Management by objectives and corporate social responsibility disclosure

0 downloads 0 Views 824KB Size Report
Mar 10, 2015 - Keywords Corporate social responsibility, Voluntary disclosure, ... Environmental, Social and governance disclosure, Management by ...
Accounting, Auditing & Accountability Journal Management by objectives and corporate social responsibility disclosure: First results from Italy Chiara Mio Andrea Venturelli Rossella Leopizzi

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

Article information: To cite this document: Chiara Mio Andrea Venturelli Rossella Leopizzi , (2015),"Management by objectives and corporate social responsibility disclosure", Accounting, Auditing & Accountability Journal, Vol. 28 Iss 3 pp. 325 364 Permanent link to this document: http://dx.doi.org/10.1108/AAAJ-09-2013-1480 Downloaded on: 10 March 2015, At: 05:50 (PT) References: this document contains references to 135 other documents. To copy this document: [email protected] The fulltext of this document has been downloaded 61 times since 2015*

Users who downloaded this article also downloaded: Charles H. Cho, Giovanna Michelon, Dennis M. Patten, Robin W. Roberts, (2015),"CSR disclosure: the more things change…?", Accounting, Auditing & Accountability Journal, Vol. 28 Iss 1 pp. 14-35 http://dx.doi.org/10.1108/AAAJ-12-2013-1549 Max Baker, Stefan Schaltegger, (2015),"Pragmatism and new directions in social and environmental accountability research", Accounting, Auditing & Accountability Journal, Vol. 28 Iss 2 pp. 263-294 http://dx.doi.org/10.1108/AAAJ-08-2012-01079 Marek Reuter, Martin Messner, (2015),"Lