analyzed were
able to unanimously confirm that indeed socially responsible investing paid-
off.
The link was strongest in social aspects that were part of the corporate
social performance realm. Even when environmental performance was
isolated, the same causality is evident but only to a lesser extent. Indeed, an
analysis of the impact of CSR status on financial performance, and vice versa
was already a complex issue. Using common sense and indulgence in theory an
in empirical research established the results of analysis as one ranging from
negatively associated, positively associated or simply unrelated.
However, despite the importance of this type of research and the
intensity of study directed to it, in the end, CSR performance and financial
performance relationship was still disputed in the aspects of measure, context
and specific variables that were factored in. On another end were good
management advocates who insinuated that good management practice, which
technicallyrelated to corporate social performance have all the possibilities to
improve a company’s relationship with its stakeholders (Orlitzky, 2001as
mentioned in Van de Velde, Vermeir and Corten, 2005). Accordingly, these
advocates argued that pronounced social activities could redound to an
improved and expanded financial performance and accelerated competitive
advantage (Donaldson and Preston, 1995; Freeman, 1994; Waddock and
Graves, 1997; Prahalad and Hamel, 1994). Several theories strengthened the
argument that this research offered. Corporate social responsibility and
financial performance were related. More importantly, beyond CSR and
financial performance relationship was the basic desire of corporations to do
what was right for the society because even the people who managed and
owned these corporations appreciated the importance and sustainability
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relevance of a positive business-society relationship (Visser, Matten, Pohl and
Tolhurst in Wood, 2007).
The Stewardship Principle (as it appeared in Donaldson and Davis, 1991)
This theory purports that those managers, when left on their own would
indeed act as responsible stewards of the resources they control. This theory is
an alternative view of the Agency Theory in which the managers were assumed
to have acted on their own self-interests at the expense of stakeholders (Barney
and Hesterly, 2008). The theory further specified certain devices, which
reduced agency loss including that of executive rewards, in terms of
compensation, benefits and incentive schemes by rewarding them financially
or offering shares that aligned the financial interest of executives. The purpose
of which is to motivate them to exhibit better performance (Donaldson and
Davis, 1991).
The corporate executive is not only defined by accountability to
shareholders. The executive is not merely a business agent but also a political
and social agent for a broader constituency (Frederick et al, 1989). For
instance, the issue of closing a manufacturing plant could be considered as a
purely business decision or it could be considered as socio-political-economic
decision. This became the positive development on the perspective of business
and society relations.
As a grounding theory of this research, Stewardship Principle is the
basis used in determining whether a positive financial performance would
result to a good reputation index and vice versa. It was assumed that societies
would continue to expect good will from the corporations beyond the provision
of life-enhancing goods and services produced from their factories and service
centers. Stewardship Principle will further define itself as every individual
becoming a good manager of resources both directly owned and indirectly
utilized (Vaidyanathan, 2008). The requirement for corporation will be greater
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particularly in the area of environment since every manufacturing entity would
need the raw materials that is provided by nature.
As an employer, the role of pursuing the protection of workers through
competitive compensation, enabling policies, retention and rewards
mechanisms, promotion of work-life balance, medical and retirement benefits,
training and development programs as well as career succession and tracking
would be key areas of corporate involvement. An expansive application of the
Stewardship Theory would also include greater transparency, voluntary
reporting, adherence to standards and disclosures.
To the general society, the theory addresses the prominent role that was
assumed by corporations as a partner in community building, development and
sustainability. A corporation is deemed to be able to perform well at the society
perspective, at all costs. This research posits that social performance,
represented by CSR rating positively relate to Financial Performance within
the context of the companies in the region. Managers as stewards of resources
beyond the domains of their corporations are expected to do well towards the
society where they operate.
The Stakeholder Theory (Freeman, 1984)
The term stakeholder refers to persons and groups that are affected by a
firm’s decisions, policies and operations (Donaldson and Preston, 1995). Stake
in this context meant a claim or an interest on a profitable enterprise. Those
with interests on the firm may include customers, employees, stockholders, the
media, government, various trade and professional associations, the diversity
of which finds no commonality in their relationship with the corporation. This
theory attempts to widen the scope of corporate responsibility to reiterate the
importance of satisfying complex yet related sectors (Walsh, 2005).
Around this line is the argument that corporations must assume
responsibility for all its constituents and be committedto the well-being of the
society at large. However, not everyone is convinced with this argument. There
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is a contention that despite the association with social responsibility and
corporate philanthropy, Stakeholder Theory provides little guidance for CSR
beyond what shareholder maximization champions suggest because it has no
instruction on how to even out other competing accountabilities (Sasse and
Trahan, 2007). Table 17 shows the prioritization in CSR initiative according to
stakeholder view.
Table 17 CSR Prioritization According to Stakeholder View
Stakeholder Group Addressed and Affected
CSR Component
Owners Consumers Employees Community Others
Economic 1 4 2 3 5 Legal 3 2 1 4 5 Ethical 4 1 2 3 5 Philanthropic 3 4 2 1 5
Source: Freeman, 1994
Similarly, it was argued that it is in the very self-interest of corporations
to be able to contribute in the creation of a healthy society (1984, cited in
Drucker, 2001). Corporate responsibilities go beyond business responsibilities
(Carroll, 1999). Similarly, corporations should find ways to translate social
problems into economic opportunities and economic benefit characterized by a
productive capacity, better human competence, higher paying jobs and creation
of extended wealth (Drucker, 1984 and cited in Carroll, 1999). In fact, while
Friedman puts emphasis on shareholder wealth and the profit nature of
corporations, he also mentioned that companies must invest resources in the
local community. This must be considered in order to attract better employees,
thereby employing better human capital for better financial gain.
Held as a contrasting view of what a corporation should be, this theory
aims at amplifying the broader public interest that corporations must serve. It
recognizes that apart from profit there are other values that could be created by
the firm to ensure its prolonged existence. The creation of a cleaner work and
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production process to reduce environmental damage is one of them. Advocates
of the Stakeholder Theory even proceeds to give three core arguments for their
position: descriptive, instrumental and normative (Donaldson and Preston,
1995).
Accordingly, this argument highlights the simplistic and realistic
description of how a company works. Managers are entrusted to pay keen
attention to their annual financial performance. Keeping investors satisfied
allowed them to gain more potential investors and have an increased price of
stocks. However, beyond this role of the manager is a more complex process
to produce consistent results through continuously producing innovative
products and services for its consumers, attracting and keeping talented and
loyal employees and complying with the whole gamut of government
requirements and regulations. The general aim was to keep all types of
stakeholders happy, not just the owners (Vaidyanathan, 2008).
The Instrumental Argument pursued that the Stakeholder view was an
effective corporate strategy. Companies that took into consideration the
welfare of a wider spectrum of stakeholders and who were able to put this in
black and white for the public eye, such as in the form of corporation codes
and annual reports, were better able to perform financially than those that did
not consider this. This was evident in the study of five hundred large
corporations, which were found to have performed far better financially that
those who did not mention it in their Code of Conduct or in their reports to
shareholders (Verchoor and Murphy, 2002).
The Normative Argument on the other hand states that taking care of the
other stakeholders was simply just the right thing to do. Having a great
economic influence and having the power over vast resources, carries a greater
duty that goes together with identified privileges. As corporate action affected
a larger group, they were also called to take responsibility over a wider public.
After all, everyone else whether they contributed positively, or took a risk
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could qualify to have a claim over the benefits of a corporation. The various
pressures by institutions also played a pivotal role in support of CSR.
Corporate key players were under increased pressure from groups like the
social activists, media, governments, non-profits, monitoring organizations,
consumers, and even other corporations, to assess the social impacts of their
practices. Together with financial performance, corporate social performance
was seen as an inevitable road to take.
The Good Management Theory (Waddock and Graves, 1997), further
explained the Stakeholder Theory (Donaldson and Preston, 1995), and
indicated that whenever there was good stakeholder management, the results
would be good financial performance. This relationship emanated from value-
enhancing processes for the firm, which was generated from good relationships
with communities, governments, suppliers, customers and employees. The
argument it offered was that management will tend to satisfy its public without
the condition of financial rewards and that a company being inherently good
would always try to work for the good of the society and its various
stakeholders. This propels the companies to attain a comfortable and positive
image and reputation. Theoretically, this theory served as an impetus for
business leaders to continue to strive and seek new ways to better their
competitiveness, which resulted to an improved financial performance.
The Slack Resources Theory (Waddock and Graves, 1997), was the
other end of Good Management Theory. The theory was developed based on
the perception that companies could only perform CSR when it has resources
to fund it. Slack resources, which meant available and accessible resources
(Waddock and Graves, 1997), pertain to company resources both financial and
non-financial that were meant for strategic use in company developmental
plans and programs. These resources could be otherwise channeled to business
expansion.
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However, to help in the intention of self-preservation by the entity, the
same resources could be re-directed for activities that could result to image and
reputation building. These activities, which were not necessarily directly
measured for their financial benefits for the company, were still considered
critical and must be pursued nonetheless. Meanwhile, slack resources have to
be maintained at comfortable levels to guard against sudden need for change in
operational requirements. The siphoning of slack funds that serves as buffer for
organizational growth funding is a leadership prerogative that is anchored on
organizational and management values, priorities and directions. This theory
indicates that better financial performance leads to better investment
opportunity, which includes allocation of funds to socially responsible
endeavors (Waddock and Graves, 1997)
This research affirms that a corporation must take within its area of
responsibility the good of various stakeholders. The sectors that claim a stake
in a company must go far beyond its stockowners. Owners and non-owners
alike could share the same purpose with a corporation. These purpose include
the provision of access to quality products and services, to make available in a
sustained manner the natural resources that are vital for the production of
goods, or create a sense of stability in the knowledge that workers are treated
well in a work-conducive environment.
Further, this research amplified previous studies that emphasized how a
corporation will be able to lay a legitimate reason to exist when it is able to
fulfill the needs of different sectors. The public would be willing to patronize a
business that has their collective interest at heart. Along this line, this research
posits that social performance in the form of positive CSR ratings positively
relates to financial performance in the context of the companies in Southeast
Asia.
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Multiple Bottom Line Perspective (derived from Elkington, 1994 and cited in
Margolis and Walsh, 2003)
Figure 4. Multiple Bottom Line Perspective
Source: Margolis and Walsh, 2003
The Multiple Bottom-line Perspective of CSR underscores the self-
effecting nature of a positive CSR and financial performance with each other.
Both metrics of firm performance, seemingly contradicting for some, are
actually reinforcing each other at both ends. Figure 4 illustrates this
relationship between CSR and Financial Performance. Undeniably, when
companies perform well, they are able to gain economic benefits that can
support their social endeavors. When done strategically and consistently, these
social activities could sustain the long-run profitability of the company. As all
citizens of the communities are considered as stakeholders, satisfying some of
their needs legitimized the corporation’s continuous quest for shareholder
maximization.
Strengthening the Multiple-Bottom-Line Theory as the grounding of
CSR and Financial Performance relationship is the Ownership Theory of the
Firm cited by Demsetz in 1983. It is equally known by its other names, such as
Property Theory or Finance Theory. This theory argues that the firm is clearly
recognized as the property of the owner/s. Thus, its purpose to maximize
returns for the shareholders or the various owners of the firm is of paramount
importance.
Corporate Social
Performance
Owner
Consumer
Employee
Others
Community
Multiple Bottom Line Types
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Managers and Board of Directors are seen as agents of the shareholders
and have no obligation to others, besides the obligations that were clearly
specified by law. This being the case, a family-owned corporation will more
likely to take this role of ownership more seriously. Their thrust was to earn
profit while at the same time ensure that society will permit its continued
operation. This continued operation is necessary if they were to perpetuate
their company continuity and protect the legacy of their family name.
In Southeast Asian culture, the image of a family business is shaped by
the business integrity its leaders exercised. In as much as the public image of
the people behind the family name is at stake, the need for acceptance and
affirmation is a constant struggle in channeling profit. In fact, the common
practice was for large corporations to establish a foundation. The corporate
foundation becomes the unit of the business that would perform the CSR tasks
in honor of either the family name or the name of the founder himself. The
founder may be a matriarch or a patriarch. It is therefore important that
companies are able to align their profit objectives with the desire to create a
good public image.
Legacy creation is a result of a good company name, an untarnished
company reputation and a well-acknowledged family name. On the other side
of the spectrum is the shareholder’s view that their interests are more important
than all the other purposes and these interest take precedence over the interest
of anyone else, including the external stakeholders of the entity.
In this theory, the relationship of Corporate Social Responsibility
performance and Financial performance might yield a noteworthy outcome
depending on the ownership structure of the business, that is, whether it is
family-owned or not. Satisfying all bottom lines corresponds to positive
performance in both financial and non-financial aspects of the firm. This
research posits that social performance based on Corporate Social
Responsibility performance ratings and financial performance metrics were not
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mutually exclusive and that positive relationship has always existed between
financial performance and corporate social performance.
New Corporate Governance Theory (Hilb, 2008)
This proposition emphasizes that good corporate governance happens
when a board is successful in delivering both shareholder and stakeholder
value (Hilb, 2008). Hilb noted that the apex of board functioning would only
happen when they act in accordance with what is legal and legitimate,
displaying integrity in both strategic direction function and strategic
controlling function (Hilb, 2008). An amalgamation of shareholder value
orientation and stakeholder orientation, the creation of a shared vision
orientation as far as company values is concerned can be stretched beyond
typical governance roles. This study upholds the aforementioned argument, as
it presents an inclination of business-society engagement that is based on the
confluence of social performance and financial performance.
As a school of thought, the New Corporate Governance Theory is an
affirmation that corporate management is in union with the shareholder,
customers, employee and general public interest. In a related comparison, four
dimensions are laid down particularly; situational implementation, strategic
direction, integrated board management and holistic monitoring (Hilb, 2008).
These dimensions were given their articulation on the traditional and new
corporate governance standpoints.
The dimension of Holistic Monitoring is the area of focus in the
grounding of this research. Under the Holistic Monitoring part, traditional
corporate governance only asserted the controlling of the financial area of
business. However, the new corporate governance suggested that Holistic
Monitoring came as an outcome of shareholder, clients, employees and
public’s perspectives. Needless to say, the oversight of management operation
to ascertain whether performance is efficient or not came from parties outside
the organization. As a management framework, the New Corporate
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Governance standpoint emphasized the value of both financial and social
performance effectiveness, which was to be taken not in isolation but as an
integrative concept within the context of every organization.
It is in the interest of a corporation that they performed well in all the
relevant and acceptable financial ratios while at the same time complete in the
requirements of reputational ratings report. This situation signifies a well-
balanced use of resources. A well-manned corporate board understood the
importance of all stakeholders, and would painstakingly strive to satisfy all
their interests. A board that practiced integrity and accountability in its
dealings does not stop at satisfying the needs of top executives and
shareholders alone. With full knowledge of the situation a well-governed
company would always consider in their decision-making the reasonable
demands of the public. This research posits that it is in accordance to good
corporate governance practice that companies sought to attain a positive
performance in both financial and social responsibility aspects, without
sacrificing one for the other, and doing well at both areas at optimal capacities.
2.3.3 Corporate Governance in Southeast Asia: Laying the
Groundwork for an Important Region
How do financially performing companies in Southeast Asia like those
in the Philippine context practice Corporate Social Responsibility as a form of
Good Corporate Governance? Corporate Governance as a set of principles
outlined the way corporations should practice. The widespread acceptance of
these principles as underscored by the OECD brought forward the generally
acceptable truth that misdeeds were not allowed, and misdeeds have universal
understanding. As a universal standard of how actions should proceed in the
context of business operation, there was hardly an expectation that Corporate
Governance must be culture based or country specific. Many concepts have
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emerged which articulated what corporate governance is. It may be good to
mention that in the Philippines, only ten specific principles were given more
focus. These principles include; Independence, Rights and Duties, Original
Power to Decide, Loyalty, Long-Term Sustainability, Fairness, Transparency,
Accountability, Ethics and Social Responsibility. Looking at these principles, it
would be easy to surmise that they are interrelated, and that the adherence to
one necessitated the observance of the others.
In practice, the principles outlines followed this progression; from
independence to a charter; from rights and duties to a code of governance;
from the board of directors to a code for board practice; from loyalty to the
corporation to duties of directors; from long term sustainability to strategic
role; from fairness to policy rule, from transparency to monitoring role; from
accountability to accountability systems; from ethics to code of ethical
practices and from code of social responsibility to code of corporate
directorship.
For this research, the CSR and Financial Performance emphasis of
Corporate Governance would be seen in the principles of Long-term
Sustainability, Ethics and Social Responsibility, on Fairness, Transparency and
Accountability. Long-term Sustainability Principle emphasizes the duty of the
Board to advance the long-term upkeep of the business, bearing in mind both
internal and external factors that might affect it. The Principle of Ethics
allowed the board to identify what is proper and improper, acceptable and
unacceptable, or good and bad behavior.
The Principle of Social Responsibility refers to the duty of the Board to
acknowledge its role in the pursuit of society’s common good. More than the
protection of its internal interests, the Board identified its position to safeguard
the political, economic, cultural, social and physical environment framework of
the business. Fairness underscores correct dealings with all stakeholders. This
was not only true to those who extended financial resources to the corporation,
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but even to those whose livelihood and wellbeing depended on the business.
Transparency Principles articulates the requirements mandated to the Board to
have a system of disclosure that is aligned with local and international third
party regulators in both financial and non-financial performance.
The Principle of Accountability, on the other hand, is the requirement of
the law for corporations to have a system that ensures integrity in all actions,
decisions and operations, the proper management of risks and the evaluation of
performance that will lead to rewarding those who do well and punishing those
who does otherwise. The basic and universal character of these principles
could only be practiced successfully within the backdrop of specific cultures
and country structures. Cultures and country specific situations created the
influencing environment that could result in laudable and sustained actions. It
is inherent upon the corporations to act on a manner that would best suit its
situation without alienating itself from the true spirit of the Corporate
Governance principles. The culture of good governance thrives in the condition
of insisting to do what is right and proper even without the hammering dictates
of the law. The culture of voluntary reporting and disclosure is much more
valuable than mere compliance and enforcement.
Moreover, governance is not just for the CEO or the top management
team that worked hand in hand with the Board. Governance is not meant to be
just about policy creation, but a general involvement and a complete on
boarding of every stakeholder in the values, mission and vision of the
corporation. With freedom as its most basic value, Corporate Governance is
outlined by integrity, discipline and sustainability (Echanis, 2000). Every
amount of freedom corresponds to a greater requirement of responsibility. This
freedom in the practice of good corporate governance must therefore balance
itself with the spirit of inclusiveness, tolerance and right judgment. The whole
idea is inclusiveness in the identification of stakeholders to consider; tolerance
in the uniqueness and differences of various sectors; and the exercise of right
judgment in every decision and in all actions. The ten best practice guidelines
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suggested in Corporate Governance writings, are performed mindful of the
specific circumstances and nature of corporations in the country.
In the past, Thailand, Indonesia, South Korea, Malaysia and to some
extent, the Philippines became the focus of worldwide attention as regards the
effects of the financial crisis that hit the region in the 1990s. The sudden and
arbitrary exit of foreign capital that was placed in the collapsed property asset
investment affected the market and magnified the lack of governance policies
and the presence of other institutional weaknesses. From then on, cautious
study on how to introduce improvements fortified the governance system
(Echanis, 2006).
In the Philippines, it is important to identify four external influences in
the corporate governance route of the country. These include its legal system,
regulatory system, judiciary system and financial reporting standards.
Contained in the document called the Republic Act 8799 of the Philippines44
are the various stipulations that articulate corporate governance in the
Philippine setting. The legal system is within the confines of the Corporation
Code, the Securities Regulation Code, the General Banking Law and the
Central Bank Act while the regulatory system is under the agencies of
Securities and Exchange Commission, the Philippine Stock Exchange and
Central Bank of the Philippines. The judiciary system enters the picture to hear
cases that formerly were resolved by the Securities and Exchange Commission.
Financial reporting standardsin the Philippines are set by the Philippine
Generally Accepted Accounting Principles (GAAP) andpromulgated by the
following agencies listed onthe order of priority; Philippine Securities and
Exchange Commission; the Financial Reporting Standards Council composed
of theBoard of Accountancy, the SEC, the BSP, theBureau of Internal
Revenue, theCommission on Audit, the accredited national organizationof
Certified Public Accountants and a major organization composed of preparers
44Approved and enacted on July 19, 2000 as a product of the 13th Congress of the Philippines and known as the Securities Regulations Code of the Philippines. It has 78 sections categorized in 13 chapters.
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and users of financial statements; the Standards issued by the International
Financial Reporting Standards Board and the Accounting principles and
practices that has enjoyed a long history of acceptance and usage (Echanis,
2000).
In a study of Indian managers, the growing construct of Corporate
Governance was inclined toward the way managers were exhibiting CSR in
their operations (Palepu, Healy and Peek, 2010). The vigor in developing the
Corporate Governance principles and the actions done by corporations so as
not to fall short in the requirements of legislations and assessors was offset by
the same dynamism for voluntary CSR work in Indian companies. This picture
that was considered for a developing country stands as a case in point for the
Corporate Governance and CSR interplay.
CSR performance was also seen as an important factor in investment
recommendations (Dima et al, 2008), a clear example of a corporate
governance case. Assessors and investment analysts who have the full and
complete knowledge of both financial and non-financial performance of a
company, either through reports or due to greater visibility practice would tend
to give better recommendations and thereby boosts the company’s value in the
stock market. In Hong Kong, studies on the CSR inclination of companies
were prioritized in the same breadth and depth as that of studies that dealt with
general corporate governance components such as risk management, product
safety, widespread corruption and abusive labor practices.
More importantly, the choice of the application of CSR was also a
Corporate Governance tool. The responsibility must be decided and the
expected return of investments in this area must be calculated and balanced
with other resource use. If CG denotes rights and responsibilities in strategic
management decisions, CSR initiatives must have champions and point
persons. These people must have motivations that were not driven by mere
compensation but by the overall prospect of business sustainability. This
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motivation must be anchored in the business knowledge that a good public
reputation resonate the presence of public accountability with far reaching
benefits. CSR has a branding and value enhancing use in the good corporate
governance pursuits of a company. Corporate governance must become an
expansive framework of financial decision, action and performance.
Corporate Social Responsibility in the Philippines: A Compendium of Institutional Information
In 2006, the League of Corporate Foundations (LCF) of the Philippines
conducted a survey among the country’s prominent chief executive officers
and part of its data relevant to this research is shown in Table 18. The same
survey underscored the reality that 22% of CEOs believed that the company’s
CSR views were their personal influence. Twenty-eight percent believed that
the CSR worldview of their company was influenced by the collective
corporate view while 50% affirmed that the company’s CSR beliefs was a
combination of the CEO’s personal view and the corporation in general.
Meanwhile, when asked to itemize their top three business cases of CSR, the
following factors were cited: managing reputation and brand equity; enhancing
competitiveness and market positioning; and attracting, motivating and
retaining talented employees.45
In 2009, the Corporate Social Responsibility Research Survey Report
was published in the Philippines. Together with the efforts of the Management
Association of the Philippines (MAP)46 and funding support from the Canadian
International Development Agency, the research of forty seven respondents
from 10% of the combined membership of MAP, the League of Corporate
45The other factors were enhancing effectiveness at learning and innovation, improving investor relations, access to capital, improving operational efficiency and protecting the license to operate. 46MAP is the Management Association of the Philippines, a leading association of large company leaders. Information on MAP can be found at http://www.map.org.ph
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Foundations (LCF) and the Philippine Business for Social Progress (PBSP)47
revealed very promising results in the way CSR was viewed in the Philippines.
Accordingly, Philippine corporations attributed their CSR values as
something that was hinged on their owners or founders or CEOs’ values and
rated it at 44%, second from their Board of Directors, which they rated at 16%
and third from their Management Committee, which they rated at 13%. Other
identified prime movers of CSR included; corporate foundations, corporate
communications or public relations office, parent company and the human
resource development office. Among the respondents, 25% said that they
identified well with their company’s CSR values because it was consistently
pronounced.
Table 18 Perspectives of Philippine CEOs on CSR
Questions Yes in %
No In %
1. Do CEOs address CSR issues at the Board level? 89 11 2. Are LCF member CEOs personally involved in collective leadership initiatives
focusing on corporate responsibility? 100 -
3. Are CEOs starting to see something that brings the bottom line up? 35 –SA 35 – A 18-MA 6 – D 6 – SD
4. Are companies sure about the definition of CSR? 62 38 5. Does CSR enhance the reputation/image of a company? 29 – SA
65 – A 6
6. Does the public have a right to expect good CSR programs from companies? 31 – SA 43 – S 13 – MA
13
7. Does CSR need to be a top priority for companies? 94 6 8. How involved are Board of Directors in CSR? 95 5 9. How involved are senior management in CSR? 87 13 10. How involved are middle management in CSR? 94 6 11. How involved are staff members in CSR? 81 19 12. Does corporate financial performance affect a company’s corporate social
performance? 72 28
13. Does corporate social performance affect a company’s financial performance? 83 17
14. Are CSR issues integrated into your company’s executive education program? 50 50 15. Do you explicitly integrate CSR issues into the recruitment and induction of new
managers? 38 62
16. Do you have a system of recognizing and rewarding good practice of CSR either by individual or by teams?
47 53
17. Are CSR-related issues becoming a part of your company’s senior engagement performance assessment/incentive structures?
38 62
Source: CEO Perspectives on Corporate Social Responsibility. League of Corporate Foundations,2006 Philippines
47Philippine Business for Social Progress was created as a non-profit entity to address the needs of corporations at that time for an avenue to extend their resources to society without having to create their individual foundations. More information on PBSP can be found at http://www.pbsp.org.
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Another 22% believed that the practice of CSR was specifically an
obligation to its stakeholders and a generally a responsibility to the society.
Further, 13% of the respondents articulated that their enthusiasm to be
involved in CSR work was due to their faith and values, which influenced their
thinking and their practice of CSR. A few others believe that doing well in
business enabled their companies to do well for the society and that CSR was
always a part of the overall business strategy. They also said that it was CSR
that boosted their company’s reputation. They even added that the
communities expected their CSR initiatives to materialize. Still others opined
that they performed CSR because it was required by law to do so. These
responses accentuated the fluidity by which CSR became part and parcel of
business identity, of its vision and mission, and of its regular operation.
In the larger view of Corporate Governance, the separation of economic
performance by the firm from its social performance became vague with the
apparent identification of the official roles of CEOs, Board of Directors and
even the management committees. In the perception of people who are the
prime minds behind the CSR work performed by companies, the work for
addressing society’s concerns is clearly identified even with the roles
associated with CEOs and members of the Board. All for a good purpose, the
realities in Philippine companies only emphasized the value placed on CSR as
distinct and as important as financial performance, underscoring that the gains
from one can also be an achievement for the other.
2.4 CSR-FP Relationships: The Foundation of this Research
Attempts to find a single view on CSR and Financial performance
relationship will remain an enigma for as long as new parameters are
continuously considered such as industry focus, the variety of measurement
tools, ownership, culture context and time lag. The social and financial
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indicator-match up will become more sophisticated and unique, and therefore,
newer paradigms will be created. The foregoing discussions conveyed some of
the results from previous studies on the CSR and Financial Performance
relationship. The relationships enumerated are further divided to positive,
negative and neutral, and has used a variety of social and financial
performance indicators, sample types and other control variables.
2.4.1 Positive CSR and Financial Performance Relationship
Buchholz and Rosenthal identified companies that were socially aware
and which were managed by concerned leaders have the required skills and
know-how to operate the most successful companies in the traditional financial
sense and thus attractive in itself in the mind of investor (1999). Thus, socially
responsive firms are inclined to perform better than non-responsive or less
responsive ones in terms of accounting profitability variables. Those firms,
which have reflected outstanding performance in the triple bottom line, do so
as a result of their outstanding and sustained financial performance.
It a nutshell, this statement is an affirmation that both Stakeholder and
Stewardship theories were correct in its position that there must be some
market for socially performing companies and those benefits that ultimately
converts to their improved financial performance. Likewise, a seamless
dependency of social and financial performance to ensure the sustainability of
a company proves to be a hallmark of good corporate governance.
Managers do not just extend donation during times when the company
is doing well. Evidences show that companies have previously partnered with
the various stakeholders on strategic and focused activities that deliberately
helped society. It is a vital issue for corporations to establish the positive
relationship of CSR and Financial Performance. A negative relationship meant
a re-evaluation of social expenses and a re-direction of previously held
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decisions. On the other hand, a positive relationship would result in greater
society involvement as a form of reinforcement of previous actions. Table 19 Summary of Studies of Positive CSR and FP Relationships
Author/s and Year of Publication
Objectives and Sample Results
Cochran and Wood (1984)
39 companies; using reputation index (CEP) and content analysis for CSR; investor and accounting returns for Financial Performance from 1970-1979; with industry-specific control groups.
The average age of corporate assets were found to be highly correlated, with social responsibility ranking, providinga significant positive relationship between CSR and Financial Performance.
McGuire, Sundgren and Schneeweis (1988)
151 firms rated by Fortune; CSR performance through computed average rankings from 1983-1985 and social responsibility rating of 1983; financial performance from COMPUSTAT as Return on Assets, Total Assets, Sales Growth, Asset Growth and Operating Income Growth; accounting measures of risk such as Debt to Assets ratio, Operating leverage, and the standard deviation of operating income; as well as market performance metrics in the form of risk-adjusted returns (alpha) and market risk measure of measure of systematic risk and standard deviation of total return (beta) from 1977-1981.
A firm’s prior Financial Performance assessed in both stock market returns and accounting- based measures is more closely related to CSR performance than is latter Financial Performance.
Preston and O’Bannon (1997)
67 US companies; financial performance from COMPUSTAT-obtained data; social performance using Fortune magazine ratings from 1982-1992.
Positive relationship between CSR and Financial Performance
Waddock and Graves (1997)
469 companies; social performance through KLD index; financial performance using Return on Assets, Return on Equity and Return on Sales.
Positive dual causality relationship between CSR and Financial Performance.
Simpson and Kohers (2002)
385 Netherland banks; CSR performance through the Community Reinvestment Act compliance; financial performance in the form of Return on Assets and ratio of loan assets to total loans over a period 1993 and 1994.
Positive link between CSR and Financial Performance
Tsoutsoura (2004) 422 companies; financial performance in the form of Return on Assets, Return on Equity and Return on Sales; CSR performance using KLD and Domini indexes for the period 1996-2000.
Positive association between CSR and Financial Performance although higher correlation in the KLD index than Domini index.
Fauzi and Idris (2009)
Indonesian firms in the Jakarta Stock Exchange were analyzed using the CSR performance variables of Jantzi Research Incorporated 2008 with deletions of some dimensions to conform to Indonesian environment, business strategy using strategic orientation by Mitzberg 1973, structure (formalization, centralization and decentralization), company size in the form of total assets, based on the Jakarta Stock Exchange as financial performance.
Positive dual causality in CSR and Financial Performance.
Yang, Lin & Chang (2010)
149 companies listed in the Taiwan SEC Taiwan 50 Index and Taiwan SEC Taiwan Mid-Cap 100 Index from 2005-2007; social performance based on the five indicators of the AReSE method of France; financial performance in the form of Return on Assets, Return on Equity, and Return on Sales.
Previous CSR performance has positive impact on latter Financial Performance in ROA considering R&D and size.
Orlitzky, et al (2003) Meta- analysis of fifty-two studies testing the empirical link between corporate social and financial performance.
Moderate positive relationship between CSR and Financial Performance.
Margolish et al (2007)
Meta-analysis of CSR and Financial Performance relationship in one hundred sixty seven studies
Positive though small relation exists between CSR and Financial Performance.
Source: Researcher’s compilation
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In the summary of studies about positive CSR and Financial
relationship, some parameters needed emphasis. In the paper of Cochran and
Wood (1984), only Accounting measures were used, hence only financial
indicators of previous performances were accounted for. Likewise, industry
specific control groups were used but only thirty-nine samples were covered.
The study revealed that asset age as a control variable correlated with CSR,
which implied that companies with older assets have lower CSR ratings
(Cochran and Wood, 1984). This result anchored the position that the more
entrenched companies were in both older practice and archaic beliefs about
corporate roles. These companies were more unbending in upholding new
ideas such as greater community partnership and involvement. Table 19
provides a summary of studies where CSR and financial performance exhibited
a positive relationship.
In McGuirre et al (1988), the five-year time lag of the study reveals that
previous financial performance positively relates to CSR performance more
than CSR performance to subsequent financial performance. This result affirms
the Slack Resources Theory of Waddock and Graves (1997), and dismissed the
other proposition that CSR performance created improved profitability. The
short period of study narrowed the possibility of looking at trends and
movements in variables. The failure of the variety of financial metrics to reveal
other parameters of relations is an area to look into. Perhaps the financial
metrics need not be many to be able to identify causality. More importantly,
the choice of metrics should be considered for value, relevance and timing.
In the study of Preston and O’Bannon (1997), the more commonly
observed CSR and Financial Performance relationship was highlighted and
explained for a sample of sixty-seven companies. The issue of direction was
put forward and a dual causality was established following the Slack Resources
and Good Management theories, which were posited by Waddock and Graves
in 1997. The positive relationship affirmed that there was incentive in doing
CSR, which will eventually result in improved financial performance.
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Meanwhile, a good financial performance becomes an impetus for the release
of resources that are meant for greaterwork in the area of CSR.
In Simpson and Kohers (2002), the positive relationship between CSR
and Financial performance was affirmed in the Netherland banking industry.
This solidified the higher integrity, transparency, accountability and
responsibility expectations by the public from their financial sector. Since
banks were entities that made profit from the money of other people, they were
therefore expected to be more conscious of maintaining a higher level of
customer satisfaction in the services they render. The marketing of service
companies requires a different skills set and their branding is highly influenced
by reputation. The study of Simpson and Kohers underlined the value of
looking at CSR and FP relationship in the context of industry-specific
situations.
In Tsoutsoura (2004), CSR and FP relationship was further cemented
but this time it revealed a uniqueness of results when a different reputation
rating was used. The study further articulated the caution that must be taken by
researchers in their choice of reputation ranking to represent CSR performance
and to take into account the differences in criteria and focus of said third party
ratings.
The study of Fauzi and Idris (2009) on Indonesian firms held much
relevance for this research due to the country context that was considered.
Having a unique set-were more companies are government-owned, it was
notable that ownership did not cause a divergent result in the positive CSR and
FP relationship, which was originally posited. This underscored the position
that the public demands equal social responsiveness from both government and
non-government controlled entities. Being both profit-oriented entities, only
with a different beneficiary of primary profits, social responsibility becomes an
equalizer and a common denominator on the public’s perception.
In Yang, Lin and Chang (2010), positive relationship between CSR and
subsequent ROA is found, considering Research and Development investments
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and size. This result affirmed the value of CSR rating in the overall
profitability of the company. Spending on R&D was perceived to be a step in
positive direction and was a welcome chance to show the company’s
commitment to the public in providing quality products and services.
2.4.2 Negative CSR and Financial Performance Relationship
Keeping in mind the position of Friedman on the role of corporations,
profit making would remain to be the businessperson’s on-going pursuit within
the tenets of the law (Friedman, 1970). This was the position of the studies
that perused the negative relationship between CSR and Financial
Performance. All other things constant, firms with low CSR exposure were
inclined to incur lesser cost than those with deeply rooted social practices.
Ultimately, less CSR cost meant greater returns to shareholders. This was the
standpoint of a negative causality school of thought. Some of the studies that
revealed a negative CSR and Financial performance relationship were hereby
detailed.
In a study conducted for Turkish companies, the financial performance
of companies listed in the Istanbul Stock Exchange were analyzed as to their
social performance in the form of being a signatory or non-signatory in the
Defense Industries Initiative and it revealed a negative relationship (Boyle,
Higgins and Rhee, 1997). Perhaps the negative relationship was brought about
by the indifference of the companies to such an initiative. That defense concern
was not a priority over and above corporate profit making and therefore
immaterial in the larger context of business operation.
It also meant that Defense Industries Initiative reporting was seen as a
looming control mechanism for firms that were by default socially non-
responsive such as firearms or armaments manufacturing and advocacy. This
highlighted the caution that must be taken by researchers when finding a
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representative data for the CSR variable. Ideally data set representing variables
should be culture and context-specific so that unusual results could be better
explained.
In the study of Wagner (2005), European companies in the pulp and
paper industry were analyzed as to their social responsibility performance and
financial performance. The study revealed that when environmental factors
were used to indicate CSR performance up against accounting ratios as
financial performance representatives, a negative relationship exists. The
obvious adverse effects that were made by an industry of this kind to the
natural environment could explain this negative relationship. As greater
economic gains were achieved, companies in the pulp and paper industry are
doing more harm than good to the natural environment in the absence of other
factors such as R and D cost on process and resource procurement
improvement initiatives.
In Lopez et al. (2007), European companies were analyzed as to their
Dow Jones Sustainability Index ratings and their corresponding profit before
tax and revenue. A negative relationship was observed highlighting that a
different CSR index may lead to different, even conflicting results. The
diminishing negative relation could be a matter of further observation
considering that unusual time lag of six years which was the period covered in
this study. The cost of doing CSR made firms less competitive in its price,
which affected its marketability and profitability.
The diminishing negative effect over a period of time was also an
indication perhaps of more pronounced changes in the business landscape that
was not included in the study. Consequently, this result leads to a better
appreciation of the nuances that may occur in a CSR – Financial performance
link when variables other than those that were directly related to corporate
social engagement and financial ratios were considered. Table 20 provides a
summary of studies, which showed a negative CSR-FP Relationship.
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Table 20 Summary of Studies of Negative CSR and FP Relationships
Author/s and Year of
Publication
Objectives and Sample Results
Boyle, Higgins and Rhee (1997)
Twenty-five signatories and thirty-nine signatories of the Defense Industries Initiative of the Istanbul Stock Exchange were analyzed from 2005-2007 using accounting based measures of profitability for financial performance and CSR performance using event study from six months to 18 month period.
Negative association between CSR and Financial Performance
Wagner (2005)
Firms from four European countries in the pulp and paper manufacturing industries were analyzed in their CSR performance using environmental factors such as emission of SO2, NO2 and COD as well as energy and water inputs against financial performance using accounting based measures of profitability.
Negative association between CSR and Financial Performance.
Lopez et al, (2007)
One hundred ten European firms using the DJSI for social performance and accounting ratios of profit for financial performance from 1998-2004.
Negative effect between CSR and Financial Performance that tends to diminish over time.
Source: Researcher’s compilation
2.4.3 Neutral CSR and Financial Performance Relationship
Also existing is the neutralityin Corporate Social Responsibility and
Financial performance relationship. As a complex rationality, CSR and FP
relationship only existed by way of some other underlying reasons or
externalities. Ullman called it relationship by chance (1985), affirming
previous observations that there was less forthrightness in the neutral
relationship of CSR and FP. Such that, CSR could only affect future FP when
there is too much or too little resources expended (Ullman, 1985). That is, a
neutral relationship would require an overwhelming situation such as greater
expenditures in R&D (McWilliams and Siegel, 2000) as a component of
financial performance. The low financial profitability and the speculative view
of investors on future financial performance were counteracted by a similar
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increase in reputation points. This was especially true if the concern being
addressed by the R&D expenses was better and was a more environmentally
affecting product or system.
When the relationships between pollution disclosures, as a CSR item
and economic performance or financial performance were studied in four
highly pollution- causing sectors namely, oil refining, steel manufacturing,
electrical utilities distribution and paper and pulp manufacturing (Freedman
and Jaggi, 1982), a nil association was realized. It is only when firms from
other industries and of varying sizes that a significant positive association
between pollution index and six financial ratios was noted. Perhaps the use of
common industries in the study does not provide a standout data that could
provide a different result altogether. It was also likely that only large
companies, due to the accompanying costs are the only ones who could only do
pollution disclosures. In the study performed by McWilliams and Siegel
(2000), the neutral relationship was only abated when the R&D costs well as
other industry-specific items were factored in. Using COMPUSTAT data and
Domini 400 as financial performance and CSR performance metrics
respectively to a sample of five hundred twenty four companies in a five-year
period, a significant positive relationship was arrived at when the cost of R&D
was excluded (McWilliams and Siegel, 2000).
Perhaps, the overwhelming expense for research and development was a
possible diversion of what could have been spent for CSR initiatives. Since
when not properly explained, very few would show interest in a research and
development work even if the same may redound to a better, more
environmentally friendly product and operations. Finally, a study covering the
companies in the Istanbul Stock Exchange National 100 Index, which used
content analysis alone in the determination of social performance revealed a
positive association only between company size and CSR (Aras et al, 2010).
What was notable in this study was the definition of company size when
developing countries were taken into consideration.
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Meanwhile, it was hardly fool proof that document alone, and not other
methods of determining social performance, say a third party assessor would
already define the social performance of a company. Needless to say, those
with resources have the ability to publish CSR activities regardless of their
frequency of occurrence, impact, resource value and extent. Generally,
corporations are not just obsessed by the simple pursuit of profit. The present
business milieu encouraged them to search for better and greater social
practices. The studies, which started more than four decades ago on CSR
performance and financial performance relationship only, intensified in this
day and age with more relevant factors, unusual observations and newer
constructs being identified. Corporations were not primarily established to
conduct CSR, yet a sustainable return on the resources that were expended in
the course of business operation became simply inadequate to gauge the
company’s overall health. Schools of thought are still split on the importance
of CSR on business existence. Table 21 of this section provides a summary of
studies, which resulted to a neutral CSR-FP relationship.
Source: Researcher’s compilation
Table 21 Summary of Studies of Neutral CSR and FP Relationships Author/s and
Year of Publication
Objectives and sample Results
Freedman and Jaggi (1982)
Firms from four high polluting industries were studied in social performance using pollution disclosure index and on financial performance using accounting ratios from 1973-1974.
No significant relationship between CSR and Financial Performance, except for the oil industry sector.
McWilliams and Siegel (2000)
Five hundred twenty four firms were analyzed using CSR performance based on Domini 400 Social Index and KLD ratings, R&D and financial performance using financial accounting measures derived from COMPUSTAT from 1991-1996.
Neutral impact between CSR and Financial Performance.
Aras, Aybars and Kutlu (2010)
Fortyfirms listed in the Istanbul Stock Exchange were analyzed on its CSR performance usingsocial and environmental disclosures and financial performance using accounting-based measures of profitability from 2005-2007.
No significant relationship between CSR and Financial Performance. However, correlation between firm size and CSR exists.
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Arguing that all corporate actions entailed a corresponding cost, any
CSR activity was a cause for re-channeling of resources or reduction in profit.
On the other hand, a company that was not in a good place in the society’s
perception, would not be able to maintain a market foothold, or can only do so
in a diminishing fashion, therefore resulting in a declining profitability. Hence,
this study suggests that previous positive financial performance creates a
subsequent positive social performance, and a positive social performance
leads to subsequent positive financial performance. Taking off from this dual
causality of positive social and financial performance relationship was the
overall belief that well-governed organizations must simply exhibit more than
acceptable rating in both measures. Good corporate governance highlights the
need for corporations to continuously consider the wellbeing of all its
stakeholders through carefully considered management decisions, within well-
crafted policies, through humane rules, around inclusive practices and using
transparent disclosures. This is the premise of this research.
2.5 Section Synthesis: The Way Forward in CSR-FP
Relationship Study
In this study, the observation that Corporate Social Responsibility is a
heterogeneous construct while Financial Performance is a homogeneous
paradigm was highlighted. CSR understanding and appreciation corresponds to
an interesting match with the highly standardized and strict Financial
Performance norms. Different as they are, both variables outlined the overall
situation of a company on its road to success and sustainability. CSR and FP
are undeniably equally important functions of business and were therefore
valuable aspects of any good Corporate Governance.
If the appreciation of a CSR and FP relationship is culturally unique,
then it could also be said that some aspects of Corporate Governance have a
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degree of culture-adaptability. This could be found in the consumption of CSR
and Financial Performance relationship information. At this point of the
research, it is valuable to look at the CSR and financial performance
relationship as gleaned from current decade of studies and one that looked at
other context of specific industries and nation locales.
For instance, in the study of Greek companies, evidence showed that
stock returns are positively impacted by performance in Corporate Social
Responsibility (Karagiorgos, 2010). Perhaps, the positive image created
through various works in the CSR area led to greater confidence among current
and prospective owners of stocks. Tourism is another industry of importance.
In a study written on the dimensions of CSR as it relates to financial
performance within tourism and tourism-related companies, it was found out
that the effect of the variables with each other is not the same when CSR was
reduced to a single construct.
The study revealed an entirely different outcome when CSR and FP
relationship was analyzed using each of the CSR dimensions of employee
relations, product quality, community relations, environmental issues and
diversity issues (Inoue and Lee, 2011). This situation may have been brought
about by the apparent difference in the focus of the different CSR dimensions.
For instance, environmental relations in the Tourism industry may impact
financial performance far greater than employee relations would. Meanwhile,
diversity issues would be a critical area requiring a higher level of engagement
if financial performance is expected to rise. As an industry that thrives on a
multi-cultural context and in excellence in the aspect of hospitality, diversity
must be acknowledged, embraced, appreciated and sustained.
Strategies of engagement proved to moderate the relationship of
Corporate Social Responsibility and financial performance (Tang, Hull and
Rothenberg, 2012). The manner by which a company performs in social
involvement, using processes and activities that enhance the quality of
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community life seem to spell the difference between failure and success.
However, it is also imperative that internal engagement should be strengthened
prior to external community undertaking. The beginning of CSR is in the local
front of company undertaking and relationships. Only when employees and
other internal stakeholders are convinced of the CSR agenda that they will
begin to have the drive to share this with the external stakeholders and the
general public.
Meanwhile, in the study of players in the restaurant industry, economic
variables were added to find the relationship between CSR and financial
performance (Lee, Singal and Kang, 2013). The highly volatile spending and
profit-making pattern of the industry was taken into account when determining
financial performance possibilities. On the other hand CSR was classified
whether it was part of the core business component or not. This study posited
that CSR engagements that were within the core business function tend to
impact the financial situation when difficult economics times hit the industry.
This result affirms the need to have CSR activities that are highly identified
with the industry where a company belongs and greatly identifiable with the
market it serves.
Since banks largely constitute the service industry identified in this
study, it is of value to look at the CSR and financial performance link among
Islamic banks (Mallin, Farag and Ow-Yong, 2014). Using CSR disclosure that
covers ten dimensions and financial performance using profitability ratios, this
study asserts the inclination of Islamic banks towards commitment in its vision
and mission more than articulating its position in mandatory disclosure
recommendations. Meanwhile, in a research crafted using publicly traded
Swedish companies as study cohort, CSR and financial performance were
found to have no significant relationship (Johansson, Karlsson and Hagberg,
2015). The consistent use of ROA and Tobin’s Q in previous studies as metrics
for financial performance determination left no novel results when related with
CSR performance. However, it amplified the position that CSR and financial
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performance relationships can create varying results depending on industry,
location factors and differences in metrics used (Peng and Yang, 2012).
Table 22 Recent Direction of CSR and Financial Performance Relationship Studies
CSR Performance Basis Financial Performance Basis Year, Subject and Results
Voluntary disclosures Stock returns 2010; Greek companies; positive correlation
Five Dimensions of CSR according to Clarkson (1995)
Profitability ratios 2011; tourism related industries; effect is per dimension/varied
CSR Engagement based on KLD Index
ROA and R&D costs 2012; longitudinal data of Canadian firms; varied results and engagement pace does not moderate the relationship
CSR activities as to core and non-core
Consumer spending 2013; restaurants in U.S.; varied and economic conditions as intervening factor
Ten CSR dimensions from disclosure reports
Supervisory board size 2014; Islamic banks in 13 countries; CSR disclosure is determined by financial performance
KLD Index ROA and Tobin’s Q 2015; Swedish publicly listed companies; no significant relationship
Source: Researcher’s Compilation
A study on ASEAN48 top listed companies showed a high commitment
on the beliefs of Corporate Social Responsibility. Using corporate commitment
through social disclosure in GRI and financial performance using the proxy
ROA, ROE and Earnings per Share, the study posited that correlation results
between the variables vary when country context and industry sectors were
considered (Waworuntu, Wantah and Rusmanto, 2014). Clearly, the recent
48 ASEAN stands for Association of Southeast Asian Nations. It was founded in 1967 by the five original nations namely, Indonesia, Malaysia, Philippines, Singapore and Thailand. The purpose of this regional cooperation is embodied in its foremost objective to promote peace, freedom and prosperity. http://jakartapm.dfa.gov.ph/index.php/asean-history
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studies have not helped in finally clarifying the one type of relationship that
may exist between CSR and financial performance, even when efforts were
made to create differentiation using new industries and national peculiarities.
These results only strengthened the position of Peng and Yang (2012), that
country and industry contexts are factors in ascertaining a relationship of this
nature, variables used notwithstanding. A clearer picture is given in Table 22
where the study locales were highlighted, the CSR and financial metrics used
were pronounced and the corresponding study results were summarized.
Studies of late also showed the importance of looking at CSR and
financial performance relationship using moderating factors. As no direct
relationship between CSR and financial performance can be made even up to
this time, the smarter way to look at this matter is to consider mediators such as
sustainable competitive advantage, reputation and customer satisfaction as in
the case of two hundred five Iranian companies that were studied for this
purpose (Saeidi, Sofian, Saeidi, Saeidi and Saaeidi, 2015). The study
concluded that only reputation and competitive advantage mediate the CSR
and FP relationship. On the other hand, a study conducted in the United
Kingdom showed that carbon emission disclosure mediate the corporate carbon
emission proxy of CSR and financial performance relationship (Liu, Zhou,
Yang and Hoepner, 2016). As a factor negatively associated with financial
performance, carbon emissions disclosure, an honest self-assessment of the ill
footprints that a company leaves on the planet, is enough reason to harm the
firm’s reputation. This impact on reputation ultimately redounds to negative
results in financial performance.
Innovation and productivity were also considered as mediating variables
in a CSR and financial performance relationship study (Al-Shuaibi, 2016).
Using Structural Equating Modeling, one hundred ninety seven firms in Saudi
Arabia were tested on CSR, productivity, innovation and performance
dimensions. It was found that some factors are more influential in results than
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the others. This study further showed the relevance of determining the many
other facets oaf CSR and financial performance relationship as crucial
information when navigating the engagements of the company during
economic crisis and when contemplating to enter a new business market.
The robustness of factors considered when analyzing the CSR and
financial performance relationship may be as important as that of the depth of
reporting that would be done by companies. In Germany, Austria and
Switzerland, the importance of CSR reporting was observed and a study
showed empirical evidence that a higher reporting quality reduces the volatility
of stock returns, as well as abnormal returns resulting from unexpected and
untoward CSR performance risk (Gruener, Gutsche and Schulz, 2014). This
situation asserts that a transparent and precise CSR reporting is an impetus to a
better firm valuation. The amount of reports that are either separately prepared
or fused with other disclosure documents magnifies the relationship that indeed
exists in aspects of CSR and financial performance. The ideas and study results
highlighted in this section seem to strengthen the existence of a growing
interest in the value of CSR and FP studies, both in quality and quantity.
If one were to follow the trends in Philippine business situation,
possible information worth considering is the responses of corporate movers
and shakers on the perceived benefits of CSR as shown in Table 23.
Source: Researcher’s Compilation
Table 23 Philippine Business Leaders’ Perception of Benefits Derived from doing CSR
1. Maintenance of good relationship with the community. 2. Maintenance of good relationship with other stakeholders. 3. Maintenance of good relationship with the government. 4. Helps improve employee satisfaction and retention. 5. Helps improve customer satisfaction. 6. Contributes to the company’s profits. 7. Generates savings for the company. 8. Generates awards for the company.
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The perception that CSR is good for the stakeholders, the government,
the community, the employees and that it generated profits for the company are
valuable awareness factors that are too important to ignore. If institutions were
to succeed in any corporate governance direction, it is simply evident that
financial performance motivation must be pursued with social performance
motivation going hand in hand with it. The roadblocks may not be simple.
Even theories are challenging the need for corporate social performance to a
role that corporations should perform. For now, it is best to view the crucial co-
existenceof CSR and Financial Performance in the long-term view of the
company’s presence in the economic and social communities.
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3 Specific Empirical Sections
This section articulates the methods utilized to arrive at answers for the
research questions presented. It specified the empirical method that was
adopted as well as the manner by which the CSR performance and Financial
Performance of the eighty companies involved in the study were established. It
explains the statistical treatment involved in ascertaining the relationship
between CSR and Financial Performance using selected financial ratios and the
methodology employed for the CSR scoring process. Consequently, data were
analyzed, interpreted and explained in relation to the relevant theories chosen
for the study. Finally, recommendations were drawn and concluding insights
were presented.
3.1 Research Hypotheses
Based on the Statement of the Problems, the following null (Ho) and
alternative (Ha) are derived at 95% level of confidence:
From Statement of the Problem 8:
Ho1:There is no significant relationship between Corporate Social
Responsibility and firm’s size in Southeast Asian companies from 2006-2015.
Ha1:There is significant relationship between Corporate Social Responsibility
and firm’s size in Southeast Asian companies from 2006-2015.
From Statement of the Problem 9:
Ho2: There is no significant relationship between Corporate Social
Responsibility and level of risk in Southeast Asian companies from 2006-2015.
Ha2: There is significant relationship between Corporate Social Responsibility
and level of risk in Southeast Asian companies from 2006-2015.
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From Statement of the Problem 10:
SOP 10.a
Ho3: There is no significant relationship between Corporate Social
Responsibility and Return on Assets in Southeast Asian companies from 2006-
2015.
Ha3: There is significant relationship between Corporate Social Responsibility
and Return on Assets in Southeast Asian companies from 2006-2015.
SOP 10.b
Ho4: There is no significant relationship between Corporate Social
Responsibility and Return on Equity in Southeast Asian companies from 2006-
2015.
Ha4: There is significant relationship between Corporate Social Responsibility
and Return on Equity in Southeast Asian companies from 2006-2015.
SOP 10.c
Ho5: There is no significant relationship between Corporate Social
Responsibility and Return on Capital Employed in Southeast Asian companies
from 2006-2015.
Ha5: There is significant relationship between Corporate Social Responsibility
and Return on Capital Employed in Southeast Asian companies from 2006-
2015.
SOP 10.d
Ho6: There is no significant relationship between Corporate Social
Responsibility and Gross Profit Margin in Southeast Asian companies from
2006-2015.
Ha6: There is significant relationship between Corporate Social Responsibility
and Gross Profit Margin in Southeast Asian companies from 2006-2015.
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SOP 10.e
Ho7: There is no significant relationship between Corporate Social
Responsibility and Net Profit Margin in Southeast Asian companies from
2006-2015.
Ha7: There is significant relationship between Corporate Social Responsibility
and Net Profit Margin in Southeast Asian companies from 2006-2015.
SOP 10.f
Ho8: There is no significant relationship between Corporate Social
Responsibility and Earnings per Share in Southeast Asian companies from
2006-2015.
Ha8: There is significant relationship between Corporate Social Responsibility
and Earnings per Share in Southeast Asian companies from 2006-2015.
SOP 10.g
Ho9: There is no significant relationship between Corporate Social
Responsibility and Price/Earnings Ratio in Southeast Asian companies from
2006- 2015.
Ha9: There is significant relationship between Corporate Social Responsibility
and Price/Earnings Ratio in Southeast Asian companies from 2006-2015.
SOP 10.h
Ho10: There is no significant relationship between Corporate Social
Responsibility and Price/Cash Flow Ratio in Southeast Asian companies from
2006-2015.
Ha10: There is significant relationship between Corporate Social
Responsibility and Price/Cash Flow Ratio in Southeast Asian companies from
2006-2015.
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SOP 10.i
Ho11: There is no significant relationship between Corporate Social
Responsibility and Price/Book Value Ratio in Southeast Asian companies from
2006-2015.
Ha11: There is significant relationship between Corporate Social
Responsibility and Price/Book Value Ratio in Southeast Asian companies from
2006-2015.
SOP 10.j
Ho12: There is no significant relationship between Corporate Social
Responsibility and Dividend Yield in Southeast Asian companies from 2006-
2015.
Ha12: There is significant relationship between Corporate Social
Responsibility and Dividend Yield in Southeast Asian companies from 2006-
2015.
3.2 Research Design
This section itemized the procedure done to select the companies that
formed the cohort of this research, how the Financial Performance for the
periods 2006-2015 were obtained, the determination of the yearly CSR scores
for the same period and the statistical method that was employed to test the
hypothesis.
3.2.1 Unit of Analysis and Statistics Used
Financial performance was represented by ten ratios per company for
ten years. Correspondingly, CSR performance was represented by a hundred
percentile score converted to equivalent points for the ten year-specific factors
that were used in the study. Pearson Product Moment Correlation coefficient
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denoted by r was derived to determine the strength of linear association
between CSR and FP variables. This tool was chosen due to the difference in
scale and units of measurement of the CSR and FP variables used in this study.
While one is in the form of ratios, the other is in the form of intervals.
Likewise the position of this paper that CSR and Financial Performance
exhibits dual causality makes the Pearson correlation coefficient applicable. It
should be noted that this tool does not take into consideration whether a
variable has been classified as independent or dependent. In this statistical tool
all variables are treated equally, and it makes no account of the reasons behind
the choice of the variables being compared.
3.2.2 Selection Method
Selection of Companies
The companies were selected based on their consistent appearance in
the uppermost list of top 100 performing companies in each of the four
countries included in the study namely, Indonesia, Malaysia, Philippines and
Thailand. The list was cross checked with the regional companies that
appeared in the issues of Fortune 500 for the last ten years, the sustainable
companies found in Southeast Asia identified by the Asian Sustainability
Rating, the revenue reports of the taxation institution of the countries as well as
the four countries’ respective stock markets, namely Bursa Malaysia, the
Philippine Stock Exchanges, the Jakarta Stock Exchange and the Stock
Exchange of Thailand. Purposive sampling was done resulting to twenty
companies from each country. This was done for uniformity in country
representation. This resulted to a sample of eighty companies coming from
various industries. However, these eighty companies were only categorized as
either manufacturing or services for ease of data analysis.
Selection of Financial Performance Ratios
The financial ratios used were consistent with those that were utilized in
previous researches on social performance and financial performance
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relationships. Return on Assets, Return on Equity and Earnings per Share used
by Margolis and Walsh (1997) was maintained.
Selection of CSR Performance Indicators
Following the components of Asian Sustainability Rating, the
company’s adoption to GRI and Global Compact was considered as a CSR
indicator in this study. In addition, the CSR Survey on Hang Seng constituent
companies performed in Hong Kong served as additional basis for the ten-year
CSR criteria.
3.2.3 Data Source
The scores for CSR performance were obtained from ten different
factors, each one representing a component year. The yearly CSR data was
determined using available public documents, media releases, corporate
websites, business environment updates, web-based survey and structured
interview of representatives of selected company samples. The components of
CSR were scored based on the Likert-type scale denoting absence, slight
presence, moderate presence, high presence and very high presence of CSR
indicators. The articulation of the CSR component for the focus was based on a
checklist from among opinions of CEOs and CSR practitioners largely based in
the Philippines.
The 2006 CSR was represented by the factor ownership structure, i.e.
family-owned and/or controlled with a possible score of 60 points or publicly
owned with highest possible core of 100 points. The assumption was that
publicly - owned firms have wider stakeholder group, hence a stricter CSR
requirement and expected response. Given that the CSR in Southeast is not
measured prior to this research, the initial basis is type of business ownership.
It is assumed that compared to family-owned firm, a public firm would be in a
greater public scrutiny and was therefore compelled to perform better on CSR.
Year 2007 CSR pertained to a company’s direct environmental effect
taking into account the very nature of its core business operation getting.
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Extracting companies were therefore expected to score low on this factor.
Banks and other companies in the financial sector were expected to score high
on this factor.
Year 2008 CSR performance indicated the presence or absence of a
philanthropic activity. Known as corporate giving, a high occurrence of
philanthropic activities would score high on this factor at a range of 20 to 100
points. It is reiterated that this basis was created under the explanations
presented in literature, which expressed that philanthropy was the
acknowledged beginning of CSR practice.
Year 2009 CSR indicated the presence or absence of a Code of Conduct
that itemized the multi-stakeholder engagement basis of conduct of the
company. The points were either 100 to denote that a Code of Conduct/Code
of Ethics was found in the corporate website or 20 points when there was no
mention at all of a Code of Conduct in company web based publications. This
is to emphasize that before CSR could be performed it is crucial that the
company is able to communicate its values and principles to the public. This is
corollary to the CSR performance method applied in the earlier studies of Fry
and Hock in 1975 and Preston and O’Bannon in 1997 based on disclosure.
Year 2010 CSR pertained to the company’s status on the Global
Reporting Initiative or GRI, a voluntary reporting platform for businesses. The
score of 100 is given to companies who are on reporting status and for non-
reporting / non-following companies in the standards set by GRI, 20 points
will be given. This indicator of CSR presence has universal applicability.
Year 2011 CSR implied that application or claims of following the UN
Global Compact with scores of either 100 or 60, if there was not even a
mention of its use at all would be given to the companies as their year scores.
The UN GC is an index for global reporting, which although voluntary in
nature is complete with the factors of indicated in the Millennium
Development Goals and now with the Sustainable Development Goals set by
the United Nations.
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Year 2012 CSR indicated the score given to a company when a
discussion on Good Corporate Governance = 100 is found in its website or
none at all = 20, given that communicating GCG is a necessary step towards
greater transparency and a measure of accountability to stakeholders. Year
2013 CSR was measured based on the indication of a Corporate Social
Responsibility framework in the corporate website as 100 points or 20 points
for none at all, given that the website would be the most available document to
communicate a company’s CSR framework and an important tool for rating
entities to validate or negate a company’ CSR claims.
Year 2014 CSR points was based on the availability of a published
Sustainability Report, given 100 points versus none at all at 20 points,
considering that the publication of a Sustainability Report is already
widespread for publicly-listed companies. Finally, the year 2015 CSR was
scored based on the Corporate Social Responsibility and/or Good Corporate
Governance awards received as either 100 points or none yet at 20 points,
given that an award by a third party is an affirmation of the company’s good
performance.
Other Variables
To understand what drove CSR performance other than Financial
Performance, the size of the firm (Orlitzky, 2001) as well as its level of risk
were included in the study. Consistent with the ratios used in the determination
of financial performance, firm size was computed as Enterprise Multiple that
is, Enterprise Value / EBITDA and level of risk as Total Debt/Equity.
Enterprise Multiple was chosen to proxy for firm size as it took into account
the value of the firm as a candidate for acquisition. Enterprise Multiple is
applicable for cross-country comparisons since it does not consider the
possible effects of the differences in country taxation. A higher Enterprise
Multiple value is deemed to be a sizeable company, which does not qualify as
a good takeover candidate. It is assumed that the higher the size, the more
resources were available for the company. This meant that the company has the
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capability to back up its CSR initiatives. A low Enterprise Multiple value
meant that a company would be a good takeover candidate and this
vulnerability would be detrimental to the sustainability of any current or
prospective CSR that it might wish to consider.
Meanwhile, total Debt to Equity ratio underscored the leveraging
capacity of the company. The higher the leverage, the greater is the possibility
that the company is in a potentially difficult situation, at the detriment of its
stockholders. This situation would necessitate a slowdown in any CSR
initiative considering the scarcity in resources.
3.2.4 Data Analysis
To ascertain the linear association of CSR performance and Financial
Performance among Southeast Asian companies over the ten-year period
indicated, the researcher utilized correlation analysis using the Pearson Product
Moment Correlation denoted as r. As a test that will indicate the strength of
linear association between the two variables, the r will also attempt to draw a
line of best fit through the data of these two variables. The results were tested
for its 2-tailed alpha coefficient to measure the degree of significant
relationship and thereafter determine the rejection or acceptance of the null
hypothesis.
As a measure of correlation coefficient, the r is not sensitive with the
commonality of the metrics of the two variables that will be measured. A
variable could be in interval form on one hand and a ratio form on the other,
yet they can still be measured on their linear association. In a related manner,
the r is not strict on the labeling of a dependent or an independent variable as it
treated all variables equally. This type of analysis was an important
consideration in the CSR and Financial Performance relationship study where
one is assumed to cause the other, either to increase or decrease and vice versa.
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3.3 Research Limitations
The study is limited on the following areas:
1. The heterogeneity of the industries were the sample companies could be
found;
2. The four countries that were made part of the cohort as a good
representation of the regional context being considered; and
3. The non-representation of other macroeconomic variables that may have
effects on the way business is conducted in the various countries that
were part of this study.
3.4 Research Findings
Profile of companies
To simplify the reporting of firm classification, the eighty companies
from four countries were identified as either manufacturing or services only.
Table 24 shows that 45% of the companies considered in the study were
engaged in the manufacturing of products and 55% of the companies were into
delivery of services. Table 24 Industry type by country
Industry type Indonesia Malaysia Philippines Thailand Service 44 (55%) 12 (60%) 10 (50%) 11 (55%) 11 (55%) Manufacturing 36 (45%) 8 (40%) 10 (50%) 9 (45%) 9 (45%) Total 80 (100%) 20 (100%) 20 (100%) 20 (100%) 20 (100%)
The same inclination can be seen in the per country data, were majority
of the companies in the top twenty slots of the most financially performing
firms are in service delivery. As far as the services sector is concerned, the
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concentration of the companies that were studied were engaged in banking and
telecommunications.
The CSR performance of Southeast Asian companies from 2006-2015
The CSR performance of Southeast Asian companies from 2006-2015
can be seen in Table 25. It shows that the highest score indicating CSR
performance was posted by Thailand in year 2014 at 98%, while the lowest
score was that of Philippines at 52% in 2012. When aggregated, companies in
Southeast Asia exhibited a noteworthy CSR performance with an average score
of 90% in year 2007, while the lowest average score of 58% was posted in year
2015. CSR performance in 2007 was based on the direct environmental impact
of the companies being studied as a default of their core business.
Table 25 CSR Performance of Southeast Asian companies
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Average Indonesia 64 84 64 66 76 76 84 64 92 58 73 Malaysia 76 92 66 68 96 84 88 73 92 56 79 Philippines 69 88 68 68 84 84 52 76 68 57 71 Thailand 74 96 62 64 96 88 92 66 98 62 80 Average 71 90 65 67 88 83 79 70 88 58 76
Fifty five percent of the companies studied were engaged in service.
The lowest average CSR score was posted in 2015 when the basis for CSR
performance was in the number of sustainability-related local or international
awards a company received. In a related item, companies in Thailand exhibited
the highest average CSR score over the ten-year research period while
Philippine companies posted the lowest CSR score. Generally, the average
CSR performance score of 76 for the companies in the region is already an
indicator of high presence of social responsibility performance.
Of further interest is the type of CSR engagement that was mostly
performed by the eighty companies that were studied. Table 26 shows
education and education related activities top the list at 31%. This was
followed by environment related CSR engagements at 17% and poverty
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alleviation programs at 16%. While companies still perform donations or
philanthropy within their CSR agenda at 7%, it should be noted that they are
already serious in promoting workplace programs as a separate endeavor at
6%. Funds for research other than education and to pursue advocacy is still at
a low 4%.
Table 26 Type of CSR Engagements Percentage Education 31% Environment related 17% Poverty Alleviation 16% Enterprise Development 11% Community Infrastructure 8% Donations 7% Workplace Programs 6% Research and Advocacy 4% Total 100%
Moreover, worthy of attention is the unique type of institutional
collaboration that is pursued by companies in Southeast Asia when they
engage in CSR programs. Table 27 shows that schools and other similar
educational institutions top the list of institutional collaboration at 30%. The
interface with schools is double in percentage compared to the cooperation
with local communities at 15%. The collaboration with national government
agencies and local government units is at 8% and 11% respectively. The
significant role of non-profit organizations in community work can be seen at
the 13% extent of collaboration that companies have undertaken with them. It
is however alarming that the agriculture and aqua-culture dependent population
of the region has financially profitable companies that only pursue minimal
collaboration initiatives with the agriculture and fishing sector at 5% and 4%
respectively.
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In the same vein, there are interest groups that are now being considered
as valuable stakeholders and community program partners by companies in the
region. These include the women’s group (7%), the indigenous peoples (3%),
the elderly (2%) and the persons with disabilities (2%).
Table 27 Type of Institutional Collaboration Specific Institution
Percentage of Engagement
Schools and educational institutions 30% Local community 15% NGO 13% Local government units 11% National government units 8% Women’s organization 7% Agricultural and farming communities 5% Fishing communities and associations 4% Indigenous peoples 3% Elderly or senior citizens group 2% Persons with disabilities 2% Total 100%
It must be emphasized at this point that the large number of people
benefitting from various corporate CSR funds are those who are in the
activities that create ripple effects and self-reinforcing. Education is a favored
CSR activity of companies because they see it as an equalizer of the perceived
imbalance in access to opportunities. However, there is also imminent danger
when sectors such as agriculture and fishing communities are neglected. As a
safety net when food security in the region is considered, corporations must
also see to it that least noticed sectors, and least advocated groups would also
benefit from the rewards of corporate performance. Overall, the CSR direction
in the Southeast Asian region is in a good posture and the challenge would be
likely aligned in creative execution, sustainability and impact measurements
for it to be relevant as a multi-stakeholder undertaking.
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The Financial performance of Southeast Asian companies from 2006-2015 Table 28 Financial Performance of Southeast Asian companies using Return on Assets 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Average Indonesia 12.19 9.16 9.16 11.14 11.07 11.47 13.12 12.12 7.97 9.06 10.65 Malaysia 7.48 8.20 7.53 5.05 5.85 6.50 6.27 6.11 7.40 7.22 6.76 Philippines 8.28 8.55 5.23 7.38 7.48 7.08 7.09 6.55 6.71 8.95 7.33 Thailand 9.11 8.74 8.51 9.34 10.85 12.20 12.55 10.63 9.49 9.94 10.14 Average 9.27 8.66 7.61 8.23 8.81 9.31 9.76 8.85 7.89 8.79 8.72
Table 28 shows that Indonesian companies posted the highest financial
performance based on average Return on Assets at 10.65% while Malaysian
companies posted the lowest at 6.76%. On a yearly basis, the highest average
ROA was attributable to Indonesian companies in year 2012 at 13.12%.
Meanwhile, Philippine companies exhibited the lowest average ROA in 2008
at 5.23%.
Table 29 Financial Performance of Southeast Asian companies using Return on Equity
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Average Indonesia 24.77 23.02 22.53 26.20 26.15 26.45 28.37 26.00 22.42 23.71 24.96 Malaysia 17.06 18.90 17.22 12.52 14.59 15.62 16.01 14.35 16.15 16.15 15.86 Philippines
28.14 15.77 11.06 16.87 17.40 15.59 16.20 15.51 24.89 34.66 19.61
Thailand 20.57 18.88 26.83 19.29 23.39 27.57 29.24 25.96 24.21 25.16 24.11 Average 22.64 19.14 19.41 18.72 20.38 21.31 22.46 20.46 21.92 24.92 21.13
Table 29 shows that Indonesian companies posted the highest financial
performance based on average Return on Equity at 24.96% while Malaysian
companies posted the lowest at 15.86%. On a yearly basis, the highest and
lowest ROE was attributable to Philippine companies at 34.66% year 2015 and
11.06% in 2008 respectively.
Table 30 shows that Indonesian companies posted the highest financial
performance based on average Return on Capital Employed at 19.09% while
Malaysian companies posted the lowest at 10.58%. On a yearly basis, the
highest ROCE was attributable to Indonesian companies in year 2012 at
23.19%. Meanwhile, Philippine companies exhibited the lowest average ROCE
in 2008 at 7.73%.
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Table 30 Financial Performance of Southeast Asian companies using Return on Capital Employed
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Average Indonesia 17.94 17.24 17.29 19.42 20.43 21.78 23.19 20.65 15.56 17.38 19.09 Malaysia 11.71 13.02 12.29 8.05 9.51 9.67 9.62 9.12 11.58 11.19 10.58 Philippines 12.72 12.45 7.73 10.96 11.40 11.12 11.29 10.45 10.08 12.94 11.11 Thailand 13.80 13.01 12.86 13.51 16.09 19.23 20.25 16.34 14.53 15.29 15.49 Average 14.04 13.93 12.54 12.99 14.36 15.45 16.09 14.14 12.94 14.20 14.07
Table 31 shows that Philippine companies posted the highest financial
performance based on average Gross Profit Margin at 33.51%, while Thai
companies posted the lowest at 27.17%. On a yearly basis, the highest average
Gross Profit Margin was attributable to Philippine companies in year 2007 at
41.47%. Meanwhile, Thai companies exhibited the lowest average Gross Profit
Margin in 2013 at 25.91%.
Table 31 Financial performance of Southeast Asian companies using Gross Profit Margin 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Average Indonesia 27.66 28.01 29.93 32.54 35.46 36.73 39.50 39.85 29.21 27.81 32.67 Malaysia 31.96 31.64 30.55 29.12 31.05 28.99 28.89 27.45 34.29 33.20 30.71 Philippines 28.53 41.47 30.98 32.22 34.55 37.06 35.61 35.80 29.52 29.38 33.51 Thailand 27.88 25.60 25.97 27.60 27.51 26.87 27.64 25.91 27.82 28.93 27.17 Average 29.01 31.68 29.36 30.37 32.14 32.41 32.91 32.25 30.21 29.83 31.02
Table 32 shows that Philippine companies posted the highest financial
performance based on average Net Profit Margin at 115.51% while Indonesian
companies posted the lowest at 26.28%. On a yearly basis, the highest Net
Profit Margin was reflected among Philippine companies at 869.74 in year
2007. Meanwhile, Indonesian companies exhibited the lowest Net Profit
Margin in 2015 at 21.87%. Table 32 Financial Performance of Southeast Asian companies using Net Profit Margin
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Average Indonesia 22.48 23.88 23.82 26.68 29.54 28.76 31.72 30.15 23.86 21.87 26.28 Malaysia 33.67 34.02 32.31 29.41 30.94 29.24 30.76 29.02 34.99 35.37 31.97 Philippines 34.14 869.74 27.06 31.16 31.52 29.15 31.18 30.86 32.56 37.75 115.51 Thailand 25.17 27.96 27.38 26.97 30.42 32.78 32.54 33.89 28.68 28.38 29.42 Average 28.87 238.90 27.64 28.56 30.61 29.98 31.55 30.98 30.02 30.84 50.79
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Table 33 Financial Performance of Southeast Asian companies using Earnings per Share 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Average Indonesia 35.34 33.55 20.51 62.01 55.04 24.07 27.03 10.75 45.18 43.38 35.69 Malaysia 17.24 32.35 19.19 7.50 33.47 34.08 18.00 5.54 14.85 11.82 19.40 Philippines 26.79 25.13 5.24 60.58 42.18 6.57 22.56 15.45 84.96 53.59 34.31 Thailand 4.44 11.11 39.86 27.47 32.83 63.72 20.41 -0.5 24.13 8.59 23.21 Average 20.95 25.54 21.20 39.39 40.88 32.11 22.00 7.81 42.28 29.35 28.15
Table 33 shows that Indonesian companies posted the highest financial
performance based on average Earnings per Share 35.69% while Malaysian
companies posted the lowest at 19.40%. On a yearly basis, the highest
Earnings per Share were reflected among Philippine companies in year 2014 at
84.96%. Meanwhile, Thai companies exhibited the lowest Earnings per Share
in 2012 at -0.5%.
Table 34 Financial Performance of Southeast Asian companies using Price/Earnings Ratio
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Average Indonesia 25.35 27.99 36.05 34.65 49.15 220.88 16.58 13.69 19.37 20.42 46.41 Malaysia 15.45 15.07 13.47 18.74 18.69 17.70 15.65 16.69 15.45 15.87 16.28 Philippines 14.91 16.79 14.17 13.96 18.07 17.07 24.45 18.93 13.04 12.21 16.36 Thailand 11.48 16.36 10.62 20.58 12.65 13.27 13.98 14.51 11.16 10.98 13.56 Average 16.80 19.05 18.58 21.98 24.64 67.23 17.67 15.96 14.76 14.87 23.15
Table 34 shows that Indonesian companies posted the highest financial
performance based on average Price/Earnings Ratio 46.41% while Thai
companies posted the lowest at 13.56%. On a yearly basis, the highest
Price/Earnings Ratio was reflected among Indonesian companies at 220.88% in
year 2011. Meanwhile, Thai companies exhibited the lowest Price/Earnings
Ratio at 10.62% in 2008.
Table 35 Financial Performance of Southeast Asian companies using Price/Cash Flow Ratio 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Average Indonesia 13.86 17.36 34.21 27.85 28.54 32.00 36.84 38.03 12.72 10.67 25.21 Malaysia 10.49 10.16 8.50 10.02 10.82 11.19 12.41 12.83 8.15 8.51 10.31 Philippines 7.16 22.13 7.60 6.43 6.80 8.18 8.86 10.62 3.78 6.07 8.76 Thailand 5.40 5.42 7.00 7.56 5.46 6.12 12.60 9.80 6.20 5.22 7.08 Average 9.23 13.77 14.33 12.97 12.91 14.37 17.68 17.82 7.71 7.62 12.84
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Table 35 shows that Indonesian companies posted the highest financial
performance based on average Price/Cash Flow Ratio at 25.21% while Thai
companies posted the lowest at 7.08%. On a yearly basis, the highest
Price/Cash Flow Ratio was reflected among Indonesian companies at 38.03%
in year 2013. Meanwhile, Philippine companies exhibited the lowest
Price/Cash Flow Ratio in 2014 at 3.78%.
Table 36 Financial Performance of Southeast Asian companies using Price/Book Value Ratio 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Average Indonesia 4.09 4.85 8.51 5.50 8.68 9.39 4.10 3.46 2.96 2.77 5.43 Malaysia 2.02 2.32 2.24 2.40 2.46 2.44 2.54 2.79 1.66 1.90 2.28 Philippines 2.81 2.43 1.38 2.10 2.83 2.64 2.93 2.78 2.28 2.47 2.47 Thailand 3.58 3.99 4.55 2.87 4.26 5.97 5.85 6.09 3.03 3.08 4.33 Average 3.13 3.40 4.17 3.22 4.56 5.11 3.86 3.78 2.48 2.56 3.63
Table 36 shows that Indonesian companies posted the highest financial
performances based on average Price/Book Value Ratio at 5.43% while
Malaysian companies posted the lowest at 2.28%. On a yearly basis, the
highest Price/Book Value Ratio was reflected among Indonesian companies at
9.39% in year 2011. Meanwhile, Philippine companies exhibited the lowest
Price/Book Value Ratio in 2008 at 1.38%.
Table 37 Financial Performance of Southeast Asian companies using Dividend Yield
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Average Indonesia 2.79 2.23 2.42 3.63 3.15 2.75 2.74 2.58 5.32 4.34 3.20 Malaysia 2.65 2.88 3.64 2.72 3.15 3.32 3.31 2.93 2.66 2.51 2.98 Philippines 8.51 3.04 3.22 13.25 9.28 5.81 7.95 2.09 9.48 8.54 7.12 Thailand 3.59 3.85 4.41 4.53 4.34 4.86 4.07 3.97 2.91 12.00 4.85 Average 4.39 3.00 3.42 6.03 4.98 4.19 4.52 2.89 5.09 6.85 4.54
Table 37 shows that Philippine companies posted the highest financial
performance based on average Dividend Yield at 7.12 while Malaysian
companies posted the lowest at 2.98. On a yearly basis, the highest Dividend
Yield was reflected among Philippine companies at 13.25 in year 2009.
Meanwhile, Indonesian companies exhibited the lowest Dividend Yield in
2007 at 2.23.
185
The size of financially performing Southeast Asian companies which do Corporate Social Responsibility work from 2006-2015
Eighty companies form part of this regional study on CSR and Financial
performance relationship. Although these companies were conveniently
categorized under services and manufacturing, they actually come from diverse
industries that include property development, general industrial, oil and gas,
banking and financial services, telecommunications, food and agriculture,
power and utilities, retail, hospital services and tobacco manufacturing.
Table 38 Firm size (EBITDA/Total Assets) of SEA companies
Average Size
Range minimum
Range Maximum
Indonesia 15.42 0.29 72.77 Malaysia 9.13 0.16 14.60 Philippines 10.27 5.06 22.40 Thailand 9.96 4.98 20.32 Average 11.20 0.16 72.77 N=80
Table 38 shows the size of these companies using the computation
Enterprise Value over EBITDA. The largest companies that perform socially
responsible work can be found in Indonesia with an average size of 15.42,
followed by the Philippines and Thailand in several point below. Companies in
Malaysia appeared to be the smallest in firm size based on Enterprise Value
over EBITDA computation.
The level of risk of financially performing Southeast Asian companies which do Corporate Social Responsibility work from 2006-2015
Table 39 shows the level of risk of financially performing Southeast Asian companies, which is negatively inclined in the Malaysian corporate milieu. The nature of the business of these companies that were studied in Malaysia that were mostly agro-based, power and energy and technology underscores the high level of risk in some companies more than the others.
186
While service sector based companies scored low on level of risk, the average for the entire region is still considered high.
Table 39 Level of risk of SEA companies Country Average
Risk Range minimum
Range Maximum
Indonesia 79.86 2.1 456.25 Malaysia 101.16 7.68 296.02 Philippines 100.68 12.8 242.28 Thailand 80.92 26.57 138.46 Average 90.66 2.1 456.25
N=80
The degree of relationship of Corporate Social Responsibility and firm
size in Southeast Asian companies from 2006-2015
Table 40 Pearson r value and relationship of CSR and firm size Country Pearson r value Degree of Relationship Type of Relationship Indonesia 0.051 Very weak or no
relationship Positive
Malaysia 0.320 Weak Positive Philippines -0.036 Very weak or no
relationship Negative
Thailand 0.087 Very weak or no relationship
Positive
Overall 0.013 Very weak or no relationship
Positive
0-0.2 Very weak or no relation 0.21-0.4 Weak relation 0.41-0.6 Moderate relation 0.61-0.8 Strong relation 0.81-1.00 Very Strong relation
Table 40 above shows the correlation of CSR and firm size of Southeast
Asian companies denoting lowest positive correlation for companies in
Indonesia r= 0.051 and Thailand r = 0.087. The companies in the Philippines
showed negative correlation at r = -0.036. Malaysian companies posted the
highest although weak positive correlation at r = 0.320. Companies in the
Philippines exhibit very weak and negative CSR and firm size relationship.
Meanwhile, Thai companies exhibit a CSR and firm size relationship that is
very weak but positive.
187
Overall, for Southeast Asian companies, CSR and firm size has very
weak but positive relationship. This CSR and firm size relationship worth
considering since one tends to equip and enhance each other in both ways. A
large company denotes the substantial resources at its disposal that can be
utilized for CSR initiatives, including manpower and management. Meanwhile,
a positive CSR performance boosts the legitimacy of business to grow and
thereby improve its value.
The degree of relationship of Corporate Social Responsibility and the
companies’ level of risk in Southeast Asian companies from 2006-2015
Table 41 Pearson r value and relationship of CSR and level of risk Country Pearson r value Degree of
Relationship Type of Relationship
Indonesia -0.149 Very weak or no relationship
Negative
Malaysia 0.194 Very weak or no relationship
Positive
Philippines 0.084 Very weak or no relationship
Positive
Thailand -0.248 Weak Negative Overall -0.003 Very weak or no
relationship Negative
0-0.2 Very weak or no relation 0.21-0.4 Weak relation 0.41-0.6 Moderate relation 0.61-0.8 Strong relation 0.81-1.00 Very Strong relation
Table 41 above shows that companies in Malaysia (r = 0.194) and
Philippines (r = 0.084) exhibit very weak but positive correlation between CSR
and level of risk. The lowest negative correlation between CSR and level of
risk was noted in Thailand at r = -0.248. Meanwhile, a low and negative
correlation between CSR and level of risk was also exhibited by companies in
Indonesia where r = -0.149. Overall, CSR and level of risk among Southeast
Asian companies exhibit very weak and negative relationship.
188
The degree of relationship of Corporate Social Responsibility and
financial performance in Southeast Asia companies from 2006-2015
Table 42 below indicates that CSR and Return on Assets indicates
strong negative correlation among Malaysian companies in year 2006 at r = -
0.71. Meanwhile, it exhibited a strong positive correlation of r = 0.67 among
companies in the same country in year 2008. Finally, a moderate negative
correlation was reflected at r = -0.04 in Thailand in year 2010 Table 42 Pearson r values -Relationship between CSR and Return on Assets
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Overall Indonesia 0.09 0.03 0.00 -
0.34 -0.01 0.03 0.01 -
0.02 0.14 0.01 -0.01
Malaysia -0.71 0.21 0.67 0.32 0.25 0.02 0.12 -
0.19 0.24 -0.25 0.04
Strong Negative
Strong Positive
Philippines -0.16 0.16 0.04 0.24 -0.48 -0.29 0.07 -0.33
0.06 -0.06 -0.07
Moderate Negative
Thailand -0.27 0.11 0.00 -0.14
-0.04 0.20 0.29 -0.01
0.20 0.19 0.11
Overall -0.16 0.11 0.17 -
0.07 -0.11 0.02 0.16 -
0.17 0.21 -0.02
0-0.2 Very weak or no relation 0.21-0.4 Weak relation 0.41-0.6 Moderate relation 0.61-0.8 Strong relation 0.81-1.00 Very Strong relation
Table 43 shows the relationship of CSR to Return on Equity. It showed
strong negative correlation in Malaysia in 2006, at r= -0.64, moderate positive
in the same country at r – 0.58 in year 2008. In Thailand, a moderate negative
was exhibited in year 2010 at r = -0.50 and the same moderate positive relation
was seen in the same country in 2014, when r = 0.50. Overall, a weak positive
relationship was observed during the year 2014.
189
Table 43 Pearson r values - Relationship between CSR and Return on Equity
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Overall Indonesia -0.02 -0.16 -0.25 -0.08 0.10 0.10 0.11 0.03 0.35 0.12 0.04 Malaysia -0.64 0.19 0.58 -0.03 -0.02 0.06 0.14 -0.15 0.11 -0.20 0.02 Strong
Negative Moderate
Positive
Philippines 0.35 0.29 0.13 0.08 -0.50 -0.33 0.13 -0.06 0.50 -0.34 -0.04 Moderate
Negative Moderate
Positive
Thailand -0.21 0.10 -0.01 0.01 -0.14 0.20 0.13 0.01 0.31 0.05 0.04 Overall 0.05 0.05 0.03 -0.03 -0.17 0.04 0.19 -0.12 0.22 -0.16 Weak
Positive
0-0.2 Very weak or no relation 0.21-0.4 Weak relation 0.41-0.6 Moderate relation 0.61-0.8 Strong relation 0.81-1.00 Very Strong relation
Table 44 Pearson r values - Relationship between CSR and Return on Capital Employed
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Overall Indonesia -0.08 -0.05 -0.25 0.10 0.01 -0.57 0.12 0.03 0.35 0.12 0.04 Malaysia -0.03 0.06 0.58 -0.02 -0.03 -0.04 -0.20 -0.15 0.11 -0.20 0.02 Moderate
Positive
Philippines 0.08 0.36 0.13 -0.50 -0.50 -0.33 -0.34 -0.06 0.50 -0.34 -0.04 Moderate
Negative Moderate Negative
Moderate Positive
Thailand 0.01 -0.57 -0.01 -0.14 -0.14 0.20 0.05 0.01 0.31 0.05 0.04 Overall -0.03 -0.04 0.03 -0.17 -0.17 0.04 -0.16 -0.12 0.22 -0.16 Weak
Positive
0-0.2 Very weak or no relation 0.21-0.4 Weak relation 0.41-0.6 Moderate relation 0.61-0.8 Strong relation 0.81-1.00 Very Strong relation Table 44 above shows that the relationship between CSR and Return on
Capital Employed was moderate positive in year 2008 in Malaysia at r = 0.58,
in the Philippines in years 2009, 2010 and 2014 (r = -0.50).
Table 45 shows that CSR and Gross Profit Margin has moderate
negative relationship for Indonesian companies in year 2015 at r =-0.48.
Across countries, the positive relationship was weakest in the year 2007 at r
=0.03 and strongest in year 2010 and 2014, both at r =0.11.
190
Table 45 Pearson r values - Relationship between CSR and Gross Profit Margin
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Overall Indonesia -0.02 0.32 -0.15 -0.27 0.30 0.29 0.01 -0.14 0.36 -0.48 0.07 Moderate
Relation
Malaysia -0.16 0.20 0.19 0.05 -0.03 -0.06 0.18 -0.26 0.16 -0.03 0.02 Philippines -0.40 -0.01 -0.07 0.16 0.13 -0.25 -0.03 -0.28 -0.06 0.12 -0.01 Thailand 0.11 -0.33 -0.06 -0.09 0.16 -0.19 0.02 0.03 0.08 0.18 -0.01 Overall -0.11 0.03 -0.01 -0.02 0.11 -0.06 -0.03 -0.18 0.11 -0.06
0-0.2 Very weak or no relation 0.21-0.4 Weak relation 0.41-0.6 Moderate relation 0.61-0.8 Strong relation 0.81-1.00 Very Strong relation
Table 46 above shows the correlation of CSR and Net Profit Margin
across countries over the ten-year observation period. Noticeable is the strong
positive relationship that was shown in Indonesian companies in year 2014 at r
= 10.78. The strongest positive relationship was observed in year 2013 at r=
1.74, while the weakest positive relationship was observed in year 2014 at r =
0.0. Table 46 Pearson r values - Relationship between CSR and Net Profit Margin
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Overall Indonesia -0.32 0.18 -0.38 -0.16 0.17 0.17 -0.13 0.25 0.61 -0.19 0.06 Strong
Relation
Malaysia -0.03 0.07 -0.04 -0.27 -0.01 -0.30 0.21 -0.18 -0.22 0.09 -0.05 Philippines -0.32 0.10 0.27 0.08 0.08 -0.33 -0.02 -0.27 -0.08 -0.24 0.07 Thailand 0.15 -0.32 -0.29 -0.18 0.09 -0.02 0.15 -0.22 0.06 0.35 0.04 Overall -0.08 0.04 -0.09 -0.05 0.09 -0.09 0.05 -0.15 -0.01 0.03
0-0.2 Very weak or no relation 0.21-0.4 Weak relation 0.41-0.6 Moderate relation 0.61-0.8 Strong relation 0.81-1.00 Very Strong relation
Table 47 shows the correlation of CSR and Earnings per Share across
countries over the ten-year observation period. Noticeable is the moderate
relationship exhibited among Philippine companies in 2010 at r = -0.45 and in
191
Thai companies in 2011 when r = -0.54. Overall, CSR and Earnings Per Share
show a very weak correlation. Table 47 Pearson r values - Relationship between CSR and Earnings Per Share
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Overall Indonesia 0.07 -0.05 -0.04 -0.05 -0.03 0.05 -0.11 0.07 -0.02 -0.29 -0.03 Malaysia -0.03 0.06 0.02 -0.28 0.01 0.10 0.25 0.16 0.14 -0.37 0.04 Philippines 0.06 0.36 -0.14 0.17 -0.45 -0.15 0.18 0.08 0.00 -0.25 -0.07 Moderate
Relation
Thailand -0.31 -0.57 0.16 -0.02 -0.20 -0.54 -0.08 -0.17 0.19 0.07 -0.15 Moderate
Relation Very
Weak Overall -0.10 -0.04 0.01 -0.02 -0.19 -0.18 0.06 0.08 -0.14 -0.21
0-0.2 Very weak or no relation 0.21-0.4 Weak relation 0.41-0.6 Moderate relation 0.61-0.8 Strong relation 0.81-1.00 Very Strong relation Table 48 Pearson r values- Relationship between CSR and Price/Earnings Ratio
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Overall Indonesia 0.07 -0.11 -0.10 -0.10 -0.36 -0.34 0.37 -0.19 -0.47 -0.03 -0.16 Moderate
Relation Very
Weak Malaysia -0.20 0.30 0.08 0.29 0.09 0.14 0.11 -0.31 -0.27 -0.18 0.05 Philippines 0.33 -0.23 0.11 -0.05 0.19 0.11 -0.21 0.26 0.13 0.08 -0.01 Thailand -0.23 0.12 0.21 -0.04 0.07 0.07 0.25 0.49 -0.13 -0.20 0.02 Moderate
Relation
Overall -0.03 -0.08 -0.04 -0.04 -0.26 -0.21 -0.15 0.18 -0.19 -0.05 Weak
Relation
0-0.2 Very weak or no relation 0.21-0.4 Weak relation 0.41-0.6 Moderate relation 0.61-0.8 Strong relation 0.81-1.00 Very Strong relation
Table 48 above shows that CSR and Price Earnings Ratio exhibits
moderate relation in Indonesia at r - -0.47 in 2014, but is overall very weak for
the same country when taken in aggregate years. The same moderate relation
was seen in year 2013 in the Philippines, when r = 0.49. Overall for the entire
region, correlation between these two variables was observed weak in year
2010.
192
Table 49 on the other hand shows that various correlation types exist
between CSR and Price/Cash Flow Ratio when taken per country and per year
of observation. Moderate relation between CSR and P/CF was observed in
year 2007 among Malaysian companies at r = 0.37, among Philippine
companies in year 2009 at r = .33 and among Thai in year 2012 at r = 0.17.
Overall, a weak correlation was found in years 2006 at r = -0.29 and during
2010 at r = -0.26. Table 49 Relationship between CSR and P/CF Ratio
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Overall Indonesia -0.43 -0.58 -0.11 -0.08 -0.33 -
0.31 -0.40 -
0.12 -0.19
-0.41
-0.21
Moderate Relation
Weak Relation
Malaysia -0.16 0.37 0.34 0.51 0.04 0.25 -0.42 -0.13
0.03 -0.34
0.03
Moderate Relation
Philippines -0.12 0.09 0.27 0.33 0.24 0.13 0.52 0.23 -0.17
-0.10
0.12
Moderate Relation
Thailand -0.29 0.11 0.33 -0.07 -0.37 0.22 0.17 0.41 0.08 0.23 0.07 Overall -0.29 -0.07 -0.02 -0.02 -0.26 -
0.18 -0.11 -
0.06 0.06 -
0.17
Weak Relation
Weak Relation
0-0.2 Very weak or no relation 0.21-0.4 Weak relation 0.41-0.6 Moderate relation 0.61-0.8 Strong relation 0.81-1.00 Very Strong relation
Table 50 shows that CSR and Price/Book Value Ratio exhibited a
moderate relation in year 2006 among Indonesian companies at r = -0.45. It
also showed a moderate relation in 2011 among Indonesian companies at r = -
0.50 and among Philippine companies in year 2014 at r = 0.51. Overall, these
two variables exhibited an overall weak relation in years 2010, with r = -0.28,
year 2011 with r = -0.22 and year 2014 with r = 0.23.
193
Table 50 Relationship between CSR and Price/Book Value Ratio
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Overall Indonesia -0.45 -0.40 -0.13 -0.06 -0.37 -0.50 0.27 -0.08 0.20 -0.18 -0.21 Moderate
Relation Moderate
Relation Weak
Relation Malaysia -0.43 0.05 0.21 0.07 0.12 0.18 0.17 -0.34 0.04 -0.31 0.02 Philippines 0.26 0.03 0.13 -0.10 -0.18 -0.09 0.09 0.41 0.51 -0.13 0.07 Moderate
Relation
Thailand 0.09 0.18 0.03 0.08 0.06 0.23 -0.24 0.05 0.13 0.22 0.08 Overall -0.11 -0.11 -0.07 -0.03 -0.28 -0.22 0.10 -0.05 0.23 0.02 Weak
Relation Weak Relation
Weak Relation
0-0.2 Very weak or no relation 0.21-0.4 Weak relation 0.41-0.6 Moderate relation 0.61-0.8 Strong relation 0.81-1.00 Very Strong relation Table 51 Relationship between CSR and Dividend Yield
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Overall Indonesia 0.53 0.42 -0.22 -0.13 -0.23 -0.1 0.12 0.42 -0.02 0.33 0.07 Moderate
Relation
Malaysia -0.01 0.13 0.08 -0.03 0.13 0.14 -0.53 -0.24 0.23 -0.21 -0.02 Moderate
Relation
Philippines -0.34 0.20 0.09 -0.11 0.12 0.11 -0.18 -0.02 0.45 0.37 0.01 Moderate
Relation
Thailand 0.00 -0.02 -0.12 -0.01 -0.10 0.19 0.06 -0.22 0.21 -0.09 -0.11 Overall -0.17 0.24 -0.04 -0.06 0.04 0.08 -0.16 -0.12 0.07 0.10 Weak
Relation
0-0.2 Very weak or no relation 0.21-0.4 Weak relation 0.41-0.6 Moderate relation 0.61-0.8 Strong relation 0.81-1.00 Very Strong relation
Table 51 above shows the relation between CSR and Dividend Yield. In
year 2006, a moderate relation was seen among companies in Indonesia at r =
0.53. The same negative and moderate relation was found in year 2012 among
companies in Malaysia at r = -0.53. A positive and moderate relation was also
found among Philippine companies in year 2014 when r = 0.45.
194
The significant relationship of Corporate Social Responsibility and firm
size in Southeast Asian companies from 2006-2015
Table 52 F-computed values - Significant relationship between CSR and firm size Country R Relationship Type of
Relationship F Computed
F Critical Significance
Indonesia 0.051 No Relationship 0.05 4.41 Not Significant
Malaysia 0.320 Weak Relationship
Positive 2.05 4.41 Not Significant
Philippines -0.036 No relationship Negative 0.02 4.41 Not significant
Thailand 0.087 No relationship 0.14 4.41 Not significant
Overall 0.013 No Relationship 0.01 3.96 Not Significant
0-0.2 Very weak or no relation 0.21-0.4 Weak relation 0.41-0.6 Moderate relation 0.61-0.8 Strong relation 0.81-1.00 Very Strong relation
Table 52 shows that CSR performance and firm size in relationship
among Southeast Asian companies is not significant as shown by the f-
computed values that are way below the F-critical level of 4.41. This meant
that the relationship between CSR and firm size is not significant and therefore
the null hypothesis is accepted.
The significant relationship between Corporate Social Responsibility
and level of risk in Southeast Asian companies
Table 53 shows that despite the positive relation exhibited by Malaysian
companies when CSR is related to level of risk, overall, result of f-computed
values indicated that the relationship between CSR and level of risk is not
significant. As to the decision on the posited significant relationship between
CSR and firm size, the null hypothesis is accepted.
195
Table 53 F-computed - Significant relationship between CSR and level of risk Country R Relationship Type of
Relationship F Computed
F Critical Significance
Indonesia -0.149 Very Weak Negative 0.41 4.41 Not Significant
Malaysia 0.194 Very Weak Positive 0.70 4.41 Not Significant
Philippines 0.084 No Relationship 0.13 4.41 Not significant Thailand -0.248 Weak Negative 1.18 4.41 Not significant Overall 0.003 No Relationship 0.00 3.96 Not
Significant 0-0.2 Very weak or no relation 0.21-0.4 Weak relation 0.41-0.6 Moderate relation 0.61-0.8 Strong relation 0.81-1.00 Very Strong relation
The significant relationship of Corporate Social Responsibility and
Financial performance in Southeast Asian companies from 2006-2015
10.a The significant relationship between Corporate Social
Responsibility and Return on Assets in Southeast Asian companies from 2006-
2015.
Table 54 F-computed values – Significant relationship between CSR and Return on Assets 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Overall Indonesia 0.16 0.02 0.00 2.41 0.00 0.01 0.00 0.01 0.34 0.00 0.01 Malaysia 17.91 0.84 14.62 2.03 1.19 0.01 0.27 0.70 1.12 1.20 0.32 Sig Sig Philippines 0.48 0.44 0.04 1.14 5.50 1.67 0.09 2.27 0.06 0.07 0.99 Sig Thailand 1.42 0.22 0.00 0.37 0.03 0.72 1.63 0.00 0.76 0.64 2.36 Overall 1.97 0.89 2.45 0.37 1.04 0.05 2.17 2.35 3.58 0.03
*F critical value 4.41 (per country per year) (per item) *F critical value 3.96 (overall per year) (down) *F critical value 3.89 (overall per country from 2006-2015) (across)
Table 54 shows that significant relationship existed between CSR and
financial performance in the form of Return on Assets in year 2006 and
2008 among Malaysian companies, at f = 17.91 and f = 14.62, respectively.
Meanwhile, a significant relationship also existed between CSR and ROA
196
among Philippine companies in the year 2010, when f = 5.50. The null
hypothesis is accepted, that is, there is no significant relationship between
Corporate Social Responsibility and Return on Assets in Southeast Asian
companies from 2006 – 2015.
10.b The significant relationship between Corporate Social
Responsibility and Return on Equity in Southeast Asian companies from 2006-
2015
Table 55 F-computed values – Significant relationship between CSR and Return on Equity 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Overall Indonesia 0.01 0.48 1.16 0.11 0.16 0.19 0.21 0.02 2.58 0.27 0.28 Malaysia 12.58 0.65 9.33 0.01 0.01 0.06 0.35 0.40 0.22 0.73 0.09 Sig sig Philippines 2.5 1.66 0.33 0.12 5.80 2.19 0.30 0.06 5.92 2.4 0.34 sig sig Thailand 0.85 0.19 0.00 0.00 0.37 0.78 0.32 0.00 1.88 0.05 0.27 Overall 0.17 0.17 0.08 0.05 2.39 0.12 2.81 1.06 4.05 1.74 sig
*F critical value 4.41 (per country per year) (per item) *F critical value 3.96 (overall per year) (down) *F critical value 3.89 (overall per country from 2006-2015) (across)
Table 55 shows that significant relationship existed between CSR and
financial performance in the form of Return on Equity in year 2006 and 2008
among Malaysian companies, at f = 12.58 and f = 9.33, respectively.
Meanwhile, a significant relationship also existed between CSR and ROE
among Philippine companies in the year 2010, when f = 5.50 and in 2014 when
f= 5.92.
Table 56 shows that significant relationship existed between CSR and
financial performance in the form of Return on Capital Employed in year 2010
for Philippine companies and in overall data of 2011.
197
Table 56 F-computed values – Significant relationship between CSR and ROCE 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Overall Indonesia 0.09 0.04 0.03 0.04 0.01 0.04 0.23 0.08 0.01 1.70 0.13 Malaysia 0.01 0.07 0.01 1.53 0.00 0.18 1.17 0.48 0.34 2.87 0.35 Philippines 0.07 2.69 0.34 0.50 4.62 0.39 0.61 0.13 0.00 1.18 1.04 sig Thailand 1.97 8.71 0.49 0.01 0.74 7.39 0.12 0.50 0.66 0.09 4.32 Sig Sig Overall 0.76 0.11 0.00 0.04 3.04 2.51 0.26 0.48 1.53 3.44
*F critical value 4.41 (per country per year) (per item) *F critical value 3.96 (overall per year) (down) *F critical value 3.89 (overall per country from 2006-2015) (across)
Table 57 F-computed values – Significant relationship between CSR and Gross Profit Margin 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Overall Indonesia 0.01 2.11 0.43 1.50 1.78 1.68 0.00 0.37 2.71 5.48 1.07 Sig Malaysia 0.47 0.75 0.64 0.05 0.02 0.07 0.62 1.27 0.45 0.02 0.12 Philippines 3.49 0.00 0.09 0.47 0.32 1.25 0.01 1.52 0.08 0.24 0.01 Thailand 0.20 2.29 0.07 0.15 0.47 0.66 0.01 0.02 0.13 0.61 0.01 Overall 0.89 0.08 0.01 0.04 0.92 0.28 0.09 2.55 0.95 0.26
*F critical value 4.41 (per country per year) (per item) *F critical value 3.96 (overall per year) (down) *F critical value 3.89 (overall per country from 2006-2015) (across)
Table 57 above shows that significant relationship existed between CSR
and financial performance in the form of Gross Profit Margin 2015 for
Indonesian companies, and in aggregate of countries in the year 2013.
Table 58 F-computed values – Significant relationship between CSR and Net Profit Margin 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Overall Indonesia 0.09 0.04 0.03 0.04 0.01 0.04 0.23 0.08 0.01 1.70 0.13 Malaysia 0.01 0.07 0.01 1.53 0.00 0.18 1.17 0.48 0.34 2.87 0.35 Philippines 0.07 2.69 0.34 0.50 4.62 0.39 0.61 0.13 0.00 1.18 1.04 sig Thailand 1.97 8.71 0.49 0.01 0.74 7.39 0.12 0.50 0.66 0.09 4.32 Sig Sig Overall 0.76 0.11 0.00 0.04 3.04 2.51 0.26 0.48 1.53 3.44
*F critical value 4.41 (per country per year) (per item) *F critical value 3.96 (overall per year) (down) *F critical value 3.89 (overall per country from 2006-2015) (across)
198
Table 58 shows that the relationship between CSR and financial
performance in the form of Net Profit Margin is significant in the year 2010
among Philippine companies, with f-computed value at 4.62. It is also
significant in Thailand in 2011 when f= 7.39. Across countries, where f = 4.32,
CSR and financial performance in the form of Net Profit Margin is
significantly related.
Table 59 below shows that the relationship between CSR and financial
performance in the form of Earnings Per Share is significant in 2010 for the
Philippines (f= 4.62), in Thailand in the year 2011 at f= 7.39 and overall at f =
4.32.
Table 59 F-computed values – Significant relationship between CSR and Earnings per Share 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Overall Indonesia 0.09 0.04 0.03 0.04 0.01 0.04 0.23 0.08 0.01 1.70 0.13 Malaysia 0.01 0.07 0.01 1.53 0.00 0.18 1.17 0.48 0.34 2.87 0.35 Philippines 0.07 2.69 0.34 0.50 4.62 0.39 0.61 0.13 0.00 1.18 1.04 sig Thailand 1.97 8.71 0.49 0.01 0.74 7.39 0.12 0.50 0.66 0.09 4.32 Sig Sig Overall 0.76 0.11 0.00 0.04 3.04 2.51 0.26 0.48 1.53 3.44
*F critical value 4.41 (per country per year) (per item) *F critical value 3.96 (overall per year) (down) *F critical value 3.89 (overall per country from 2006-2015) (across) Table 60
F-computed values – Significant relationship between CSR and Price/Earnings Ratio 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Overall Indonesia 0.09 0.23 0.20 0.17 2.60 2.38 2.80 0.70 5.15 0.02 5.00 sig sig Malaysia 0.78 1.80 0.12 1.69 0.16 0.36 0.20 1.97 1.36 0.62 0.51 Philippines 2.25 0.98 0.20 0.04 0.65 0.21 0.84 1.30 0.30 0.12 0.01 Thailand 1.02 0.29 0.82 0.02 0.08 0.09 1.18 5.69 0.29 0.74 0.08 Overall 0.05 0.45 0.10 0.11 5.82 3.66 1.76 2.53 2.90 -0.18 Sig
*F critical value 4.41 (per country per year) (per item) *F critical value 3.96 (overall per year) (down) *F critical value 3.89 (overall per country from 2006-2015) (across)
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Table 60 shows that the relationship between CSR and financial
performance in the form of Price to Earnings Ratio is significant in the year
2014 among Malaysian firms at f = 5.15 It is also significantly related in 2014
among Indonesian firms at f = 5.15. Across countries, it was significant in year
2010 at f = 5.82.
Table 61 below shows that the relationship between CSR and financial
performance in the form of Price/Cash Flow Ratio is significant in Indonesia in
2007, at f = 9.31, in Malaysia in year 2009 at f = 6.18, in the Philippines in year
2012 at f = 6.52. Overall, across years it is significantly related among
Indonesian firms at f = 9.44. Meanwhile, across countries, the relationship
between CSR and financial performance in the form of Price/Cash Flow Ratio
is significant in year 2006 at f =7.18 and in year 2010 when f = 5.68
Table 61 F-computed values – Significant relationship between CSR and Price/Cash Flow Ratio 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Overall Indonesia 3.97 9.31 0.20 0.12 2.27 1.92 3.35 0.25 0.64 3.62 9.44 Sig sig Malaysia 0.47 2.91 2.41 6.18 0.03 1.15 3.79 0.29 0.02 2.29 0.15 Sig Philippines 0.28 0.13 1.43 2.26 1.08 0.32 6.52 1.01 0.52 0.17 2.78 sig Thailand 1.60 0.23 2.19 0.08 2.86 0.91 0.52 3.65 0.11 1.04 1.11 Overall 7.18 0.46 0.04 0.02 5.68 2.56 0.91 0.33 0.28 2.43 Sig Sig
*F critical value 4.41 (per country per year) (per item) *F critical value 3.96 (overall per year) (down) *F critical value 3.89 (overall per country from 2006-2015) (across)
Table 62 shows that the relationship between CSR and financial
performance in the form of Price/Book Value Ratio is significantly related in
year 2006 and 2011, among Indonesian companies at f= 4.54 and f= 6.04,
respectively. Overall, across countries it was significantly related in the years
2010 (f=6.37), year 2011 (f = 4.02) and in year 2014 (f= 4.47).
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Table 62 F-computed – Significant relationship between CSR and Price/Book Value Ratio 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Overall Indonesia 4.54 3.48 0.30 0.06 2.86 6.04 1.40 0.12 0.74 0.58 8.98 Sig sig sig Malaysia 4.07 0.05 0.85 0.08 0.25 0.62 0.53 2.41 0.03 1.91 0.06 Philippines 1.31 0.02 0.29 0.08 0.58 0.14 0.13 3.63 6.44 0.30 1.04 Thailand 0.15 0.62 0.02 0.11 0.07 0.97 1.13 0.04 0.31 0.93 1.25 Overall 0.88 0.91 0.36 0.06 6.37 4.02 0.73 0.23 4.47 0.02 sig sig sig
*F critical value 4.41 (per country per year) (per item) *F critical value 3.96 (overall per year) (down) *F critical value 3.89 (overall per country from 2006-2015) (across)
Table 63 F-computed Significant relationship between CSR and Dividend Yield 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Overall Indonesia 7.10 3.96 0.91 0.33 0.99 0.17 0.27 3.96 0.01 2.20 1.1 Sig Malaysia 0.00 0.30 0.12 0.02 0.29 0.34 6.90 1.11 1.00 0.86 0.05 sig Philippines 2.29 0.76 0.16 0.21 0.26 0.20 0.59 0.01 4.68 2.82 0.01 sig Thailand 0.00 0.00 0.25 0.00 0.19 0.68 0.06 0.94 0.82 0.15 2.42 Overall 2.23 4.62 0.14 0.24 0.13 0.46 2.11 1.14 0.33 0.79 sig
*F critical value 4.41 (per country per year) (per item) *F critical value 3.96 (overall per year) (down) *F critical value 3.89 (overall per country from 2006-2015) (across)
Table 63 shows that the relationship between CSR and financial
performance in the form of Dividend Yield showed positive and significant
relationship in year 2006 at f = 7.10, in year 2012 in Malaysia when f = 6.90
and in the Philippines in year 2014 when f = 4.68. Across countries, the
relationship between CSR and financial performance in the form of Dividend
Yield was significant in year 2007, when f = 4.62.
Summary
How does Corporate Social Responsibility relate to Financial
Performance in Southeast Asian context?
CSR and Financial Performance of selected companies in Southeast Asia
do not exhibit a single relationship that is present in comparisons made in
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previous studies. A total of four hundred t-computed values were identified in
the study. There were twenty-four incidences of positive CSR and Financial
performance relationship. Further, fifty- seven incidences of negative
relationship were found in CSR and financial performance relations. The
highest number of occurrences was found in the financial metrics of Price to
Cash Flow and Price to Book Value at six occurrences each. Table 64, shows
the summary of these incidences.
Table 64 Summary of Significant CSR and Financial Performance Relationship Incidences Financial
Performance Positive Negative Financial
Performance Positive Negative
ROA None None EPS 1 5 ROE 4 5 P/E 4 1 ROCE 1 2 P/Cash Flow 1 6 Gross Profit Margin
4 3 P/Book Value 2 6
Net Profit Margin
2 4 Dividend Yield 5 1
Ø 24 positive and 33 negative; 57 Out of 400 t-computed values; or percentage of 14.25% of total incidences. The remaining number accounts for either neutral correlation or non-existent relationship
Table 65 Aggregate CSR performance and Financial Performance for Southeast Asian companies
Criteria r description F computed F critical Interpretation Decision Net Profit Margin
0.1723 Slight relation
1.1633 4.09 Not Significant
Accept Ho
ROA 0.1098 Slight positive
0.463 4.09 Not Significant
Accept Ho
ROCE 0.1039 Slight positive
0.41475 4.09 Not Significant
Accept Ho
Gross Margin 0.0869 Slight Positive
0.2893 4.09 Not Significant
Accept Ho
Price Cash Flow
0.0539 Slight positive
0.11085 4.09 Not Significant
Accept Ho
Dividend Yield
-0.2348 Slight Negative
2.21748 4.09 Not Significant
Accept Ho
ROE -0.0846 Slight Negative
0.2741 4.09 Not Significant
Accept Ho
Price Earnings
-.0416 Slight Negative
0.06583 4.09 Not Significant
Accept Ho
Earnings per share
-0.0276 Slight Negative
0.02897 4.09 Not Significant
Accept Ho
Price to Book Value
-0.0022 Slight Negative
0.00018 4.09 Not Significant
Accept Ho
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Table 65 shows the aggregate results of the CSR and financial
performance for all the eighty companies that were used in the study. The f-
computed and f-critical values were highlighted and thereafter interpreted. It s
apparent from this table that there is no significant relationship between CSR
and Financial performance in all the financial metrics and CSR variables that
were tried to assess relationship. The slight relationship either negative or
positive, when CSR and financial performance were linked together resulted to
the acceptance of the null hypotheses, denoting the non-relationship between
the two variables, which were studied.
Discussion The practice of Corporate Social Responsibility is a prevailing situation
among Southeast Asian companies. CSR reporting was done not just to follow
a trend, rather to remain true to the highest form of stakeholder relationship.
Although still a nascent practice in the region, steps are being taken to assure
the stakeholders that corporate disclosure is essential, and that it is at the heart
of new corporate governance framework. Given this direction, companies are
posting in their public sites the status of their CSR agenda, progress and
success. As actions of large companies are placed under greater public
scrutiny, it is has become imperative that transparency, accountability and
greater responsibility have become the guideposts of their programs and
operations.
From the results of CSR performance in the Southeast Asian region in
2006, it can be validated that ownership structure of companies is still
controlled by families who have established themselves in the industry for
years. While these companies are publicly listed, the ownership of majority
shares is still within the hands of its founders or next generation members. The
average of 71 points in CSR denotes an inclination to family owned and
controlled corporations and presupposes that family members in the region do
not necessarily welcome dilution of ownership control in their companies.
While they may have lesser public scrutiny to face with, compared to highly
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publicly owned entities, they can provide substantial contribution to answering
the needs of the society in environmental, social and governance milieu. The
results underscored the inherent direction of a Southeast Asia-based
corporation in the area of stakeholder theory. Companies which are publicly
owned have a greater stakeholder base to consider, and is therefore accountable
to a greater public. Meanwhile, family-owned corporations take into account
the protection of the family name, making them equally disposed to perform
CSR as an inherent company value and tool to promote goodwill.
The level of CSR performance was highly scored in 2007 at 90 points,
when the consideration was on the environmental impact of the company. It
should be noted that the companies that were considered in this study were not
tempered on the homogeneity factor of selection. The companies were
distinctly classified as either manufacturing or services. This classification
showed that majority of the companies at 55% were engaged in the provision
of various services and 45% were in manufacturing. Since the companies
classified under manufacturing are in the oil and gas sector, there is possible
cause for a low CSR score. By default these companies do not score well in an
environmental barometer, and as a result should exercise extraordinary care in
the dispensing of its functions.
Meanwhile, though low in number in the sample, property developers
must take extra care in the environmental footprints they leave behind.
Likewise, companies engaged in the extraction of resources need more than the
usual and traditional CSR activities to redeem itself in from the doubting eyes
of the public. As companies in this type of industry should be necessarily large
since these are capital-intensive operations, resources must be strategically
placed as well to society-enhancing activities to negate the inherent effects on
clean air, safety, and carbon-use concerns. Significantly, while service
companies seem to be creating less carbon footprints, attention is still expected
from them in how they can help mitigate the damage businesses is doing to the
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natural environment. Service companies can think of strategic contributions
they can make in the proactive protection of the environment.
Corporate giving was not in the topmost agenda for companies in
Southeast Asia as shown by the average CSR score of 65 in the year 2008. As
the easiest way to extend help to society, philanthropy was the CSR action of
choice particularly for companies that do not have a clear framework for their
society relations. In Thailand and Indonesia, corporate giving extends to the
donations made to promote religion and to provide charitable contributions to
the personal projects of the monarchy. However, the low average of CSR
scores for the year may indicate non-reporting of philanthropic work.
Companies in Southeast Asia are conscious of having their Code of
Conduct statements fairly visible in their corporate communication tools as
shown in the results of average CSR score of 67 in the year 2009, with
Malaysia and the Philippines having the same score. While publication of a
Code of Conduct is already a practice for many companies in other continents,
doing the same is still not part of corporate communication consciousness in
the region.
The average CSR scores in years 2010 and 2011 are 88 and 83 points
respectively. Application and involvement status in the precepts of the Global
Reporting Initiatives and the UN Global Compact were the basis of scoring for
these years. The scores only amplify the efforts at compliance of a big number
of Southeast Asian companies in some of the standards being followed by
western companies in the areas of governance and sustainability reporting.
This action is in the right direction as far as grounding the practice of good
Corporate Governance in the region is concerned.
The fairly high CSR average score of 79 posted by the companies in
2012 when the basis was the presence of a Good Corporate Governance
framework in their websites is a positive indication that companies in
Southeast Asia have made great efforts to better their stakeholder relations in
recent years. The transparency in reporting and in decision making, as well as
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the guidelines in whistle blowing adopted by companies under the GCG
direction highlights the commitment of Southeast Asian companies to create an
attractive environment for investors and to attract excellent managers and staff
who could use the presence of these parameters in the companies when they
evaluate their options for future employment.
The CSR scores of 2013 were based on the presence of an actual CSR
framework in the communication tools of the companies. Based on the
availability of CSR agenda of the companies that were studied, at an average
score of 70 points, it is apparent that companies are beginning to articulate
their model of conducting themselves in the society where they operate. The
challenge is to engage the information carriers in the projects of the companies,
not only as a tool to advertise. More importantly, CSR reports are tools to
educate the public. The actual work on CSR is as important as conveying the
same work in words. It is about writing about these initiatives in a manner that
is understandable to the public. Part of the strategic role of any CSR
professional in the company is to ensure that the public is aware of the
activities of the company and that the stakeholders appreciate the relevance of
these activities in their lives.
The CSR score of 2014 denotes the compliance of companies with the
requirements of submitting a Sustainability Report and to make its public
availability as its major strength. The high average score of 88 points during
the year shows the effort in these countries to meet an important investor
requirement. In the Philippines, Sustainability Reports although uncommon
particularly in the banking sector where most of the companies studied came
from, is now gaining appreciation. Sustainability Report is now a requirement
in governmental transactions.
The CSR score of year 2015 was primarily based on the awards
received by the companies in the past and the present in the areas of CSR,
governance and sustainability. Perhaps, the low average score of 58 in the
region manifests the inability of companies to take part in awards search, not
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because they are not qualified but perhaps because they felt that they have not
yet done enough. However, one company that stood out in the number of
awards received is a multi-national corporation, which for all intents and
purposes has the capacity and machinery to comply with the requirements of
search committees for awards nomination.
Overall, the performance of Southeast Asian companies is 76, and this
is above the threshold of 60%, denoting high presence of CSR factors. More
than the CSR scores is the reality that companies in Southeast Asia are fully
engaged and immersed in their respective societies and has embedded in their
operations the desire to leave a positive mark to their public. While this study
may not be able to present in full the motivation of these regional companies in
the way they do their CSR, what is important is that each company has taken
steps in the positive direction to ensure that they will remain both financially
performing and socially relevant. The CSR performance of companies in the
Southeast Asian region amplifies the position of this study that financially
performing companies are also conscious of their social performance. The
companies in the region show how they continue to find ways to consistently
serve the interests of their stakeholders, following the Stakeholder theory.
The second research question is crucial in the grounding of the study
and its position that financially performing companies have greater capacity to
do good to society, following the Slack Resources theory. The situation of
financial performance in Southeast Asian region overall indicates positive and
promising. The locus of overall positive financial performance in all the
metrics that were used validates the companies’ established corporate presence
in their respective industry. The growth of the region and the exciting
possibilities of more business activities necessitate a continued search for ways
by which procedures can be improved.
The overall positive financial performance is also an impetus to look at
how excellent talents could be recruited, and how efficient managers could be
attracted. Likewise, the same positive economic performance could also be
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considered to fund initiatives that would protect the environment, to
consistently satisfy the market, and to sustainably reward suppliers, creditors
and investors. Finally, the excellent financial performance of the companies in
the Southeast Asian region could be the fuel to ensure that the public image of
the business will be maintained, even enhanced.
In Southeast Asia, the degree of relationship between CSR and firm size
is very weak. It denotes that regardless of size, companies may or may not
engage in CSR initiatives. This reality in Southeast Asian companies
underscores the uniqueness of practice of CSR that can be largely culture-
based or faith-based. That CSR allows the people who owns, manage and serve
companies to exercise their moral judgment and to act in accordance with what
they believe is for the good of society, regardless of the resources available to
them, or their firm size.
Meanwhile, the information on the level of risk amplifies its relevance
when a company begins to consider using its resources in its involvement in
society-enhancing endeavors that may or may not be strategically connected
with the core business interest. When the risk is low, the better is the position
of the company to attract additional investors and thereby improve further its
financial capacity. The company’s level of risk is information that could guide
both management and investors of the prudence that should be exercised in
view of any costly business and society-relationship decisions.
The results show that that although related, no general view can be
contextualized in Southeast Asia as to the degree of correlation between CSR
and level of risk. A highly leverage company may still insist to perform CSR
perhaps as a way to regain investor confidence and boost the value of the
company. However, a company despite having a comfortable balance on debt
and equity-financed assets may still act rather conservatively and postpone or
minimize CSR spending over those expenses that have immediate rewards or
more concrete manifestations of financial gains after an explicit cost.
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4 Conclusion and Recommendations
Justification of CSR as a strategic addition to sound financial performance
Further, fifty- seven incidences of negative relationship were found in
CSR and financial performance relations. The highest number of occurrences
was found in the financial metrics of Price to Cash Flow and Price to Book
Value at sic occurrences each. From the preceding section, one can conclude
that companies in Southeast Asian were able to perform their respective CSR
activities despite the lack of a spectacular rise in its financial situation, or even
when there is no overall significant relationship between the region’s corporate
financial performance and Corporate Social Responsibility. Through the years,
the volatility of the economic condition of firms is highly evident. Considering
that these are companies that occupy the upper strata of growth and
profitability list, the fluctuations in its financial condition appear to be as
normal the way any business would experience.
Comparing the results of this study with that of existing literature in
CSR-Financial performance relationship, it can be surmised that the companies
in the Southeast Asian region follows the social and financial performance
relationship trends that was earlier posited by Freedman and Jaggi (1982),
which is negative when Pollution Disclosure Index was used for CSR and
normal ROA and ROE metric were used for FP. It also followed the negative
relationship posited in the nineties by Boyle, Higgins and Rhee (1997) when
event study was used to create a CSR representation, while and ROA, ROE
and ROS were used for financial performance measure.
The results also showed that the regional sample showed a contrasting
result when compared with the findings of Fauzi and Idris in 2009 for
Indonesian companies, which is positive significant relationship when CSR is
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taken from the results of the Jantzi Sustainability Index of Sustainalytics,49 and
when FP was represented by company size using total assets. In similar vein,
the study also yielded a contradictory result if the 2010 work of Yang, Lin and
Chang that used ROA, ROE and ROS for financial performance and the
ARESE50 method of France for social performance that resulted to a positive
significant relationship between the variables was considered (Charles-Henri
and Stephane, 2002).
Considering the various practices associated with community
engagement, it can be argued that for CSR has to be strategic in order to
become an effective addition to sound financial performance, and thereby
contribute as a practice of good Corporate Governance. From the experiences
of the companies in the Southeast Asian area, one may say that CSR
motivations can be summarized to three main types: right, reasonable and
relevant. CSR motivation is right when it is concretized beyond the realization
of a company’s legal and economic objectives. It is about going the extra mile
in being good to society even if the benefit will come to the company neither
directly or nor easily. CSR motivation is reasonable if in the course of
concretizing programs to benefit the society, it does not sacrifice the additional
economic gains of its shareholders.
CSR motivation is relevant if the entire social engagement framework is
in consonance with the core business operation framework. This is evident
when society-enhancing actions result to greater patronageof its products and
services by the consuming public, thereby continuously creating wealth for all
its stakeholders. CSR performance reinforces financial performance and allows
companies to have greater society acceptance, marketability and sustained
growth.
49Jatzi Social Index is owned by Sustainalytics, a global leader in sustainability research and analysis, serves investors and financial institutions throughout the globe through its two decades of local experience and expertise in the ResponsibleInvestment (RI) and Socially Responsible Investment (SRI) markets. http://www.sustanialytics.com 50 ARESE is a French first mover social rating agency that provides social index for French firms and was used in the study of Charles-Henri and Stephane in 2002.
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Companies were undoubtedly created for the economic gains of
individuals and groups. Interdependence would always exits between business
and society. The shared value of businesses and the communities that supports
and permits their existence will be the guiding rule in both their financial and
non-financial engagement. Efficient societies will continuously see the
interaction of governments, businesses and communities in ensuring that
sustainable development will happen. Government will create mechanism and
policies to protect various groups, companies will create products and services
that will add value to the quality of life of the people and communities will
create opportunities to provide superior human resources to enterprises.
Justificationof CSR and financial performance relationship under good Corporate Governance practices
The CSR Performance and Financial Performance relationship study
could be argued as something ripe in the context of western corporations and
no longer require further exploration. However, this paper would like to
maintain its position that promising economic regions are still good areas to
test existing theories on CSR and financial performance relationships in order
to verify the likelihood of finding some aspects of good corporate governance
practice. There are arguments that could support the posture of this research,
namely moral obligation, sustainability, license to operate and reputation.51
Under the moral obligation argument, companies have the responsibility to be
good citizens, doing what is ethical and right according to moral standards and
practices. Doing so denotes taking care of communities, the natural
environment and the interests of shareholders.
Sustainability, the second argument meant the adherence to the direction
of environment and community protection that would allow for the continued
existence of companies. This could be more understood when one looks at the
source of supply of raw materials and human capital that are badly needed for a 51Porter, Michael E. and Kramer, Mark R. (2006). Strategy and Society : The Link Between CompetitiveAdvantage and Corporate Social Responsibility, Harvard Business Review.
211
company to remain in operation and continuously generate profits. The third
argument emphasizes the government’s requirement, the community’s
permission and the support of both formal and informal groups that enterprises
need to attract investors and other partners. The fourth argument underscores
the value of reputation through positive CSR and financial performances,
which in effect raises brand loyalty and brand image among its public.
These four arguments strengthen the importance of having a sound
economic performance and a positive CSR performance among companies as a
basis for good corporate governance practices. The foregoing statements
expressed the underlying view of the Stewardship Principle that first appeared
in the work of Donaldson and Davis (1991). As an alternative view of the
Agency theory, Stewardship Theory upholds that when left on their own,
corporate managers will seek to act as responsible stewards of resources,
financial and non-financial, that was placed under their responsibility.
Justification for another study oncorporate social and financial performance
A study of this nature is relevant in order to challenge the current norm
that was most likely inclined to believe that it is a positive financial
performance that fuels CSR initiatives. Congruently, that good CSR
performance only happens as a result of abundant company resources that fund
the concretization of the company’s social engagements and agenda. This
study has attempted to examine the relationship between Corporate Social
Responsibility and Financial Performance of Southeast Asian companies by
positing that CSR and financial performance are significantly related to each
other. The relationship was tested through correlation analysis, including an
additional correlation between CSR and firm size as well as CSR and level of
risk.
Ten accounting ratios that include Return on Assets, Return on Equity,
Return on Capital Employed, Gross Profit Margin, Net Profit Margin, Earnings
Per Share, Price to Earnings Ratio, Price to Cash Flow Ratio, Price to Book
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Value Ratio and Dividend Yield Ratio were used. The empirical results were
inclined to say that in the Southeast Asian region, a not significant relationship
exists more than significant positive or significant negative relationships. Out
of the 400 f-computed values only 57 posted a significant relationship at alpha
level 10% of 1.33. Out of the 57 significant relationships, 24 are significant
positive and 33 are significant negative.
Of the financial performance metrics that was used in the study, Return
on Equity posted the highest incidence of significant relationship, second is
Price/Book Value ratio. On third and with equal number of incidences of
significant relationships are Gross Profit Margin and Price to Cash Flow ratio.
The mixed results in the CSR and financial performance data for the
companies studied leads one to surmise that a mixed relationship exists in the
region but lopsided on the negative side. It should be noted that as articulated
in the theoretical part of this study, previous studies exhibited positive,
negative and neutral relationships when Corporate Social Responsibility and
financial performance were related. The results that were found out in this
study amplified the findings of McWilliams and Siegel in 2000 and Aras et al
in 2010.
If we are to follow the arguments of the critics of CSR and FP
relationships, then CSR is indeed nothing but propaganda to enhance the
marketability of a product. However, there is also another point of view to
consider regarding CSR practices in the region. This view suggests that
performing CSR need not be fully dependent on the financial situation of a
company. CSR can be performed for the pure motivation of companies to do a
valuable service to their community. Perhaps, the study was distorted by using
heterogeneous companies. Maybe, a common industry that is studied will more
likely reveal clearer relationship trends without the ambiguity of cross-industry
context. The problem may also lie in the problematic measurement of CSR
performances, which are not an exact value of points but only a reflection of
presence or absence of dimensions of CSR. It could also be that the rich body
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of CSR-FP studies in corporate Europe and America is enough to define the
entire CSR and FP relationship and that trying to find a new one for the
Southeast Asian region is already stretching the possibility too far.
The instability in geo-political and the contextual differences of country
situations may also be reasons for the distorted results. This argument is
offered to explainthat both CSR and financial performance of companies
depend on the enabling environment where it exists. However, the results will
not discount the reality that CSR will remain to be the framework by which
companies ensure the welfare of its internal and external publics and is
continuously encouraged to perform positively in economic, social and
environmental parameters.52Visser and Macintosh (1998) insinuated that CSR
as a governance challenge fits well in filling in the void left by an inefficient
bureaucracy.
The preceding statements boosted the connection of CSR and Financial
Performance relationship with the Stakeholder Theory of Freeman (1984) that
reiterated the corporation’s responsibility to all its constituents, even as it
guarantees the wellbeing of the society. Likewise, the results of the study
highlighted the inherent desire of corporations that their multiple stakeholders
will share the same values that they have. The various discussions that were
presented were also in consonance with the principles behind the Good
Management Theory and Slack Resources Theory (Waddock and Graves,
1997) that offered an explanation behind good management as something that
is both stakeholder oriented and stakeholder driven. These theories confirmed
the value of good financial performance as a catalyst of good social
performance, and the balance of both is at the very heart of the new Corporate
Governance theory and practice that is being offered (Hilb, 2008).
52Alfonso, Felipe B. and Neelankavil, James P. on CSR and Collaborative Partnerships, published by the Journal of the Asian Institute of Management in 2009
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Recommendations
Possible direction to take as regards CSR and financial performance study
as a basis of good corporate governance practice
The ambiguity in the CSR and financial performance relationships of
Southeast Asian companies offers some revelations and propositions.
Companies in the region continue to remain ethical citizens and perform good
acts as a testament of their high moral standards. It was not driven purely by
profit motivation, although it is obviously profit-funded. It could be posited
that companies in the region possess a moral compass and works on improving
its financial performance by the fact that it is an economic entity. However, its
pursuit of profit is always with a soul.
Companies in the region looks at the challenges of CSR action such as
resource insufficiency, not as an obstacle but a way to be creative and a chance
to create partnerships and synergy with diverse sectors and multiple partners.
Companies in the region understand that the role of CSR in the corporate
agenda is that of catalyst in a virtuous cycle. Financial inadequacy is not a
reason to give up on society engagement. CSR returns is not immediately
measured but a true investment in goodwill, the effects of which are far
reaching even if not simplistically and easily measurable.
The situation of CSR and financial performance relationship in the region emphasizes that it is top management who creates the enabling environment to ensure the success of any CSR agenda, policies and programs. However, the regional experience also indicates that practitioners and decision makers of CSR understands that CSR is beyond plans and sweet words. These individuals who steer the companies in both financial and social performance course understand that the impact of community engagement begins in the communication stage and ends up in the social transformation that is achieved thereafter. Management secures the success of CSR through its strategic integration in both operation and people development, more importantly in its core business. As in the case of companies, which are situated in highly culturally influenced
215
societies, the government, including the monarchy as well as the religious groups are all potent partners in ensuring proper, appropriate and relevant CSR implementation. Similar to other key functions of management, CSR work must be pre-emptive, extensive, active and profitable in the long run and that every Southeast Asian company must strive for a future when CSR is already beyond regulations and standards but one rooted on self-regulation which is founded on morality, transparency that is founded on freedom and a way of life that is anchored on man’s basic goodness and nobility in purpose of his every endeavor, economic or otherwise.
Sustainability can only be achieved when individuals and the
corporations they run have internalized some basic truths. That every entity
exists for a purpose beyond what is visible to the eye, that the world is a pie
that is too big for everyone’s taking and that sustainability is achievable when
motives for practical rewards are tempered with the untainted desire to do what
is just, good, noble and honorable.
216
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Appendix A Indonesia Firm Size and Level of Risk
INDO FIRM SIZE RISK
1 9.07 2.1 2 0.29 48.74 3 8.21 73.1 4 9.511 12.66 5 14.17 110.5 6 15.953 69.01 7 9.101 66.31 8 16.618 43.444 9 17.994 14.69
10 9.218 31.45 11 11.29 26.57 12 6.07 65.36 13 72.77 172.68 14 15.129 456.25 15 2.488 8.29 16 31.584 112.66 17 19.631 12.29 18 18.712 51.82 19 15.401 164.7 20 5.16 54.5
238
Appendix B
FIRM SIZE RISK
1 6.19 89.22 2 13.773 144.22 3 3.68 80.4 4 7.65 61.34 5 12.662 160.94 6 13.14 54.57 7 11.09 22.66 8 13.352 190.42 9 12.75 43.87
10 0.16 36.28 11 8.21 12.95 12 6.83 9.92 13 11.33 10.96 14 14.598 177.44 15 7.395 296.02 16 9.61 33.07 17 5.71 76.29 18 7.68 7.68 19 7.94 250.76 20 8.92 264.12
Malaysia Firm Size and Level of Risk
239
Appendix C Philippines Firm Size and Level of Risk
PHIL FIRM SIZE RISK
1 10.16 94.95 2 17.08 47.67 3 7.89 25.65 4 20.996 128.61 5 5.98 57.45 6 10.42 175.14 7 7.27 53.46 8 5.06 101.7 9 9.13 81.81
10 7.29 102.4 11 10.49 12.8 12 9.02 47.71 13 7.6 242.28 14 5.428 138.72 15 14.48 159.81 16 6.61 122.09 17 8.225 119.23 18 8.24 143.09 19 11.63 94.18 20 22.396 64.93
240
Appendix D Thailand Firm Size and Level of Risk
THAI FIRM SIZE RISK
1 7.26 51.11 2 4.981 75.81 3 15.802 137.96 4 7.11 94.41 5 9.37 105.93 6 11.02 89.37 7 15.47 40.56 8 11.887 91.77 9 7.497 123.2
10 5.58 39.93 11 11.29 26.57 12 5.79 81.57 13 7.26 69.58 14 8.37 42.17 15 9.16 66.553 16 7.17 65.15 17 8.75 138.46 18 20.321 100.83 19 6.03 66.74 20 19.023 110.72
241
Appendix E1 Indonesia CSR and Financial Performance Year 2006
INDO FIRM FPROA FPROE FPROCE FPGPM FPNPM FPEPS FPPE FPPCF FPPBV FPDY CSR
2006 1 18.62 38.09 26.46 22.83 6.75 54.19 11.5 9.4 2.5 0.9 80
2 0.09 0.12 0.1 19.65 1.84 24.55 137.5 36.08 2 0.7 80
3 7.31 17.35 15.67 16.72 15.42 -31.97 17.1 1.1 2.8 2.8 80
4 2.77 25.02 23.67 31.09 31.39 18.15 15.1 15.7 3.5 4.12 80
5 1.88 14.7 6.18 19.9 16.4 -34.04 25.1 2.6 3.5 4.28 80
6 1.17 9.77 6.56 9.39 9.8 29.82 24.4 2.1 2.3 0.91 80
7 0.71 14.43 10.53 14.92 15.96 36.79 12.9 5.1 1.4 3.88 80
8 3.26 28.17 21.41 32.97 33.76 28.65 9.4 3.6 2.7 6.74 80
9 9.65 25.2 23.83 20.13 21.32 76.12 32.7 30.8 7.5 0.27 40
10 66.32 7.67 7.52 79.55 10.83 46.64 13.5 14.2 1.5 4.29 80
11 29.97 68.78 48.36 24.95 19.82 47.98 12 18.9 6 6.07 80
12 12.22 31.14 18.34 15.38 12.6 115.02 8.3 3.7 2.3 6.99 80
13 3.43 13.79 13.68 3.78 1.6 -21.3 17.8 25 2.4 0.6 40
14 5.64 29.37 7.43 30.52 30.52 19.15 24.8 24.2 6.8 1.5 40
15 14.1 29.22 27.42 39.48 48.75 7.38 12.1 6.9 3.3 3.35 40
16 15.06 38.73 17.04 41.67 51.74 116.58 35.8 9.8 7.4 2.78 80
17 18.31 26 24.16 37.7 27.41 29.31 16.6 4.2 3.9 2.23 40
18 10.49 18.54 16.15 40.28 36.39 2.56 9.4 14.6 1.8 2.88 40
19 9.65 25.2 23.83 20.13 21.32 76.12 32.7 30.8 7.5 0.27 40
20 13.09 34.09 20.47 32.24 36.06 65.07 38.3 18.5 10.6 0.16 40
242
Appendix E2 Indonesia CSR and Financial Performance Year 2007
INDO FIRM FPROA FPROE FPROCE FPGPM FPNPM FPEPS FPPE FPPCF FPPBV FPDY CSR
2007 1 14.36 17.98 17.65 25.25 8.8 36.9 12 9.6 2.5 0.4 100
2 0.97 1.39 1.17 23.71 11.93 15.95 137.9 36.1 2 1.1 100
3 11.73 26.43 14.02 18.66 19.4 75.57 17 1.6 4.1 2.36 100
4 2.45 23.32 21.5 33.03 33.4 6.09 19.9 28 4.4 3.27 100
5 1.83 20.88 9.34 24.08 22.67 57.4 18.9 2.8 3.7 1.95 100
6 1.71 15.64 9.58 22.74 23.18 76.17 16.7 2.7 2.5 2.41 100
7 0.71 5.61 4.49 6.67 7.79 55.22 30.8 5.2 1.7 1.49 100
8 2.83 26.64 20.67 29.17 30.81 4.92 9.4 5.5 2.7 5.32 100
9 11.63 30.02 29.2 20.47 23.22 43.8 22.9 23.2 6.3 1.08 20
10 7.29 10.58 9.08 78.52 11.48 43.13 11.3 10.3 1.2 2.45 100
11 26.48 52.68 42.22 26.15 19.46 2.73 17.3 12 8.5 5.1 100
12 5.89 11.42 7.79 11.46 12.59 6.62 19.1 4.9 2.2 4.79 100
13 5.58 16.83 11.82 0.99 1.17 29.07 69.8 95.1 11.2 0.22 20
14 6.04 30.53 8.01 29.95 29.95 28.88 21.9 22.2 6 1.45 20
15 13.43 28.78 27.73 38.5 48.65 15.41 10.6 6.9 2.8 3.52 100
16 10.47 26.47 12.28 39.96 44.03 17.22 27.8 19.2 9.4 1.51 100
17 22.34 29.28 28.12 41.29 31.49 36.9 18.7 13.5 5 3.01 100
18 7.97 12.89 11.32 33.01 33.28 -23.75 19.2 5 1.8 2 100
19 11.63 30.02 29.2 20.47 23.22 43.8 22.9 23.2 6.3 1.08 20
20 17.81 43.1 29.51 36.15 40.99 98.87 35.6 20.1 12.6 0.16 100
243
Appendix E3 Indonesia CSR and Financial Performance Year 2008
INDO FIRM FPROA FPROE FPROCE FPGPM FPNPM FPEPS FPPE FPPCF FPPBV FPDY CSR
2008 1 17.6 20.67 20.68 36.79 11.6 5.23 9.8 9.9 1.8 1.01 100
2 2.39 3.41 2.93 25.11 22.8 136.55 14.6 15.1 0.5 1.38 60
3 13.42 30.61 16.5 22.04 19.01 40.99 4.6 0.4 3.6 8.25 60
4 2.7 26.42 23.46 33.08 33.31 28.96 13.8 3.4 3.4 2.49 60
5 1.81 14.29 6.8 15.24 15.78 -28.25 10.2 0.9 4.1 2.6 60
6 1.87 17.78 11.6 24.77 25.27 21.32 8 1.3 1.4 5.31 60
7 0.9 7.49 5.64 9.29 9.58 25 8.5 1.2 0.7 1.18 100
8 2.78 28.51 22.25 25.62 26.16 10.54 14.5 8.2 3.7 5.15 60
9 10.23 29.23 29.2 25.39 24.53 18.41 35.3 44.6 9.4 0.74 60
10 9.47 12.69 11.83 75.18 13.07 30.27 4.4 11.3 0.5 2.94 60
11 25.46 48.35 39.23 28.35 18.59 7.5 9.1 35.1 7.5 4.62 60
12 5.65 13.64 8.34 18.25 8.1 -59.48 11 6.1 1.7 1.89 60
13 5.39 24.27 10.78 1.34 1.78 67.25 406.5 424.8 90 0.04 60
14 6.66 28.12 8.89 30.75 38.4 43.97 23.8 11.4 5.3 1.05 60
15 13.86 27.45 26.71 35.42 46.54 11.83 10.6 6.6 2.7 3.26 60
16 4.27 9.47 5.12 45.76 27.68 -59.54 44.4 22.4 11 1.8 60
17 26.73 34.34 33.38 43.49 33.54 42.47 9.8 16 3 2.67 60
18 4.39 6.12 5.98 38.08 33.65 -8.57 22.3 6 3.3 1.11 60
19 10.23 29.23 29.2 25.39 24.53 18.41 35.3 44.6 9.4 0.74 60
20 17.32 38.51 27.34 39.23 42.45 57.3 24.5 14.9 7.2 0.16 60
244
Appendix E4 Indonesia CSR and Financial Performance Year 2009
INDO FIRM FPROA FPROE FPROCE FPGPM FPNPM FPEPS FPPE FPPCF FPPBV FPDY CSR
2009 1 17.64 19.99 19.99 38.15 16.25 20.17 16.4 13.7 3 0.6 60
2 3.48 5.11 4.4 39.64 36.19 58.89 19.3 14.3 1 1 60
3 12.39 27.52 15.42 22.73 20.54 19.25 14 1.4 3.5 3.23 60
4 2.77 26.62 24 31.69 32.76 18.22 17.4 4.3 4.2 3.08 60
5 1.79 11.62 6.88 14.06 12.61 -18.81 24.4 2 2.4 3.88 60
6 2.16 21.81 14.31 27.27 28.29 34.27 13.8 2.6 2.8 4.37 60
7 1.36 14.37 9.49 14.52 14.77 103.75 12.1 4.1 1.6 2.87 100
8 2.68 29.46 19.06 30.15 31.04 13.5 18.3 8.6 4.7 3.35 100
9 9.14 13.99 13.44 46.93 39.75 38.18 31.2 2.4 2.6 4.21 60
10 14.73 20.44 18.24 79.85 18.22 83.83 12 3.6 2.3 8.24 60
11 30.78 54.97 48.12 28.39 20.24 30.6 9 7.5 4.4 9.01 60
12 16.84 51.75 29.97 23.43 14.82 25.53 2.3 3.5 0.9 15.8 60
13 6.68 15.7 13.14 0.45 2.51 -24.06 347.2 370.5 51.1 0.06 60
14 5.61 17.3 7.79 24.42 24.42 -18.98 17.4 12.75 2.7 1.05 60
15 12.35 23.3 22.11 33.31 44.97 -0.39 8.4 7.1 1.8 3.26 60
16 24.67 66.24 29.01 50.92 57.88 835.71 66.4 23.8 6 1.12 60
17 28.6 36.42 35.5 46.79 35.49 32.86 13.3 9.4 4.4 5.15 60
18 6.35 10.18 9.42 38.7 25.83 -44.13 11.3 31.7 0.7 0.94 60
19 7.9 26.29 26.22 21.13 19.54 8.95 23.7 25.4 5.7 1.13 100
20 14.92 30.91 21.87 38.28 37.53 22.81 15.1 8.4 4.1 0.16 60
245
Appendix E5 Indonesia CSR and Financial Performance Year 2010
INDO FIRM FPROA FPROE FPROCE FPGPM FPNPM FPEPS FPPE FPPCF FPPBV FPDY CSR
2010 1 16.57 18.74 18.6 40.79 17.69 12.9 29.6 44.6 5 10 100
2 7.83 14.05 11.34 51.06 46.16 198.35 18.1 6.7 2.4 14.6 20
3 14.76 32.21 18.3 20.47 19.83 43.1 15.4 1.7 4.5 2.93 20
4 2.99 27.37 25.29 37.12 38.02 24.73 18.4 14.1 4.6 1.76 100
5 2.99 16.84 10.77 24.05 21.76 84.01 16.6 2.6 2.6 2 100
6 2.47 24.05 16.85 31.46 31.99 28.58 14.8 3.1 3.3 2.54 100
7 1.89 15.7 11.96 21.47 21.37 72.14 14.6 10.1 2.2 1.7 100
8 3.77 32 25 27.25 28.8 23.13 9.2 9.9 2.5 2.65 100
9 5.26 7.36 7.03 50.83 42.31 13.98 39.9 22.1 2.6 0.62 100
10 14.92 20.99 18.98 78.41 17.7 19.99 18.6 12.7 3.6 3.03 100
11 33.79 62.11 59.52 25.9 21.5 26.18 19.2 10.6 4.4 2.5 100
12 17.86 44.84 33.28 22.57 15.32 353.73 10.2 3.5 3.7 3.25 100
13 4.59 16.93 8.35 1.12 1.73 22.69 628.7 331 100.2 1.84 20
14 5.25 19.51 7.79 31.43 31.43 39.76 24 13.42 4.3 1.32 20
15 10.25 20.04 18.63 31.28 48.67 -1.98 12.1 7.1 2.3 3 100
16 21.61 48.74 24.96 50.46 51.24 -1.91 14.9 11.3 8.2 2.24 100
17 25.81 32.73 31.4 47.18 36.46 8.3 15.4 10.4 4.7 4.09 20
18 5.69 12.1 10.67 48.38 35.49 77.72 23.1 25 2.2 1.81 100
19 8.98 30.03 29.91 15.01 21.47 38.9 27 23 7.4 0.97 20
20 14.13 26.56 20.04 52.93 41.95 16.57 13.2 7.8 2.8 0.16 100
246
Appendix E6 Indonesia CSR and Financial Performance Year 2011
INDO FIRM FPROA FPROE FPROCE FPGPM FPNPM FPEPS FPPE FPPCF FPPBV FPDY CSR
2011 1 21.84 25.72 25.27 45.27 15.8 66.75 251.6 60.05 7 6 100
2 12.42 24.33 21.13 58.72 53.56 107.13 13.7 5.9 3 7 20
3 13.92 32.41 17.39 19.43 19.43 23.78 16.8 1.8 49.6 2.84 20
4 3.25 28.43 25.87 40.94 42.95 27.59 18 17.6 4.6 1.42 100
5 3.16 15.14 9.98 24.11 21.2 13.75 11 1.8 1.5 2.1 100
6 2.62 23.7 16.33 30.04 30.34 22.52 12.8 2.9 2.5 2.19 100
7 2.32 16.45 12.72 25.92 26.7 17.29 12.2 13.6 1.9 1.64 100
8 3.77 32.5 25.3 32.61 34.78 22.64 10.7 6.3 3.3 3.69 100
9 7.95 12.93 11.03 61.95 47.14 113.18 20.4 16 2.5 1.02 100
10 14.57 21.47 18.58 77.21 18.49 18.05 24.4 26.8 4.9 2.2 100
11 40.6 79.01 78.43 28.43 21.67 25.6 21.2 17.5 12.1 5.42 100
12 18.89 37.93 36.6 14.9 12.38 15.99 13.8 31.5 4.5 2.83 100
13 2.02 1.66 3.49 1.67 0.82 -89.6 3852.2 372 59.5 1.84 20
14 5.32 23.01 8.11 21.22 20.33 36.77 22.6 13.76 4.9 1.32 20
15 10.6 20.72 19.45 34.12 38.28 15.74 11.1 7.1 2.2 3 100
16 19.54 39.94 22.29 60.17 48.98 -4.67 17.2 13.3 7.7 3.95 100
17 22.54 29.66 26.95 45.45 34.69 7.99 17.3 16.7 4.7 3.24 20
18 6.5 17.03 14.13 42.59 31.01 33.69 31.4 6.7 3.5 1.33 100
19 10.47 33.58 33.43 26.32 23.1 39.9 16.7 7.2 5 1.73 20
20 7.19 13.3 9.05 43.44 33.46 -32.7 22.4 1.5 2.8 0.16 100
247
Appendix E7 Indonesia CSR and Financial Performance Year 2012
INDO FIRM FPROA FPROE FPROCE FPGPM FPNPM FPEPS FPPE FPPCF FPPBV FPDY CSR
2012 1 26.49 31.14 30.43 45.99 18.88 14.33 32.8 75.5 8.8 1.22 100
2 15.84 32.65 26.19 59.59 62.12 81.68 9.8 6.2 2.6 2.43 20
3 12.16 29.5 15.15 19.25 18.95 9.2 15.8 1.6 4.3 2.84 100
4 3.04 24.99 23.12 40.43 41.65 8.11 18.9 6.3 4.3 13.53 100
5 3.37 14.86 9.52 25.84 22.93 11.92 13.5 2.3 1.9 2.72 100
6 2.8 22.74 15.96 32.49 33.94 25.53 12.2 3.1 2.5 1.56 100
7 2.44 17.35 13.12 27.74 28.57 21.15 9.8 7.2 1.6 3.06 100
8 3.77 32.61 25.43 39.12 41.15 23.86 8.9 9.7 2.6 1.81 100
9 9.24 17.39 13.27 63.33 47.94 52.97 15.1 53.8 2.5 1.36 100
10 10.87 15.78 13.37 71.63 14.38 17.99 27 27.4 4.1 1.42 100
11 43.96 84.24 76.39 27.83 20.81 23.31 26.4 64.2 16.6 2.59 100
12 21.32 44.32 39.64 20.63 15.11 75.26 14.3 31.5 5.5 3.27 100
13 12.37 21.69 17.15 18.89 14.79 -52.85 15.7 373 2.7 1.84 20
14 11.54 14.29 13.41 56.19 40.23 92.59 10.5 14.1 1.4 1.69 20
15 11.6 22.36 20.38 38.27 37.03 25.33 8.2 7.1 1.7 3 100
16 25.02 45.22 28.97 49.43 52.8 35.16 12.5 11.2 4.9 3.49 100
17 21.41 30.47 25.57 47.13 36.39 23.44 19.4 16.8 5.4 2.32 100
18 9.33 26.14 20.68 42.94 31.05 64.1 21.7 11.4 3.5 1.85 100
19 11.55 31.11 30.81 22.65 23.58 17.1 8.9 7.2 2.5 2.49 20
20 4.26 8.57 5.31 40.69 32.12 -29.57 30.1 7.2 2.5 0.3 100
248
Appendix E8 Indonesia CSR and Financial Performance Year 2013
INDO FIRM FPROA FPROE FPROCE FPGPM FPNPM FPEPS FPPE FPPCF FPPBV FPDY CSR
2013 1 24.92 29.03 29.85 47.43 19.13 18.9 19.9 55.7 5.3 1.02 60
2 7.74 18.03 11.66 49.1 33.69 -27.08 9.6 4.1 1.6 1.63 60
3 10.37 25.03 12.81 17.86 18.12 -0.02 14.2 1.4 3.3 3.18 60
4 3.1 24.64 23.35 41.08 42.85 20.45 16.6 46.7 3.7 1.25 60
5 3.48 13.53 9.78 21.12 20.83 0.74 9 1.4 1.2 3.35 60
6 2.84 22.47 18.16 39.7 34.61 17.41 10.1 2.6 2.1 2.98 60
7 2.56 19.88 13.3 26.09 33.41 28.45 8.1 7.5 1.5 3.69 100
8 4 29.65 24.98 36.71 42.38 11.8 8.4 5.9 2.3 3.55 60
9 14.58 29.67 19.66 71.72 59.75 109.28 8.4 36.6 2.2 1.16 60
10 10.6 15.53 12.67 73.03 14.07 7.85 18.7 32.7 2.8 1.9 60
11 40.64 78.78 67 26.56 20.02 8.78 25.3 25.3 19.7 3.64 60
12 15.37 31.72 23.27 20.05 14.09 -3.49 7.4 31.5 2.2 5.34 60
13 9.4 19.96 14.02 32.88 16.81 -43.74 14 375 2.7 2.09 60
14 12 15 14 56.5 39.44 14.83 20.1 71.8 2.7 1 60
15 18 29 24 30.58 24.06 -19.63 9.6 9.8 2.2 2.41 60
16 20.51 34.63 23.85 40.76 44.52 8.34 12 12.4 3.5 4.7 100
17 19.72 28.09 23.52 44.15 34.47 10.79 15.6 13.9 4 2.88 60
18 10 27 21 50.96 37.04 103.5 10.2 12 2.5 2.95 60
19 9.88 23.93 22.76 29.66 21.7 -5.56 6.5 7.2 1.4 2.5 60
20 2.65 4.51 3.32 41 32 -46.52 30 7 2.2 0.3 60
249
Appendix E9 Indonesia CSR and Financial Performance Year 2014
INDO FIRM FPROA FPROE FPROCE FPGPM FPNPM FPEPS FPPE FPPCF FPPBV FPDY CSR
2014 1 17 39 28 20.3 6.13 31.2 10 9.1 2.5 0.3 60
2 0.17 0.03 0.18 28.82 5.05 20.63 137 36 2 20.12 60
3 17.74 38.34 22.15 18.21 21.34 21.38 7.2 0.9 2.4 4.4 100
4 2.47 24.07 24.27 33.84 34.23 31.65 11.4 10 2.6 13.53 100
5 4.51 32.93 19.32 44.82 43.34 57.43 8.9 2.8 2.8 1.95 100
6 2.47 23.19 10.3 27.47 34.82 62.39 6.2 1.8 1.6 11.5 100
7 0.71 27.42 17.19 20.93 20.82 274.6 7.3 65.6 1.7 1.82 100
8 3.83 33.88 23.69 10.42 10.14 43.34 5.2 3.6 1.6 6.74 100
9 6.05 13.03 12.49 17.87 15.87 48.06 22.5 17.1 2.8 0.99 60
10 10.65 15.46 12.57 78.72 13.24 2.72 11.9 12.4 2.1 2.21 100
11 20.54 37.48 26.32 26.37 20.74 41.43 14.6 9 3.1 5.14 100
12 7.86 22.11 12.28 15.35 15.34 -9.9 3.7 0.9 0.8 20.25 100
13 2.43 8.09 7.35 1.29 1.32 92.67 16.5 10.4 1.3 0.98 60
14 5.59 27.35 8.68 31.18 31.14 27.26 16.7 13.2 4.3 2.1 100
15 12.18 24.3 21.24 45.06 51.43 -10.39 12.8 8.6 2.9 2.85 100
16 6.3 14.6 7.11 28.05 32.75 -25.17 10.5 9.8 2 3.5 100
17 10.28 14.51 13.58 33.18 24.01 30.47 11.7 4.7 3 4.87 100
18 13.48 24.78 20.85 57.17 44.44 8.8 1.3 0.4 10 2 100
19 6.05 13.03 12.49 17.87 15.87 48.06 22.5 17.1 2.8 0.99 100
20 9.07 14.78 11.12 27.29 35.18 107 49.5 20.9 6.8 0.16 100
250
Appendix E10 Indonesia CSR and Financial Performance Year 2015
INDO FIRM FPROA FPROE FPROCE FPGPM FPNPM FPEPS FPPE FPPCF FPPBV FPDY CSR
2015 1 17.55 39.25 28.41 22.32 7.26 34.18 11 9.3 2.5 0.8 40
2 0.19 0.04 0.22 26.58 4.34 -87.75 137.3 36.01 2 19.27 60
3 13.65 29.57 17.33 21.03 16.53 0.97 17.6 0.7 2 3.6 100
4 2.61 24.17 23.72 32.94 33.72 12.31 11.6 9 2.6 4.37 80
5 3.32 24.44 11.45 13.03 30.25 16.92 11.7 2.4 2.7 5.61 100
6 0.44 2.51 2.09 5.14 5.33 88.59 7.3 1.4 1.4 6.78 100
7 0.71 11.54 8.97 14.9 14.84 54.11 12.1 4.7 1.8 4.16 60
8 3.54 29.52 21.31 20.98 22.71 83.87 5.2 3.6 1.6 6.74 20
9 6.98 16.84 16.18 18.14 19.75 44.86 19.7 16.4 3.1 1.04 60
10 10.55 14.94 12.39 78.77 14.8 5.59 19.5 31.2 1.7 3.69 20
11 21.85 50.52 31.35 24.45 17.73 19.82 16.4 9.7 3.4 5.36 100
12 15.81 37.32 26.17 18.66 16.37 9.05 5.7 1.3 1.8 9.73 100
13 6.13 20.02 29.61 1.89 3.15 178.09 14.6 14.4 2.7 0.8 40
14 5.34 28.32 7.45 32.41 32.41 17.55 16.1 17.6 4.3 2.33 40
15 17.53 31.88 28.5 44.77 51.83 52.86 8.8 8.6 2.6 3.19 40
16 8.72 23.37 10.02 34.53 40.55 75.45 17.3 9.9 2.6 3.88 40
17 16.23 25.16 21.92 37.89 27.48 100.93 2.2 4.7 2.4 1.41 40
18 11.6 20.36 18.59 56.11 20 8 22.7 2 2.61 2.88 40
19 6.98 16.84 16.18 18.14 19.75 44.86 19.7 16.4 3.1 1.04 40
20 11.5 27.62 15.69 33.57 38.66 107.24 31.8 14.1 8.5 0.16 40
251
Appendix F1 Malaysia CSR and Financial Performance Year 2006
MAL FIRM FPROA FPROE FPROCE FPGPM FPNPM FPEPS FPPE FPPCF FPPBV FPDY CSR
2006 1 7.09 21.53 11.8 28.39 52.43 -1.1 23.65 6 1.25 2.05 80
2 1.8 14.03 7.11 16.11 18.27 59.67 15.9 14.4 2.1 1.41 80
3 -0.86 -8.01 -1.24 11.76 -1.24 72.52 16.75 5.6 0.6 1.31 80
4 7.19 14.8 8.08 44.9 55.33 20.3 13.9 7.44 2.2 0.78 80
5 0.97 12.52 3.58 25.26 25.61 9.64 14 9 1.8 3.04 80
6 9.23 15.49 10.26 30.65 23.74 -8.37 19.4 15.3 2.8 2.45 80
7 8.21 10 9.24 32.79 18.25 6.23 17.8 14.7 1.7 3.3 80
8 1.5 16.91 5.36 31.3 33.19 8.77 14.4 38.5 2.4 5.72 80
9 29.69 67.95 65.89 70.66 54.38 -13.58 18.8 16.18 3.85 1.8 40
10 12.67 18.25 13.79 31.83 43.91 -38.07 12.5 9.05 1.9 3 80
11 13.17 18.77 15.77 29.85 32.92 58.45 14.6 10.2 2.5 3 80
12 8.23 17.8 17.39 8.66 2.04 5.36 18.25 6.1 1.3 3.28 80
13 10.63 14.14 12.82 37.85 60.5 18.03 18.3 11.4 2.3 2.94 80
14 1.49 19.62 7.05 30.93 31.61 17.08 14.9 10.3 2.9 5.63 80
15 1.02 9.31 2.68 14.77 15.25 14.87 14.3 3.7 1.3 1.28 80
16 13.15 17.07 14.05 8.01 16 52 16.55 12 2.1 3.55 40
17 6.1 10.64 7.8 49.13 47.34 14.95 6.8 1.7 2.87 2.87 80
18 5.19 11.98 7.08 40.76 37.31 -0.64 17.4 6.3 1.9 0.94 80
19 6.95 22.25 8.23 46.21 49.26 35.66 9.8 4.85 1 1.01 80
20 6.2 16.06 7.54 49.41 57.37 12.95 10.9 7.1 1.7 3.69 80
252
Appendix F2 Malaysia CSR and Financial Performance Year 2007
MAL FIRM FPROA FPROE FPROCE FPGPM FPNPM FPEPS FPPE FPPCF FPPBV FPDY CSR
2007 1 7.93 19.53 12.54 16.62 41.13 8.62 20.4 6.61 1.3 2.04 100
2 2.22 20.25 9.63 21.32 29.4 72.28 13.1 10.9 2.4 2.28 100
3 2.09 3.76 3.05 19.21 11.91 116.95 20.6 3.3 0.8 2.9 100
4 7.91 16.82 8.93 41 52.03 42.48 13.4 8.57 2.4 0.65 100
5 0.99 13.8 4.63 24.52 24.83 16.48 15 15.2 2.1 2.76 100
6 13.44 21.52 14.89 29.66 25.67 63.35 21.6 18.5 4.2 0.98 100
7 11.41 14.75 12.91 32.36 20.83 59.28 20.2 17.9 2.9 2.77 100
8 1.44 17.68 5.09 28.67 30.45 11.02 14.5 9.9 2.4 4.87 100
9 27.05 66.18 63.39 69.06 47.17 -5.95 19.01 17.15 4 2 100
10 11.5 15.5 12.6 30.54 41.46 1.06 11.9 8.92 1.8 3 100
11 12 15 14 34 35.59 11 17.6 12.9 2.5 4.4 100
12 10.09 19.66 19.29 8.77 0.52 6.86 9.5 8 1.8 3.54 100
13 13.45 17.04 16.03 42.14 63.76 28.31 17.45 11.95 2.5 2.8 100
14 1.53 23.12 8.72 32.25 32.2 21.5 17.4 13.2 3.9 4.98 100
15 1.21 11.91 4.04 17.8 18.47 39 16.3 8.1 1.2 1.7 20
16 11 17.54 14 14.91 16.01 53.57 16.02 12.1 2.1 3.62 100
17 7.51 12.83 9.84 28.77 43.25 15.1 6.2 1.9 3.15 3.15 20
18 7.8 18.7 10.79 43.49 39.76 21.34 10.5 5.8 1.8 2.66 100
19 4.81 10.79 5.61 47.24 49 17 11.45 4.83 1.15 1.86 100
20 8.61 21.54 10.34 50.5 56.93 47.65 9.3 7.4 2 4.7 100
253
Appendix F3 Malaysia CSR and Financial Performance Year 2008
MAL FIRM FPROA FPROE FPROCE FPGPM FPNPM FPEPS FPPE FPPCF FPPBV FPDY CSR
2008 1 3.77 6.64 5.29 23.73 37.06 -25.98 26.9 5.4 1.2 2.07 60
2 1.36 11.91 6.84 20.71 21.89 -31.11 10.1 7.4 1.2 3.16 60
3 4.57 11.26 6.79 16.08 12.06 205.81 4.4 4.45 0.4 2.64 60
4 2.37 4.59 2.65 39.03 28.31 -73.99 24.1 9.7 1.1 1.51 60
5 1.12 15.29 6.39 27.52 27.21 20.75 11.4 9.7 1.7 3.02 60
6 15.45 27.67 17.28 27 23.61 51.55 20.2 18 5.3 2.03 60
7 14.05 19.91 15.92 20.34 21.28 49.85 9.8 7.5 1.8 5.67 100
8 1.24 15.21 5.16 27.03 26.56 -9.05 11.7 7.9 1.8 5.12 60
9 32.33 69.72 68.39 68.12 52.77 21.22 18.5 15.2 4.55 2.25 100
10 9.71 13.1 10.65 25.93 33.5 -14.86 14.1 8.8 1.9 3.8 60
11 12 14.96 13.92 34.12 51.04 -10.57 14.6 10.2 2.5 3.44 60
12 8.75 17.87 17.62 8.07 1.46 34.73 12 9.9 2 4.15 60
13 11.47 14.09 13.47 43.05 63.6 -912.38 18.1 12.5 2.4 4.21 60
14 1.59 27.35 12 32.94 32.73 21.48 11.5 8.8 3.1 4.6 60
15 1.31 14.11 6.05 23.5 23.58 28.87 8 5.2 1.1 3.72 60
16 10.92 18 14.06 20.83 18.1 35.03 15.5 12.3 2.6 3.76 100
17 3.22 5.27 4.26 20.95 32.05 46 3 1 6.26 6.26 60
18 5.14 10.45 7.23 36.83 29.64 15.89 13.2 5.4 1 2.53 60
19 4.02 10.35 4.67 46.31 49.81 9.28 13.1 4.8 1.3 2.72 60
20 6.17 16.66 7.25 48.83 59.98 921.26 9.2 5.9 1.5 6.08 60
254
Appendix F4 Malaysia CSR and Financial Performance Year 2009
MAL FIRM FPROA FPROE FPROCE FPGPM FPNPM FPEPS FPPE FPPCF FPPBV FPDY CSR
2009 1 4.82 8.11 7.58 51.61 47.23 139.65 13.9 7.8 1.4 2.02 60
2 1.55 15.01 8.38 24 25.77 37.54 16.2 10.5 2.2 1.44 60
3 4.89 18.75 11.07 15.39 14.47 63.71 1.5 5.88 0.3 2.51 60
4 3.33 9.79 3.29 41.62 39.01 92.39 21.45 5.2 2 0.73 60
5 1.29 16.73 8.86 27.7 28.6 22.07 9.1 11.5 1.5 3.1 60
6 6.95 11.75 7.77 30.28 15.48 -54.9 28.4 15.7 6.09 1.69 60
7 7.74 10.97 8.7 29.21 16.93 -41.15 24 18.5 2.6 4.6 100
8 0.37 3.13 1.68 19.77 9.68 -77.77 49.2 8.1 1.7 1.22 60
9 12.58 23.85 17.81 39.83 34.75 -14.86 19.7 19.1 4.5 2.23 100
10 5.17 7.13 5.73 17.5 23 -42.11 23.3 9.05 1.5 3 60
11 12.98 18.4 15.13 33.17 41.48 -28.31 17.6 12.9 2.5 2.89 60
12 7.64 14.32 14.19 7.03 2.38 8.7 13.6 10 1.9 3.84 60
13 9.49 11.64 11.09 35.74 53.21 -15.04 20.7 13.2 2.4 3.5 60
14 1.34 24.49 8.3 35.19 35.12 91.96 15.4 11.2 3.5 3.55 60
15 1.34 14.54 6.58 28.03 28.65 27.24 9.5 5.9 1.3 3.1 60
16 7.05 10.59 9.05 20.05 13.31 -36.37 18.3 15.8 2 2 100
17 4.25 7.46 5.54 22.24 38.07 16.7 3.3 1.6 5.92 5.92 60
18 1.97 3.55 2.83 31.63 20.6 0.29 37.9 5.4 1.3 1.72 100
19 3.22 9.88 3.73 35.81 39.89 3.59 12.8 5.3 1.3 1.1 60
20 3.09 10.38 3.65 36.51 60.61 -43.25 19 7.7 2.1 4.33 60
255
Appendix F5 Malaysia CSR and Financial Performance Year 2010
MAL FIRM FPROA FPROE FPROCE FPGPM FPNPM FPEPS FPPE FPPCF FPPBV FPDY CSR
2010 1 5.87 9.59 7.08 57.76 41.28 -4.55 22.6 6.6 2.1 2.11 100
2 1.64 16.16 8.57 26.05 28.34 23.27 17.3 15.8 2.7 1.49 100
3 2.23 10.81 7 20.39 11.95 -48.47 4.7 7.3 0.5 2.39 100
4 5.72 14.99 6.43 44.2 40.09 110.79 18.8 11.6 2.7 0.52 100
5 2.46 16.25 19.5 31.81 32.25 9.12 12.6 22.4 2 2.05 100
6 13.31 21.29 14.67 25.78 23.24 104.35 15.2 16.8 3 3.39 100
7 11.92 17.4 13.46 29.21 21.83 65.39 17.9 14.8 3 3.53 100
8 1.4 14.47 6.26 29.54 31.38 349.17 14 9.7 1.9 6.55 100
9 13.73 26.07 18.87 66.92 49.71 12.12 17.3 11.3 4.6 5.09 100
10 2.6 3.07 2.9 15.72 18.61 -48.92 45.8 9.3 1.5 4.26 100
11 9.1 13.41 11.21 29.85 33.97 -21.88 14.6 12.9 2.5 3 100
12 10.44 17.27 17.15 9.72 3.49 38.27 11.9 8 2 4.84 100
13 9.6 11.72 11.18 36.67 56.95 1.49 20.6 12.5 2.4 4.59 100
14 1.48 25.34 7.4 39.34 39.38 20.71 14.9 10.5 3.5 3.49 100
15 1.41 15.21 6.84 32.8 31.37 30.71 13.2 9.9 1.9 2.26 20
16 2.44 3.47 3.11 17.44 9.61 -68.13 66.2 17.3 2.4 1.25 100
17 7.58 16.42 10.39 44.63 41.51 10.4 4 1.6 5.58 5.58 100
18 5.58 11.69 8.12 21.42 29.18 18.11 15 5.8 1.3 1.18 100
19 3.31 8.93 3.87 22.79 31.26 3.58 15.5 4.9 1.5 1.19 100
20 5.15 18.19 6.16 19 43.45 63.87 11.6 7.4 2.2 4.29 100
256
Appendix F6 Malaysia CSR and Financial Performance Year 2011
MAL FIRM FPROA FPROE FPROCE FPGPM FPNPM FPEPS FPPE FPPCF FPPBV FPDY CSR
2011 1 7.22 12.34 8.89 50.37 44.79 33.33 18.5 9.05 2.2 1.94 100
2 1.71 16.4 8.67 24.92 28.77 10.61 13.7 13.8 2.1 2.96 100
3 1.94 9.88 6.89 19.68 10.45 0.94 9.4 6.68 0.9 2.51 100
4 6.18 17.32 7.06 40.39 43.01 30.42 14.2 6.8 2.3 0.65 100
5 1.1 16.34 6.51 29.17 29.87 14.52 17.1 28.3 2.6 1.38 100
6 12.77 19.52 14.07 19.85 19 5.43 15.3 17.1 2.8 3.21 100
7 16.24 24.03 18.56 27.98 22.13 55.21 14.3 12.9 3.2 4.03 100
8 1.54 16.85 6.82 30.51 30.5 27.64 13.35 23.75 1.85 8.39 100
9 15.37 30.17 19.93 69.06 50.43 10.06 16.3 11.1 5.1 5.84 100
10 -2.55 -6.38 -2.87 12.08 2.96 -49.78 34.5 9.18 1.2 4.57 100
11 13.17 18.77 15.77 34 33 58.45 17.6 12.9 2.5 4 100
12 9.98 18.77 16.84 7.63 4.39 11.62 20.2 9 3.7 4.17 100
13 14.02 17.39 16.41 51.34 69.01 52.94 24.05 12.86 3.6 3.29 20
14 1.57 24.98 8.28 41.12 41.16 14.11 12.7 10.85 3 3.5 100
15 1.27 14.03 5.88 32.13 31.22 23.48 9.7 8.5 1.4 2.5 20
16 9.8 16.48 12.8 17.74 15.99 404.38 15.1 10.7 2.3 3.25 100
17 7.21 16.23 9.96 19.77 36.67 14.9 5.6 2.5 3.95 3.95 100
18 1.76 1.66 2.59 11.94 16.64 -26.26 57.3 6.2 0.9 0.64 100
19 3.83 10.33 4.24 22.57 22.63 -9.5 13.4 4.5 1.3 1.29 20
20 5.8 17.32 6.1 17.58 32.23 -0.89 11.6 7.1 1.9 4.26 20
257
Appendix F7 Malaysia CSR and Financial Performance Year 2012
MAL FIRM FPROA FPROE FPROCE FPGPM FPNPM FPEPS FPPE FPPCF FPPBV FPDY CSR
2012 1 7.32 12.58 8.9 54.5 43.1 6.46 22.3 8.3 2.8 1.85 100
2 1.65 16 7.43 25.09 28.06 7.75 13.1 13.15 2.1 3 100
3 4.22 23.21 13.79 20.51 29.42 173.65 3.1 7.29 0.7 2.47 100
4 7.69 20.63 8.65 41.56 42.09 41.36 8.5 5.7 1.6 1.45 100
5 1.27 17.4 6.54 30.03 30.04 32.28 11.8 29.09 1.9 2.86 100
6 9.08 14.53 9.99 19.91 17.08 -19.54 18.6 17 2.6 2.99 20
7 11.33 17.08 12.91 21.66 17.03 -22.97 19.4 18.2 3.3 2.95 100
8 1.42 15.18 6.2 33.06 33.7 5.67 12.7 37.8 1.8 6.89 20
9 11.4 24.53 14.35 66.48 46.55 -26.54 26.9 14.3 7.1 6.02 100
10 2.94 3.67 3.38 21.36 29.84 100 24.3 11.89 0.9 4 100
11 12 14 14 34.12 32.92 11 14.6 10.2 2.5 3.44 100
12 8.55 17.45 15.06 7.51 5.2 5.48 27.9 12.4 4.9 2.23 100
13 11.58 15.86 13.66 49.49 70.52 -2.45 27.5 12.68 4.2 3.9 100
14 1.59 22.99 9.26 36.97 38 5.04 14.9 10.68 3.2 3.1 100
15 1.25 13.35 5.33 29.78 29.81 17.15 9.7 7.3 1.3 2.87 100
16 9.93 16.59 12.97 11.07 15.09 13.25 14.3 12.2 2.3 3.4 100
17 7.32 18.23 10.69 19.42 34.17 17.1 7.6 3.1 3.64 3.64 100
18 5.91 12.66 8.63 19.54 29.57 0.23 8.9 3.8 1 2.92 100
19 3.92 10.48 4.61 21.1 21.92 5.34 16.5 6.4 1.6 0.99 100
20 5.06 13.73 6.03 14.64 21.18 -10.25 10.4 6.74 1.4 5.3 20
258
Appendix F8: Malaysia CSR and Financial Performance Year 2013
MAL FIRM FPROA FPROE FPROCE FPGPM FPNPM FPEPS FPPE FPPCF FPPBV FPDY CSR
2013 1 7.21 12.84 8.92 53.01 40.47 1.04 23.1 9.8 3 1.76 60
2 1.52 16.2 8.18 23.27 25.72 2.69 12.7 12.5 1.9 3.04 80
3 1.92 8.43 5.49 3.52 12.18 -63.97 10.5 4 0.7 2.43 100
4 3.56 7.7 3.95 37.55 38.16 -54.57 20.9 7.2 1.5 1.9 60
5 2.14 15.01 6.2 30.46 30.73 0.76 13.1 16.5 2 2.43 60
6 9.35 14.98 10.35 17.39 16.6 10.25 17.6 27.9 2.5 2.85 60
7 8.56 12.53 9.69 21.31 16.99 -24.21 26.2 20.9 3.2 2.21 60
8 1.38 14.88 6.1 34.24 34.74 4.26 13.1 9.9 1.9 5.38 60
9 11.59 27.05 14.53 66 46.46 -4.91 30.9 16 9.1 5.5 60
10 6.51 9.1 7.43 22.89 30.06 170.75 12.2 14.6 1 0.88 100
11 12 14.96 13.92 33.17 35.59 -10.57 17.6 12.9 2.5 2.89 100
12 8.21 16.91 15.37 6.19 5.01 4.17 28.5 23.1 6.5 1.64 60
13 16.91 21.4 19.68 49.97 67.51 47.96 23.1 22.3 4.7 2.27 60
14 1.5 21.15 9.28 36.66 36.41 6.22 16.7 14.4 3.3 2.68 100
15 1.15 11.5 4.65 25.52 25.81 8.4 10.8 9.8 1.2 2.06 100
16 8.53 13.93 10.8 9.06 12.91 -10.83 15.6 13.7 2.1 3.55 100
17 6.38 14.43 9.89 20.48 33.6 19.6 6.7 2.8 4.7 4.7 60
18 5.71 12.95 8.46 22.94 30.4 11.57 10.5 5.9 1.4 2.86 60
19 3.85 9.99 4.49 20.81 21.66 5.35 13.5 5.9 1.3 1.51 60
20 4.2 11.11 4.99 14.64 19.46 -13.24 10.4 6.4 1.2 6.15 60
259
Appendix F9: Malaysia CSR and Financial Performance Year 2014
MAL FIRM FPROA FPROE FPROCE FPGPM FPNPM FPEPS FPPE FPPCF FPPBV FPDY CSR
2014 1 7.03 21.03 11.98 27.92 56.3 -2.98 22.83 6.15 1.26 2 60
2 1.07 9.05 3.87 14.84 16.26 -7.52 16.6 6.8 1.5 2.3 100
3 2.42 8.03 3.36 16.41 9.03 -7.4 10 5.4 0.8 1.16 100
4 6.62 12.45 7.4 44.92 47.99 30.02 16.4 7.7 1.7 0.93 100
5 0.88 9.17 5.08 21.71 21.96 -39.51 19.8 8.1 1.7 3.57 100
6 9.2 17.65 10.49 35.2 26.09 20.64 12.7 8.4 2.1 2.21 100
7 9.24 11.04 10.38 30 17.57 9.01 11.1 8.4 1.2 3.22 100
8 1.73 17.25 7.17 34.36 35.06 20.18 15 9.1 2.5 4.28 100
9 29 67.5 65.26 70.26 52.58 11.67 18 23.85 2 1.50 100
10 13.49 21.84 14.33 41.05 48.46 74.61 11.1 11.2 2.2 2.92 100
11 12.98 18.4 15.13 49.44 32.92 -28.31 14.6 10.2 2.5 3 100
12 9.07 15.86 15.39 12.05 5.64 -2.26 9.7 4.2 1.5 3.87 100
13 7.36 10.34 8.76 37.83 65.03 12.41 24.1 11.8 2 2.38 60
14 1.71 14.69 9.38 37.99 37.38 19.39 18 11.02 2.7 2.8 60
15 1.01 7.53 3.52 13.29 13.11 -4 12 2.5 0.5 0.5 60
16 13.89 14.3 14 7.34 15 50.5 16.9 11.5 2 3 100
17 8.57 14.43 10.6 57.75 55.17 19.3 5.6 2 0.86 0.86 100
18 2.49 5.45 3.24 38.99 30.5 0.95 38.3 6.6 2.1 0.94 100
19 4.81 13.65 5.72 46.68 55.42 16.07 9.7 4.9 1.2 7.83 100
20 5.44 13.43 6.59 47.83 58.32 104.27 6.6 3.2 0.9 3.98 100
260
Appendix F10 Malaysia CSR and Financial Performance Year 2015
MAL FIRM FPROA FPROE FPROCE FPGPM FPNPM FPEPS FPPE FPPCF FPPBV FPDY CSR
2015 1 7.51 20.53 12.17 27.45 60.17 -4.8 22.02 6.3 1.28 2.2 100
2 1.16 9.04 4.28 14.03 17.65 7.7 18.7 7.5 1.6 1.89 20
3 2.55 5.47 3.59 14.8 8.11 -28.09 12.9 5 0.7 1.23 100
4 7.76 14.78 8.57 45.15 54.21 34.3 14.4 8.5 1.7 0.91 100
5 0.94 11.78 4.1 27.15 27.46 35.51 15.7 8.5 1.8 3.32 40
6 10.46 19.44 11.82 30.52 23.91 25.51 13 10.2 2.4 2.8 80
7 8.24 9.96 9.3 32 17.71 -4.56 13.4 10.7 1.3 3.72 20
8 1.52 16.13 6.06 33.24 33.91 1.63 15.9 9.2 2.5 6.77 80
9 28.38 67.07 64.64 69.9 50.78 9.76 19.95 16.66 2.75 1.75 20
10 21.67 35.77 23.15 36.98 60.29 108.04 6.2 6.9 1.9 3.75 40
11 9.1 13.41 11.21 39.35 35.59 -21.88 17.6 12.9 2.5 1.44 100
12 3.88 8.13 7.92 8.29 3.99 0.47 26.8 8 1.5 2.69 20
13 9.25 12.75 11.13 41.95 68.62 28.4 16.6 11.6 2.5 2.66 20
14 1.54 16.95 7.7 33.88 35.45 11.9 14.7 11.75 2.5 2.8 40
15 1 7.25 2.81 13.35 13.36 -2.56 12.8 3.1 0.9 0.65 100
16 12.4 16.15 14.03 7.34 15.5 50.1 16.2 11.89 2 3.25 20
17 3.25 4.51 4.09 58.9 39.64 14.8 7.4 1.7 2.59 2.59 40
18 3.8 8.29 5.08 36.05 32.1 -1.34 27.4 7.8 2.2 1.06 40
19 4.21 10.43 5.03 45.43 50.97 11.05 13.2 4.8 1.4 1.15 60
20 5.83 15.22 7.11 48.24 57.88 -39.55 12.6 7.2 1.9 3.6 80
261
Appendix G1 Philippines CSR and Financial Performance Year 2006
YEARID FIRMID FPROA FPROE FPROCE FPGPM FPNPM FPEPS FPPE FPPCF FPPBV FPDY CSR
2006 1 9.77 18.38 11.42 22.3 44.58 44.87 20.5 3.66 2.9 1.54 80
2 1.95 13.99 7.61 16.19 16.19 18.48 14.9 11.7 2 1.91 80
3 7.5 12.17 9.39 23.25 41.24 -68.55 8.05 0.84 1.3 1.51 80
4 6.04 9.78 7.73 24.42 32.08 14.53 23.05 38.09 4.1 5.25 80
5 1.72 12.1 11.02 26.24 26.24 11.16 19 13.6 2.2 4.41 40
6 11.79 34.25 12.86 43.67 48.78 -6.15 8.6 3.5 1 5.5 80
7 2.1 3.86 3.6 40.64 73.56 45.93 12.2 20 0.7 0.4 40
8 12.01 21.85 15.07 63.71 58.49 30.13 13.9 5.2 3.8 4.05 80
9 13.27 19.49 14.84 49.77 35.83 -9.48 10.6 6.1 3.3 3.14 40
10 12.51 20.91 20.91 20 12.38 28.98 24 1.2 3.8 1.92 80
11 6.65 213.15 21.15 24.7 35.77 25.66 17.8 5.4 13.2 0.64 100
12 1.8 9.35 7.99 7.88 10.14 20.77 16.4 1.8 1 2.2 80
13 10.3 20.16 12.46 6.27 6.17 6.4 0.2 1.2 1.2 2.44 40
14 5.77 9.68 7.13 22.25 39.07 55.74 9.1 1.9 1 1.43 80
15 9.71 34.22 25.46 11.78 15.33 70.59 23.3 9.5 1.1 3.74 80
16 19.28 41.44 23.3 57.96 63.79 75.3 8.7 3.6 4.9 110.65 40
17 12.22 31.14 18.34 15.38 12.6 115.02 8.3 3.7 2.3 6.99 80
18 5.02 8.29 5.94 24.82 17.93 13.9 22 1.5 1.6 2 80
19 6.95 12.56 7.83 16.29 33.2 33.14 18 2.8 1.8 7.5 80
20 9.22 15.97 10.37 53.01 59.42 9.36 19.6 7.9 3 2.95 40
262
Appendix G2 Philippines CSR and Financial Performance Year 2007
YEARID
FIRMID
FPROA
FPROE
FPROCE
FPGPM FPNPM
FPEPS
FPPE
FPPCF
FPPBV
FPDY
CSR
2007 1 10.58 21.21 12.47 21.9 48.19 52.52 17.9 5.06 1.9 1.79100
2 6.27 10.28 8.27 33.03 32.69 11.3822.3
7 38 1.9 0.42100
3 1.72 12.27 11.76 28.23 28.23 13.99 16.6 11.9 1.9 4.55100
4 1.48 11.68 7.17 17.29 17.29 -7.14 21.2 11 2.3 1.61100
5 12.82 22.82 16.85 26.94 28.02 136 10.2 0.93 1.8 1.54100
6 14.44 27.84 15.53 65.39 78 2.12 11.2 3.8 3.1 5.6100
7 2.55 5.65 4.25 44.34 70.79 6.67 15.3 22 0.4 0.41 20
8 12.73 23.87 16.77 61.76 60.16 22.88 15.7 6.6 2.9 4.2100
9 13.08 19.71 15.12 58.93 45.83 -4.11 25.4 5.3 5.2 3.14 20
10 6.2 11.77 7.74 27.09 40.87 33.68 9.1 1.9 1 1.43100
11 12.29 20.21 20.1 20.4 13.51 17.25 19.4 12.9 4.2 1.54100
12 2.77 7.56 6.36 9.95 5.09 70.59 23.3 9.5 1.8 3.74100
13 19.78 11.84 36.13 234.1116,729.9
1 25.66 17.8 290.3 2.8 0.64100
14 1.72 10.33 7.75 10.91 14.84 18.51 15.1 1.9 1.5 2.2100
15 7.94 18.27 9.66 6.78 6.49 6.4 0.3 1.4 1.4 1.75100
16 19.12 34.72 22.5 60.42 64.62 84.94 16.9 4.3 5.6 9.5100
17 3.93 6.53 4.58 24.26 17.09 -17.99 18.8 1.3 1.4 2.23 20
18 5.89 11.42 7.79 11.46 12.59 6.62 19.1 4.5 2.2 4.79100
19 6.41 11.33 7.47 15.45 25.58 13.57 17.2 2.1 2 7.3100
20 9.32 16.03 10.77 50.74 55.08 9.1 22.9 7.9 3.2 2.33100
263
Appendix G3 Philippines CSR and Financial Performance Year 2008
YEARID
FIRMID
FPROA
FPROE
FPROCE
FPGPM
FPNPM
FPEPS
FPPE
FPPCF
FPPBV
FPDY
CSR
2008 1 5.28 8.82 6.3 20.17 30.41 -42.24 13.7 6.88 1.2 1.91 100
2 6.07 10.27 8.32 30.17 28.98 11.2 41.9 38.1 1.7 0.94 100
3 1.05 7.74 7.18 21.88 21.88 2.46 19.4 11.5 1.6 4.68 60
4 0.68 3.73 3.55 6.57 6.57 -68.18 26.4 12.7 1 1.32 60
5 6.54 10.88 9.13 20.9 23.46 -31.91 4.1 1.03 0.4 1.57 60
6 3.56 4.49 3.88 60.79 26.7 84.97 21.8 4.1 1 6.58 60
7 1.61 3.57 2.64 58.32 29.03 -34.38 3.7 25.9 0.1 0.5 60
8 10.8 21.57 14.39 61.09 60.45 4.37 8.9 3.6 2 9.87 100
9 6.98 16.13 9.69 56.36 36.36 35.69 8.5 4.5 1.3 3.14 60
10 2.19 0.93 2.79 28.31 12.6 33.68 5.2 2.2 0.2 1.43 60
11 10.09 17.3 15.94 18.12 12.33 12.31 22 9.8 3 2.02 60
12 2.32 5.37 4.84 6.81 5.88 28.45 23.4 9.5 1.2 3.74 60
13 2.79 5.22 4.34 52.37 63.98 25.66 17.8 3.8 1 0.64 60
14 1.05 6.39 4.84 8.01 16.18 3.24 10.6 0.8 0.7 4.35 60
15 0.19 11.31 0.22 0.86 0.6 8.4 0.2 1.5 1.5 1.96 100
16 16.43 32.9 21.68 64.94 58.93 26.65 11.6 2.7 3.9 5.46 60
17 5.65 13.64 8.34 18.25 8.1 -59.48 11 6.1 1.7 1.89 60
18 6.74 13.59 9.16 24.91 20.48 40.95 9.2 0.8 0.9 2.27 60
19 6.42 12.93 7.6 10.6 26.07 15.64 8.4 1 1.1 7 60
20 8.18 14.35 9.85 50.07 52.21 7.34 15.6 5.5 2.1 3.2 60
264
Appendix G4 Philippines CSR and Financial Performance Year 2009
YEARID FIRMID FPROA FPROE FPROCE FPGPM FPNPM FPEPS FPPE FPPCF FPPBV FPDY CSR
2009 1 5.06 7.6 6.07 20.63 30.99 6.5 21.3 8.7 1.6 2.21 100
2 5.92 10.17 8.14 30.67 28.91 11.56 17.8 27.65 2.75 0.94 100
3 1.36 10.95 8.98 25.99 25.99 4.9 18.3 10.4 2.1 3.75 60
4 1.06 9.98 6.67 12.07 12.07 182.42 15.2 7.2 1.5 3.33 60
5 11.13 25.33 15.26 22.34 23.05 175 5.5 1.13 1.3 1.61 60
6 6.15 11.86 6.5 57.62 51 154.31 26.7 7.25 3.1 4.66 60
7 1.82 3.69 3.14 62.9 30.31 9.52 9 10 0.3 0.65 60
8 11.41 26.02 15.1 60.36 60.52 3.43 9.7 4.3 2.6 10 100
9 5.74 13.05 7.56 40.86 37.8 15.3 16.3 7.9 2 1.11 60
10 5.16 10.95 6.59 32.63 26.19 92.06 5.2 2.2 0.5 0.27 60
11 10.22 17.5 15.61 19.42 11.49 10.25 18.3 10.9 3.5 1.12 60
12 4.16 10.92 8.61 6.08 8.24 113.39 37.8 9.5 4 3.74 60
13 5.12 6.57 6.96 54.64 68.03 25.66 13.6 3.2 1 0.64 60
14 1.27 8.69 5.51 12.23 13.8 6.79 14.7 1.4 1.2 2.22 60
15 6.11 12.11 6.98 7.85 7.29 11.8 0.3 1.3 3.3 0.53 60
16 17.25 40.28 23.46 49.98 58.92 6.13 12.5 3.3 5.2 201 60
17 16.84 51.75 29.97 23.43 14.82 25.53 2.3 3.5 0.9 15.8 60
18 16.86 31.5 20.14 39.67 43.41 335.44 3.6 0.9 0.8 2.39 100
19 6.63 13.64 7.82 20.09 23.35 14.44 12.4 1.5 1.6 6.66 60
20 8.39 14.92 10.12 44.99 47.06 7.17 18.6 6.4 2.8 2.45 60
265
Appendix G5 Philippines CSR and Financial Performance Year 2010
YEARID
FIRMID
FPROA
FPROE
FPROCE
FPGPM
FPNPM FPEPS
FPPE
FPPCF
FPPBV
FPDY
CSR
2010 1 5.53 10.24 6.69 25.92 33.77 44.48 19.2 11.83 1.9 2.57 100
2 5.78 10.07 7.97 31.18 28.84 7.67 40.1 17.2 3.8 0.94 100
3 1.55 14.49 10.85 28 27.04 6.05 17.5 10.5 2.6 4.32 100
4 1.24 11.7 7.33 15.51 15.51 31.13 17.4 8.5 1.8 0.72 100
5 14.14 33.17 19.16 29.38 30.56 66.67 12.2 1.24 3.5 1.64 20
6 8.86 13.86 9.5 57.72 49.46 24.43 26.8 10.4 3.6 2.73 100
7 2.59 7.11 4.85 63 35.55104.3
5 10.7 6 0.7 0.89 100
8 8.66 20.96 11.56 65.98 58.86 -0.82 10.9 3.9 2.3 10 100
9 9 19.6 11.42 45.15 45.99 21.73 19.2 11 3.6 1.11 20
10 7.03 16.26 8.86 34.12 35.46 92.06 8.1 2.2 1.1 0.27 100
11 11.01 19.13 16.48 18.62 12.43 13.07 21.1 16.8 5.4 1.12 100
12 6.08 16.65 12.74 7.97 8.13 58.49 26.5 9.5 4.3 3.74 100
13 4.77 5.44 6.18 61.73 61.1 25.65 27.4 4.2 1.4 0.64 100
14 1.39 10.46 5.6 25.6 18.84 13.1 17.2 2.3 1.7 2.2 100
15 7.75 15.97 8.88 8.1 7.65 24.4 0.8 3.3 3.3 0.53 100
16 16.6 42.57 23.46 44.78 54.04 2.3 12 3 5.1 143 100
17 17.86 44.84 33.28 22.57 15.32353.7
3 10.2 3.5 3.7 3.25 20
18 4.54 6.79 5.22 37.68 22.49 -67.83 26.5 1.6 1.8 2.15 100
19 6.54 13.85 7.65 22.83 23.74 15.02 18 2.3 2.3 1.66 20
20 8.58 14.89 10.23 45.11 45.53 7.82 19.5 6.7 2.7 2.1 100
266
Appendix G6 Philippines CSR and Financial Performance Year 2011
YEARID
FIRMID
FPROA
FPROE
FPROCE
FPGPM
FPNPM
FPEPS
FPPE
FPPCF
FPPBV
FPDY
CSR
2011 1 4.3 8.37 5.27 40.57 30.03 -15.19 21.4 16.08 2.25 2.98 100
2 6.22 12.07 8.67 31.67 30.11 12.89 27.6 19.25 3.2 0.94 100
3 1.6 15.07 12.09 30.42 29.58 5.92 15.3 10.6 2.2 4.89 100
4 1.31 11.7 7.22 17.12 17.12 16.02 15.1 9 1.7 1.37 100
5 13.73 31.54 18.44 33.84 33.83 22.37 11.4 7.6 3.2 2.42 20
6 4.58 0.6 4.98 60.14 32.72 -35.9120.4
5 7.18 4.3 2.3 100
7 2.37 6.73 4.5 58.27 32.93 4.95 8.4 5 0.5 0.9 100
8 8.67 20.91 11.6 69.57 55.55 -3.52 15.3 4.1 3.1 4.09 20
9 9.09 18.64 11.1 61.97 41.98 18.19 19.4 11.3 2.8 1.23 20
10 8.13 16.62 9.76 27.65 20.43 -39.26 17.1 9.1 1.2 0.27 100
11 9.88 17.62 14.56 19.01 11.92 7.75 28.5 1.7 4.8 0.41 100
12 7.28 21.33 15.91 10.47 9.96 36.55 21.1 9.5 4.3 3.74 100
13 6.04 7.9 7.77 60.16 59.96 58.45 16.3 4.1 1.2 0.68 100
14 1.65 11.42 6.51 24.03 22.72 9.2 13.5 2.3 1.4 1.91 100
15 7.13 12.97 8.28 7.95 7.11 16.2 0.4 2 2 1.59 100
16 10.99 26.03 15.92 77.71 49.63 -2.78 15.6 3.7 3.7 76.38 100
17 18.89 37.93 36.6 14.9 12.38 15.99 13.8 31.5 4.5 2.83 100
18 4.47 5.37 5.01 24.05 15.1 -19.58 23.5 0.5 1.2 3.46 100
19 6.64 14.19 7.75 24.62 24.57 14.95 16.8 2.1 2.3 1.79 20
20 8.63 14.85 10.39 47.11 45.43 8.22 20.4 6.9 2.9 2.03 100
267
Appendix G7 Philippines CSR and Financial Performance Year 2012
YEARID
FIRMID
FPROA
FPROE
FPROCE
FPGPM
FPNPM
FPEPS
FPPE
FPPCF
FPPBV
FPDY
CSR
2012 1 3.98 9 5.08 39.29 29.67 17.96 30.4 21.88 2.6 3.46 100
2 5.62 12.7 8.02 35.45 31.36 14.87 28.6 20.28 1.4 1.06 100
3 1.88 17.49 13.9 32.14 33.41 8.82 20.7 11.95 3.5 3.5 100
4 1.59 11.49 8.2 20.78 20.72 26.44 16.1 8.45 1.8 1.69 100
5 12.01 26.31 15.73 32.53 31.27 2.14 14.7 7.2 3.5 2.28 20
6 13.28 28.55 14.55 67.63 65.83 -40 14.1 4.95 3.8 2.09 100
7 2.22 6.88 4.18 61.6 31.24 10111.
2 5.2 0.8 0.91 20
8 6 14.58 8.1 65.08 50.91 -12.4329.6
5 5.8 4.15 4.09 20
9 8.23 12.2 9.51 55.67 43.83 10.41 29.8 14.75 3.5 0.69 20
10 5.23 9.13 6.2 29.69 23.53 35.37 19.8 9.1 1.7 0.27 20
11 9.85 18.33 14.62 17.44 11.01 8.64 28.5 1.5 5.1 0.41 20
12 8.54 25.78 19.51 11.12 10.27 28.73 17.2 9.7 4.3 3.01 20
13 5.65 8.33 7.07 58.01 59.8 15.11 18.5 3.9 1.4 0.86 20
14 1.98 13.75 7.81 23.32 28.34 15.06 18.8 3.2 1.9 1.32 20
15 3.48 2.1 4.15 3.61 3.5 131.1 0.2 1.6 1.9 0.36 100
16 10.18 23.92 15.21 31.14 50.83 -2.75 15.1 3.4 3.8 125 20
17 21.32 44.32 39.64 20.63 15.11 75.26 14.3 32 5.5 3.27 100
18 5.39 9.2 5.98 13.9 12.91 82.11 12.1 0.4 1 2.04 20
19 6.6 14.27 7.68 32.95 23.63 14.91 22.1 2.6 2.9 1.34 20
20 8.84 15.75 10.69 60.18 46.5 9.51 27.2 9.3 4.1 1.41 100
268
Appendix G8 Philippines CSR and Financial Performance Year 2013
YEARID FIRMID FPROA FPROE FPROCE FPGPM FPNPM FPEPS FPPE FPPCF FPPBV FPDY CSR
2013 1 3.66 9.64 4.88 37.81 30.6 20.59 25.2 29.76 2.3 3.93 100
2 5.05 13.02 7.56 39.23 32.62 18.34 29.6 21.3 3.6 1.18 100
3 1.81 18.7 14.07 36.27 37.53 21.91 16.4 13.3 2.9 2.12 100
4 1.75 14.5 9.83 27.95 28.25 37.48 11 7.9 1.5 1.45 60
5 17.94 27 23.11 36.07 50.19 94.51 7.9 6.8 2.9 2.14 60
6 7.98 14.04 8.76 65.55 50.93 -47.39 21.1 8.5 2.9 1.88 60
7 1.95 6.79 3.58 64.3 29.29 4.39 9.6 4.3 0.6 1.22 60
8 4.26 11.3 5.93 60.6 46.65 -15.25 44 7.5 5.2 4.09 100
9 8.57 12.67 9.36 56.68 45.2 15.21 33.4 18.2 3.7 0.69 60
10 3.32 9 4.2 31.72 19.3 -25.76 26 9.1 1.5 0.27 60
11 11.09 21.46 17.2 18.36 11.94 14.43 38.9 20.8 8.1 0.41 100
12 7.73 24.06 18.11 12.69 10.78 0.55 16.4 9.7 3.8 3.01 100
13 5.89 8.28 7.26 59.5 56.84 15.8 15.5 3.6 1.2 0.86 60
14 2.09 18.35 9.35 29.83 33.78 37.61 9.4 2.4 1.6 1.32 100
15 2.38 3.42 2.97 4.31 3.93 50 0.3 1.4 1.5 0.36 100
16 10.36 25.11 16.15 32.02 42.72 -2.06 16.3 3.4 4.2 4.68 60
17 15.37 31.72 23.27 20.05 14.09 -3.49 7.4 35 2.2 5.34 60
18 5.8 13.61 6.57 14.55 16.91 53.97 4.7 0.2 0.7 2.24 60
19 6.12 13.47 7.14 34.39 21.09 9.31 20.4 2.4 2.6 1.45 60
20 7.97 13.96 9.73 34.2 34.64 8.78 25.1 6.8 2.5 3.13 60
269
Appendix G9 Philippines CSR and Financial Performance Year 2014
YEARID
FIRMID
FPROA
FPROE
FPROCE
FPGPM
FPNPM
FPEPS
FPPE
FPPCF
FPPBV FPDY
CSR
2014 1 7.85 12.29 8.82 16.84 52.87140.0
1 15.4 2.43 1.2 1.15 60
2 5.67 8.24 6.95 27.62 39.43 0.68 24.4 4.7 2.1 4.62 60
3 1.59 12.63 10.81 28.03 28.03 1.47 17.5 10.6 1.7 3.44 60
4 2.13 11.67 7.92 12.46 14.26 31.33 11.9 11.5 1.1 1.41 60
5 13.64 27.48 21.46 32.92 35.35742.8
6 3.5 0.7 1.7 1.64 60
6 4.79 33.23 5.18 43.38 37.75 -82.11 7 3 2.7 5 60
7 1.31 1.82 1.96 21 56.29224.9
2 11.3 6.2 0.2 0.35 60
8 10.97 21.03 14.12 56.38 51.77 51.89 11.8 5.4 1.9 1.3 60
9 10.17 13.5 11.08 60.05 35.2 10.78 10.1 3.5 1.1 9.09 60
10 6.3 9.54 6.95 21.42 32.56180.6
5 6.8 1.9 0.3 1.43 60
11 11.99 19.58 18.69 18.3 11.45 13.95 14.4 1.1 3.4 1.92 60
12 0.91 6.72 2.01 14.09 2.78 70.59 23.3 2.4 0.6 3.74100
13 6 200 20 23.06 55.71 25.66 17.8 5.4 13.2 0.64100
14 0.71 6.72 3.41 10.05 13.94 1.38 10.6 1 0.8 1.45 60
15 8.01 16.59 10.28 7.56 6.07 6.8 0.2 1.4 1.1 8.85100
16 13.79 40.41 16.35 64.58 53.57241.5
1 17.4 1.8 5.6110.6
5100
17 7.86 22.11 12.28 15.35 15.34 -9.9 3.7 0.9 0.8 20.25 60
18 4.8 7.57 5.74 28.82 16.17 9.23 21 1 1.5 1.7 60
19 6.06 12.34 6.95 34.05 29.07 27.34 16.1 3.3 1.9 9 60
20 9.57 14.41 10.54 54.48 63.59 10.1 16.5 7.4 2.6 1.92 60
270
Appendix G10 Philippines CSR and Financial Performance Year 2015
YEARID FIRMID FPROA FPROE FPROCE FPGPM FPNPM FPEPS FPPE FPPCF FPPBV FPDY CSR
2015 1 7.2 14.25 8.5 23.09 51.92 11.33 13.2 3.3 1.8 1.33 40
2 6.07 9.45 8.13 26.07 37.63 2.99 21.7 29.6 2.8 4.94 40
3 4 12.05 10.56 26.97 26.97 21.97 14.6 12.1 1.7 3.92 100
4 2.04 13.98 6.99 14.26 16.41 23.77 12.3 12.4 1.4 1.66 100
5 24.96 52.53 35.77 27.16 62.57 144.82 5.9 0.77 0.8 1.48 40
6 17.43 146.9 18.36 49.55 85 306.11 8.5 3.2 3.1 5.25 20
7 1.46 3.14 2.37 25.85 59.32 63.33 8.9 16.05 0.2 0.38 40
8 11.3 19.6 13.65 56.97 54.79 39.52 9.6 3.2 2.9 5.44 80
9 11.11 15.63 12.25 47.97 35.41 117.44 8.1 4.8 1.6 2.69 40
10 4.71 6.7 5.85 22.82 31.51 -30.77 3 1.9 0.4 1.43 40
11 10.75 18.54 17.96 18.58 12.36 13.31 18 1.4 4.2 1.54 80
12 1.76 1.23 4.92 11.32 3.52 70.59 23.3 9.5 0.4 3.74 20
13 11.32 24.31 14.39 7 6.56 7.4 0.2 1.5 1.5 2.44 20
14 17.76 59.37 21.53 58.98 65.8 62.33 8.7 2.6 4.8 110 100
15 6.5 210 21 23.06 55.71 25.66 17.8 5.4 13.2 0.64 20
16 15.81 37.32 26.17 18.66 16.37 9.05 5.7 1.3 1.8 9.73 80
17 0.69 7.44 2.96 12.66 13.47 19.2 13.8 1.1 0.8 1.45 80
18 6.23 7.71 7.42 27.25 15.1 4.87 19 0.9 1.6 1.8 80
19 8.66 17.19 9.79 36.07 41.27 149.19 16.1 3.3 1.9 7.9 80
20 9.16 15.92 10.15 53.39 63.3 9.6 15.8 7.1 2.4 2.95 40
271
Appendix H1 Thailand CSR and Financial Performance Year 2006
YEARID FIRMID FPROA FPROE FPROCE FPGPM FPNPM FPEPS FPPE FPPCF FPPBV FPDY CSR
2006 1 14.21 22.09 16.71 59.3 47.44 -14.33 14.1 2.5 3 4.6 80
2 1.34 12.42 8.96 18.95 22.75 -12.12 11.8 2.1 1.4 1.68 80
3 0.34 3.89 2.73 20.03 18.71 17.99 10.1 1.3 1.1 1.09 80
4 9.44 16.6 11.09 44.6 45.45 35.04 1.7 5 8.2 1.8 80
5 4.59 5.89 5.22 13.4 6.86 -67.89 14.3 0.4 1.1 2.91 40
6 3.94 15.24 10.98 18.17 5.62 -11.76 20.8 7.3 3 3.39 80
7 5.82 8.01 6.27 31.9 89.26 -62.15 23.9 9.3 11.1 8.85 80
8 1.71 16.43 10.96 35.78 35.71 -2.21 11.9 3.3 2.1 1.9 80
9 1.35 16.06 11.62 17.73 18.22 8.09 9.4 1.7 1.4 4.29 80
10 19.05 35.01 30.49 76.54 74.86 17.8 13 7.7 3.6 3.1 80
11 29.97 68.78 48.36 24.95 19.82 47.98 12 18.9 6 6.07 40
12 14.882 36.73 19.23 12.3 15.17 18.83 7.7 0.7 2.7 7.1 80
13 10.61 18.45 11.77 14.74 20.52 0.72 10.2 6.8 1.8 4.8 80
14 7.08 9.76 7.76 32.98 20.56 115.45 17 6.4 1.6 1.79 40
15 13.38 24.5 15.19 25.42 16.81 -2.17 14.9 7.1 3 3.55 80
16 14.62 25.18 17.53 9.41 12.46 -11.53 6.5 4.8 1.9 3.25 80
17 16.38 42.38 18.64 18.59 22.38 -8.64 9.1 1.1 3.9 6.15 80
18 1.65 11.38 8.85 23.83 -48.04 5.9 5.4 1.2 11.74 2.55 80
19 7.96 12.66 9.13 38.17 37.26 8.44 2.2 14.5 1.7 1.5 80
272
Appendix H2 Thailand CSR and Financial Performance Year 2007
YEARID FIRMID FPROA FPROE FPROCE FPGPM FPNPM FPEPS FPPE FPPCF FPPBV FPDY CSR
20 3.85 9.99 4.49 20.81 21.66 5.35 13.5 5.9 1.3 1.51 80
2007 1 14.35 21.46 16.17 34.75 28.43 0.18 17.6 2.6 3.8 4.82 100
2 1.31 12.23 8.09 26.14 27.91 7.7 11.7 2.2 1.4 1.9 100
3 0.46 6.43 2.74 4.08 3.5 28.05 7.3 1.2 1.2 1.09 100
4 12.78 23.66 14.74 36.67 28.44 84.27 1.9 10.7 10.8 3.13 100
5 3.6 2.97 4.09 12.52 5.95 48.57 25.6 0.3 0.9 7.54 100
6 4.74 16.34 14.17 19.42 3.8 10 33 12.3 3.2 4 100
7 2.75 2.34 3.04 26.26 77.17 -72.48 87.5 5.9 10.1 5.9 100
8 1.7 15.94 10.1 26.77 27.04 9.41 10.7 2.2 1.7 1.79 100
9 0.73 6.8 5.59 8.88 9.77 -54.76 17.7 1.5 1.2 2.97 100
10 16.64 29.14 25.96 71.92 73.59 1.17 11.3 9.1 5.1 2.86 100
11 26.48 52.68 42.22 26.15 19.46 2.73 17.3 12 8.5 5.1 100
12 12.75 30.04 17.41 11.34 13.82 1.99 9.25 1.3 2 7.16 100
13 10.07 16.15 11.2 13 22.9 -4.51 11.4 8.1 1.8 4.59 100
14 6.53 10.33 7.28 33.26 20.92 15.19 20.5 7.2 2 1.79 100
15 13.44 19.32 14.99 29.23 16.54 -2.38 12.6 1.3 2.4 3 100
16 16.56 31.09 20.86 7.15 10.17 8.55 6.9 0.4 2.6 3.53 100
17 15.09 37.67 17.2 15.61 19.08 3.06 9.2 7.1 3.2 6.3 100
18 1.74 17.02 8.63 29.55 62.93 12.5 7.3 4 15.23 4.08 100
19 7.64 12.52 9.05 31.41 29.49 18.6 1.9 15.7 1.8 1.5 100
20 5.44 13.43 6.59 47.83 58.32 104.27 6.6 3.2 0.9 3.98 20
273
Appendix H3 Thailand CSR and Financial Performance Year 2008
YEARID
FIRMID
FPROA
FPROE
FPROCE
FPGPM
FPNPM FPEPS
FPPE
FPPCF
FPPBV
FPDY
CSR
2008 1 14.76 22.2 16.22 34.97 40.98 0.54 14.4 2.1 3.2 4.44 60
2 1.37 11.87 7.78 27.85 29.27 5.26 6.5 1.3 0.8 2.5 60
3 1.08 6 4.67 -9.06 9.06 -72.38 31.7 3.5 1.9 1.09 60
4 13.16 24.67 15.42 35.38 28.22 38.67 3.7 23.2 24.8 1.97 60
5 5.25 7.05 5.96 13.12 6.69144.4
4 7.2 0.2 0.8 3.8 60
6 8.55 25.49 23.29 21.79 2.71124.2
4 16.6 19.6 5.3 3.21 100
7 9.4 14.68 10.56 21.07 71.87486.6
7 8.9 8.1 5.3 7.37 60
8 1.52 14.35 7.87 28.66 28.66 2.07 13.9 2.8 2.1 2.85 60
9 1.19 12.32 8.62 20.04 20.74 92.98 3.5 0.6 1 11.58 60
10 19.68 34.6 30.01 70.54 73.09 45.9 19 7.3 2.6 3.33 60
11 25.46 48.35 39.23 28.35 18.59 7.5 9.1 35.1 7.5 4.62 60
12 6.55 13.88 8.9 10.12 12.91 -47.36 10.8 1.6 2.9 7.25 60
13 11.07 16.55 12.13 16.71 25.47 11.44 9.5 7 1.5 5.15 60
14 9.54 15.98 10.95 34.89 22.08 73.63 11.8 5.4 1.8 1.79 60
15 13.33 18.87 14.98 28.15 19.51 -2.38 11.4 1.1 2.2 3.15 60
16 1.75 0.35 2.14 9.8 12.06 -98.83 9.2 0.7 0.8 5.51 60
17 8.19 199.35 9.18 12.53 13.46 -44.72 7.4 4.1 2.8 6.47 60
18 1.96 18.01 9.59 33.59 19.44 11.4 3.7 1 17.74 3.81 60
19 10.58 16.76 12.66 32.63 34.94 57.6 1.4 8.1 4.1 4.69 60
274
Appendix H4 Thailand CSR and Financial Performance Year 2009
YEARID
FIRMID
FPROA
FPROE
FPROCE
FPGPM
FPNPM
FPEPS
FPPE
FPPCF
FPPBV
FPDY
CSR
2009 20 5.83 15.22 7.11 48.24 57.88 -39.55 12.6 7.2 1.9 3.6 60
1 15.78 23.6 16.78 35.27 45.13 3.97 15 2.5 3.6 8.13 60
2 1.32 11.17 6.84 30.59 32.07 2.64 10.8 2.4 1.1 2.54 60
3 1.24 7.5 4.56 11.36 11.35 32.53 11.2 1.2 0.7 1.09 60
4 15.98 32.01 18.99 40.37 60.91 54.18 1.6 5.3 7.3 4.12 60
5 10.7 21.02 12.32 14.88 11.82245.4
5 7.5 0.5 1.5 1.85 60
6 11.8 28.14 27.73 24.22 2.79 50 22.3 9.5 5.9 4.88 100
7 12.3 17.79 13.81 20.24 70.96 15.34 13.5 5.6 2.4 8.73 60
8 1.31 12.58 6.57 26.76 26.8 -2.96 7 1.3 1.7 2.3 60
9 1.06 11.28 6.92 23.18 24.99 -2.73 9.2 1.6 1 4.06 100
10 8.74 15.99 12.52 69.22 71.95 -46.99 8.5 11.5 3.4 2 60
11 30.78 54.97 48.12 28.39 20.24 30.6 9 7.5 4.4 9.01 60
12 6.99 14.65 8.98 8.13 7.63 14.89 9.5 1.9 1.3 6.75 60
13 10.8 15.77 11.73 19.15 31.76 3.79 7.6 6.1 1.1 2.3 60
14 8.62 12.38 9.97 33.11 22.24 1.27 13.5 6.2 1.4 2.3 60
15 13.94 19.22 15.68 28.64 18.43 2.44 13.8 9.9 2.6 3 60
16 10.3 19.19 12.09 1.33 2.01 52.72214.
5 49.4 1.3 11.65 60
17 9.6 25.4 10.57 22.01 21.22 45.14 11.6 7.8 2.7 7.28 60
18 1.79 16.26 9.32 33.61 -31.23 5.3 13.1 1 10.88 3.45 60
19 7.58 10.87 9.12 32.13 31 28.93 1.5 12.8 1.4 1.5 60
20 6.2 16.06 7.54 49.41 57.37 12.95 10.9 7.1 1.7 3.69 60
275
Appendix H5 Thailand CSR and Financial Performance Year 2010
YEARID
FIRMID
FPROA
FPROE
FPROCE
FPGPM
FPNPM
FPEPS
FPPE
FPPCF
FPPBV
FPDY CSR
2010 1 21.46 36.44 23.28 38.24 45.63 20.31 12.3 2.3 6.2 6.49100
2 1.42 11.51 6.14 34.9 37.45 19.59 11.4 2.9 1.2 4.35100
3 1.46 9.19 5.03 12.13 15.93 31.82 20.5 2.7 1.5 1.09100
4 17.76 45.2 21.28 48.53 71.48 73.8 3 7.3 19.3 2.13100
5 12.59 24.68 14.71 13.05 12.1 34.21 12.1 0.9 3 5.97100
6 14.43 36.51 36.11 24.8 5.68 33.33 26.5 13.5 9.9 3.23100
7 15.96 27.53 18.24 18.15 75.56 23.65 11.7 10.3 4.2 10.76100
8 1.52 15.73 8.3 24.88 24.89 30.04 13.8 2.4 2.2 4.44100
9 1.14 12.77 6.96 24.78 26.78 27.1 12.7 2.5 1.5 2.95100
10 13.97 26.48 18.65 58.8 60.52 88.19 22 9.5 3.2 2.49100
11 33.79 62.11 59.52 25.9 21.5 26.18 19.2 10.6 4.4 2.5100
12 8.13 18.06 10.4 8.85 10.05 38.94 11.7 0.4 1.6 2.16100
13 8.31 11.47 9.04 14.22 23.44 22.58 10.6 6.4 1.2 2.3100
14 9.51 12.49 11 30.35 22.87 22.71 16.7 1.7 2.3 2.6100
15 13.98 18.59 15.88 25.44 16.22 10 15.9 1.4 3 3.52100
16 7.29 13.02 8.77 5.29 8.12 -25.38 7.2 3.7 2.3 8.37100
17 12.18 31.46 13.7 17.72 22.69 53.52 10.9 12 3.1 5.47 20
18 1.84 16.4 9.92 38.56 14.65 14 4.1 2.1 11.72 2.31100
19 11.7 16.58 14.55 35.15 35.91 64.29 1.3 9.1 1.4 8.98100
20 8.61 21.54 10.34 50.5 56.93 47.65 9.3 7.4 2 4.7100
276
Appendix H6 Thailand CSR and Financial Performance Year 2011
YEARID
FIRMID
FPROA
FPROE
FPROCE
FPGPM
FPNPM FPEPS
FPPE
FPPCF
FPPBV
FPDY CSR
2011 1 27.71 55.45 33.42 39.72 44.33 8.25 18.8 3.3 10.6 7.92100
2 1.75 11.53 7.49 28.5 29.62 11.18 10.7 2.5 1.2 3.4100
3 1.59 9.2 4.94 16.23 18.55 5.52 17.8 2.4 1.6 3.23100
4 10.69 29.4 13.02 42.15 53.35 -19.38 4.6 9.2 33.4 5.26100
5 12.61 26.08 14.7 16.31 12.76 16.67 13.6 1.1 3.6 8.16100
6 15.51 40.81 40.38 23.08 8.59 20.27 29.1 16.9 10.8 3.57100
7 33.82 76.48 43.25 29.12 112.85 106.8 8.3 11.8 6.5 12.79100
8 1.82 16.72 10.44 25.22 25.22 20.76 15 2.5 1.9 1.99 20
9 1.48 13.33 7.37 13.66 13.82 11.76 9.8 1 1.3 2.95100
10 12.36 24.04 16.4 61.85 74.27 7.07 13.3 7.5 2.8 2.99100
11 40.6 79.01 78.43 28.43 21.67 25.6 21.2 17.5 12.1 5.42100
12 9.15 20.32 11.89 7.05 8.38 24.78 10.8 0.4 1.9 3.9100
13 7.55 10.24 8.27 17.59 27.06 7.22 13.2 7.8 1.3 5.11100
14 12.85 17.48 15.97 32.16 23.57 30.61 20.2 13.8 3.5 2.87100
15 10.87 19.85 13.07 3.29 6.47 65.83 17.8 0.5 1.5 6.7100
16 8.9 19.96 10.15 14.32 13.7 -27.03 13.8 1 2.7 3.67100
17 14.03 20.66 16.66 25.18 16.12 14.29 12.4 1.1 2.5 3.15 20
18 2.46 21.34 10.85 30.23 49.93 14.5 3.8 2.3 14.04 4.15100
19 12 22.78 20.61 34.43 35.41 8.48 1.9 13.9 4.7 3.8100
20 6.17 16.66 7.25 48.83 59.98921.2
6 9.2 5.9 1.5 6.08 20
277
Appendix H7 Thailand CSR and Financial Performance Year 2012
YEARID
FIRMID
FPROA
FPROE
FPROCE
FPGPM
FPNPM
FPEPS
FPPE
FPPCF
FPPBV
FPDY
CSR
2012 1 40.61 84.46 56.99 40.69 44.04 56.82 17.8 4.4 14.3 6 100
2 1.9 12.77 9.17 29.89 31.51 20.81 11.7 2.9 1.4 3.91 100
3 1.98 13.55 6.11 20.76 20.8 57.52 14.4 1.8 1.3 2.21 100
4 5.24 12.13 6.35 44.49 38.42 -53.68 2 6.1 8.2 2.78 100
5 10.43 22.28 12.12 11.57 10.47 7.02 13 0.7 2.5 3.26 100
6 17.34 45.71 45.28 24.35 9.2 38.2 37.4 20.5 15.2 2.42 100
7 27.83 63.1 36.73 42.42 154.45 -16.83 16 15.9 9.8 13 100
8 2.26 20.76 11.35 25.79 25.96 45.55 12.1 1.9 2.5 2.05 20
9 1.55 15.18 6.49 23.63 25.05 39.86 9.8 2.2 1.5 2.96 100
10 11.88 21.71 15.83 64.78 66.93 27.05 12.5 5.9 2 3.2 100
11 43.96 84.24 76.39 27.83 20.81 23.31 26.4 64.2 16.6 2.59 100
12 7.94 18.02 10.64 8.76 9.96 -0.73 8.6 0.3 1.6 4.57 100
13 10.28 15.32 11.44 14.62 27.31 59.58 11.2 10.4 1.6 3.8 100
14 15.07 21.05 19.61 33.62 23.13 30.08 22.6 3 4.8 2.88 100
15 19.11 40.38 21.6 27.68 23.56 136.4 8.7 77 3.1 3.52 100
16 8.84 14.84 10.72 5.14 6.52 -17.03 8 4.4 1.6 5.09 100
17 7.51 16.64 11.97 13.04 10.73 -13.55 22.4 1.3 3.7 3.78 100
18 2.2 19.94 9.49 27.93 10.87 15.7 3.4 2.9 17.19 5.3 20
19 11.88 32.32 23.02 29.32 30.55 -4.61 2.6 18.5 6 3.7 100
20 3.09 10.38 3.65 36.51 60.61 -43.25 19 7.7 2.1 4.33 100
278
Appendix H8 Thailand CSR and Financial Performance Year 2013
YEARID FIRMID FPROA FPROE FPROCE FPGPM FPNPM FPEPS FPPE FPPCF FPPBV FPDY CSR
2013 1 36.31 81.42 55.13 42.17 44.67 3.99 16.4 4.2 13 6.09 60
2 1.61 12.64 7.54 30.1 31.89 12.74 9.5 2.4 1.1 3.65 60
3 1.44 10.11 4.81 21.11 22.24 -18.86 13.5 2.3 1.7 3.18 60
4 2.48 4.05 3.02 28.09 51.38 -60.71 1.7 8.9 14.6 3.3 60
5 4.43 6.59 5.11 9.48 6.68 -63.08 33.5 0.6 2.2 1.56 60
6 6.86 37.71 10.06 21.23 7.26 -4.63 35.8 22.3 13.1 2.14 100
7 30.39 62.85 37.73 42 173.35 5.67 16 25.9 9.1 13.5 60
8 2.03 20.45 9.4 26.61 26.61 17.22 13.1 2.5 1.7 3 60
9 1.63 16 7.3 24 26 21.99 10 3 1.1 3 60
10 9.26 15.86 12.39 66.49 69.61 -17.41 9.6 4.7 1.7 3.54 60
11 40.64 78.78 67 26.56 20.02 8.78 25.3 25.3 19.7 3.64 60
12 6.32 14.71 8.64 7.17 9.15 -9.52 9.1 5.2 1.2 3.38 60
13 8.13 11.49 9.22 15 28 19.95 12 11 1.2 4 60
14 13.31 19.69 18.32 32.21 21 0.17 19 13.8 3.5 2.88 100
15 10.74 21.78 11.79 27.52 16.73 -32.86 18.4 17.2 3.7 3.15 100
16 7.29 11.72 8.99 3.38 5.24 -15.65 11.2 5.9 1.3 4 60
17 10.43 23.95 13.79 16.17 15.15 54.89 13.1 10.1 3 3.88 60
18 2.22 20 11.65 29.06 28.03 9.7 8.6 2 19.66 3.66 60
19 11.93 31.3 18.82 30.9 31.3 -6.34 2.7 21.7 7 3.84 60
20 5.15 18.19 6.16 19 43.45 63.87 11.6 7 2.2 4 60
279
Appendix H9 Thailand CSR and Financial Performance Year 2014
YEARID FIRMIDFPROA FPROE FPROCE FPGPM FPNPM FPEPS FPPE FPPCF FPPBV FPDY CSR
2014 1 17.6 32 21.67 45.04 53.43 9.02 13.4 3.3 4.7 3.97 100
2 1.59 16.23 11.02 39.72 26.58 20.03 11.3 3 2 1.68 100
3 1.07 15.22 7.51 17.04 11.72 4.67 10.1 1.5 1.4 1.09 100
4 11.11 16.14 12.31 28.75 26.52 73.16 4.1 18 14 1.2 100
5 2.81 4.01 3.15 11.29 5.7 -21.47 16.4 0.3 0.8 0.1 100
6 6.78 22.87 16.91 16.47 5.86 17.38 14.8 8.1 3.5 3.13 100
7 14.28 25.13 15.16 35.06 94.98 -10.88 13.5 11 3.2 5.03 100
8 2.02 26.72 15.32 31.7 32.16 3.02 10.3 3.3 1.9 1.9 100
9 0.98 14.72 13.8 18.69 20.6 27.44 9.1 1.5 1.3 5.22 100
10 16.29 30.88 24 71.1 76.44 31.83 14.3 8.9 3.3 2.56 100
11 20.54 37.48 26.32 26.37 20.74 41.43 14.6 9 3.1 5.14 100
12 17.15 45.3 21.25 12.49 15.95 58.98 12.8 0.5 4.6 7 100
13 11.23 24.39 12.12 18.77 26.02 19.59 8.5 6.1 1.9 5.26 100
14 9.19 16.69 9.89 28.31 25.14 -70 9.6 9.5 1.1 1.79 100
15 11.92 35.09 13.38 26.07 18.17 5.99 15.5 8 5 3.52 100
16 15.65 37.13 19.47 4.06 11.65 113.66 6.5 0.6 3.1 3.1 100
17 16.73 31.17 17.5 25.62 31.59 89.31 17.1 10.9 5.1 2.36 100
18 1.6 28.56 17.32 37.54 8.26 5.7 5.2 1.4 -2.63 1.4 100
19 7.46 14.21 8.41 39.74 39.52 73.21 2.7 14.6 1.9 1.5 100
20 3.83 10.33 4 22.57 22.63 -9.5 13.4 4.5 1.3 1.29 60
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Appendix H10 Thailand CSR and Financial Performance Year 2015
YEARID
FIRMID
FPROA
FPROE
FPROCE
FPGPM
FPNPM
FPEPS
FPPE
FPPCF
FPPBV
FPDY
CSR
2015 1 16.63 27.49 20.57 41.41 52.79 6.82 15.5 3.4 4.5 4.4 20
2 1.68 15.98 11.98 22 30.49 15.28 9.9 2.7 1.7 80 20
3 1.12 16.67 9.47 17.92 18.77 20.87 7.3 1.3 1 100 80
4 9.62 18.17 10.9 16.63 11.35 14.76 5.6 0.2 0.7 0.5 100
5 14.43 24.95 16.77 38.79 30.4 52.61 2.7 8.5 16.2 1.6 100
6 4.48 18.14 11.99 16.13 5.76 -11.69 17.4 7.1 3.2 3.95 20
7 12.45 22.56 13.29 43.04 96.25 -2.71 18.7 1 2.9 6.94 100
8 1.79 19.29 13.08 33.84 34.02 -9.55 8.1 2.7 1.9 1.9 80
9 1.13 16.44 13.79 30.31 29.99 17.4 9.5 2.5 1.5 4.55 60
10 19.22 36.86 29.66 76.64 76.73 49.28 11.9 11.9 4.3 2.56 80
11 21.85 50.52 31.35 24.45 17.73 19.82 16.4 9.7 3.4 5.36 100
12 16.3 43.28 20.53 12.16 17.07 27.81 13.1 0.5 2.9 7.05 20
13 10.41 20.23 11.38 17.16 22.72 -6.49 9.8 6.5 1.9 4.8 100
14 4.26 4.76 4.6 30.22 17.56 -58.49 19.1 5.8 0.9 1.79 60
15 13.61 34.46 15.55 27.93 18.58 10.01 15 7.5 4 3.53 20
16 17.17 33.32 20.75 10.86 14.3 17.52 6.9 4.9 2 3.15 20
17 18.51 53.26 21.15 20.29 27.31 -4.38 8.7 6.6 4.6 3.5 100
18 1.62 23.28 14.69 39.56 -14.79 4.7 5 1.4 0.75 2 20
19 8.54 13.12 9.67 38.16 38.6 2.97 2.4 13.7 1.7 1.5 80
20 3.92 10.48 4.61 21.1 21.92 5.34 16.5 6.4 1.6 0.99 60
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EUNICE MARETH QUEROL-AREOLA, MBA
# 5311 Constantine St. Italia 500 BF Resort Village
Las Pinas City, 1700 Philippines +632-8726437, +63926- 6142056 [email protected]
EXECUTIVE PROFILE Lifelong learning professional in the domains of training, curriculum design and corporate consultancy; School administrator and tertiary level educator with more than twenty years of experience reflecting expertise in the areas of curriculum and instruction, community involvement, local, national and international linkages and research in the disciplines of Entrepreneurship, Economics, and Business Management. PROFESSIONAL EXPERIENCE Dean, College of Business Administration and Accountancy Colegio de San Juan de Letran
Intramuros, Manila, Philippines Lecturer / Trainer
Visiting Lecturer May 2012 –December 2014 Global Leadership Executive MBA and Business Leadership Executive MBA Institut Teknologi Bandung (ITB) Downtown campus, Jakarta, Indonesia Lecturer June 2011 – May 2015 International Business, Economics, Total Quality Management and Entrepreneurship
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University of Santo Tomas Manila, Philippines
Associate Professor June 2001- March 2012 Department of Business Management and Entrepreneurship San Beda College Manila, Philippines
Subjects Handled: Management of the Family Firm, Entrepreneurship, Corporate Internship, Strategic Management, Good Governance and Corporate Social Responsibility, International Business, International Economics
Corporate Trainer Since 2010 Conduct training courses in Personal Finance, Entrepreneurship, Leadership, Strategic Management, Coaching and mentoring and International Marketing
College Administrator
Program Head, Business Management and Entrepreneurship andExecutive
Director, Professional Development Center May 2012 – May 2014 Manila Tytana Colleges Pasay City, Philippines
• Manage the school’s preparation of CHED application for the recognition of BSBA and BS Entrepreneurship programs of the College, including curriculum revision, syllabi preparation, internship manual, research manual, and faculty and student recruitment.
• Oversee the planning and implementation of corporate training programs.
Vice Dean, College of Arts and Sciences April 2007 – April 2010 San Beda College Manila, Philippines
• Assist the Dean in the planning, administration, implementation, monitoring and evaluation of all programs, projects and activities of the College in both the academic and administrative areas. Oversee the College’s preparation for the national accreditation body’s (PAASCU) regular visit in 2009. Chaired the Sub-committee on Faculty area during the PAASCU December 2007 visit. Facilitate the submission of new program curricula for the College to the
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Philippine Commission on Higher Education. Initiate linkages with seven tertiary level educational institutions in Asia.
Administrative Officer, College of Arts and Sciences April 2004 – April 2007 San Beda College Manila, Philippines
• Perform administrative functions as assigned or delegated by the Dean, and whenever necessary, was assigned to assume the operating functions of the Dean. In-charge of the Planning, Operation, Control and Evaluation functions in the aspects of space, fund, manpower and other related resources
Program Chairperson, Department of Business Management and Entrepreneurship May 2001 – May 2004 San Beda College Manila, Philippines
Department Chairperson, Business Management Department Nov 1999 – April 2001 San Beda College Alabang (formerly St. Benedict College) Muntinlupa City, Philippines
Consultancy Entrepreneur Consultant/Incorporator From 2014
STRATMIND, Inc. • Perform a complete range of business solutions for micro, small,
medium enterprises.
EDUCATION & QUALIFICATIONS
Phd in Management – Focus on International Business (candidate) University of St. Gallen (HSG) St. Gallen, Switzerland
• Author (PhD Dissertation): “The Relationship of Corporate Social Responsibility and Financial Performance Under Corporate Governance Aspects in Selected Southeast Asian Companies”
Master’s Degree in Business Administration (1993)-University Scholar Pamantasan ng Lungsod ng Maynila (University of the City of Manila) Bachelor of Science in Business Administration- Major in Economics University Scholar, Cum Laude (1989) Pamantasan ng Lungsod ng Maynila (University of the City of Manila)
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AWARDS AND RECOGNITIONS
Pioneer Professor on Sustainability Business as Agent of World Benefit, Fowler Center, Case Western Reserve University and LEAP Into Sustainability Mindset, UN PRME Working Group under Nova Southern University Florida, USA. National Awardee, Outstanding Entrepreneurship Educator awarded by Gawad ENEDA Entrepreneurship Educators Association of the Philippines, Inc. (ENEDA) - February 2011 Professorial Chair Holder, Luis I. Ablaza, Jr. Distinguished Professorial Chair in Entrepreneurship- February 2008 National Awardee, Outstanding Business Educator Award for Management, awarded by the Commission on Higher Education (CHED), Petron Foundation, Inc. and the Philippine Council of Deans and Educators in Business (PCDEB) - December 2006 Distinguished Alumnus Awardee, Pamantasan ng Lungsod ng Maynila - June 2005 Delegate ASEAN Component Teachers Group, Philippine-ASEAN–Japan Friendship Program for the 21st Century – May to June 1991 Maynilad Awardee as Outstanding Faculty Adviser of the College Student Council and the Economics Society of Pamantasan ng Lungsod ng Maynila – 1991 to 1993
SIGNIFICANT WORKS AND PRESENTATIONS
Session Prentor, Academy ofManagement (AOM) Annual Meeting. Philadelphia, Pennsylvania, USA, August 2014. Invited Speaker, SEAMEO International Conference on Leadership and Management, HCM, Vietnam, July 2014. Preliminary Screening Judge, Global Social Entrepreneurship Competition (GSEC), Michael Foster School of Business, University of Washington, Seattle, WA, USA, since 2011 International Speaker, International Women’s Conference M.I.N.D., Wee Kim Wee Center, Singapore Management University, Singapore – March 2014 Conference Chairman, 2014International Conference on Entrepreneurship, Marco Polo Hotel, Davao – February 2014
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Conference Adviser, 2013 Global Forum on Management and Entrepreneurship, Shangri-la’s Mactan Resort and Spa, Cebu, Philippines – December 2013 International Conference Paper Reviewer, Academy of International Business- Southeast USA 2013 Conference, Georgia Institute of Technology. Atlanta, Georgia U.S.A. – October 2013 Invited Speaker, Academe-Industry Synergy for the Research Enhancement of Business Schools, SEAMEO RETRAC Conference on Globalization in Quality of Higher Education, Ho Chi Minh City, Vietnam – June 2013 Trainor, Department of Trade and Industry, Region VI Roving Academy (DTI - SMERA) - since 2013
Invited Speaker, National Educators’ Summit on Teaching Entrepreneurship (NESTE), Quezon City, Philippines- April 2013
Invited Discussant, Workshop on “Enterprise Upgrading” German Development Institute (DIE), University of the Philippines, Quezon City - May 2013 National President, Entrepreneurship Educators Association of the Philippines Inc. – since May 2013
International Speaker, Conference of the AMERICAN CREATIVITY ASSOCIATION INTERNATIONAL. Orchard Hotel, Singapore - August 2012
Forum Panelist and Workshop Facilitator, Women on the Move Forum by Wee Kim Wee Center of the Singapore Management University, Singapore - September 2012 Featured Guest, Radio Broadcast on “Understanding the Roles of Women”, hosted by Michelle Martin of MediaCorp, Singapore - September 2012 International Speaker, International Conference on Participative Leadership, Singapore Management University, Singapore - March2012 Program Chairperson/Co-Organizer, International Conference on Business, Entrepreneurship & Management, San Beda College, Philippines- January 2012 International Speaker, Seminar on “Family Legacy &Family Business Management”, Raffles International College, Ho Chi Minh City, Vietnam - November 2011
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International Speaker, Seminar in Corporate Payment & Treasury Management Crowne Plaza Mutiara, Kuala Lumpur, Malaysia - September 2011 International Speaker, Change Movers Conference, Singapore Management University, Singapore - February 2010 Member of the Organizing Committee and Presentor, 1st Asia Pacific Family Business and Entrepreneurship Conference, Bali, Indonesia - November 2006 Presentor, San Beda College-Universitas Widyatama International Study Program, Universitas Widyatama Bandung, Indonesia - February 2006 Speaker, 11th Annual Business and Entrepreneurial Management Conference, Asian Institute of Management ACCEED, Makati City - September 2005 Presentor, Southeast Asian Association for Institutional Research (SEAAIR) Conference. Organized by Universitas Widyatama and held in Bali, Indonesia - September 2005 Speaker, 10th Annual Business and Entrepreneurial Management Conference, Mandarin Hotel, Makati City - February 2005
Has participated in various conferences and academic linkages held in the key cities of Japan, in Singapore, Indonesia, Brunei Darussalam, Thailand, Malaysia, and Vietnam
Has traveled for cultural and networking activities in Cambodia, China, Macau, Hong Kong, France, Austria Germany, Liechtenstein, Netherlands, United Arab Emirates, Qatar, and South Korea
PERSONAL INFORMATION Filipino citizen; born in April 21, 1969; Married and mother to four teenage children. Social Development Leader of Couples for Christ (South A MM Sector- Las Pinas)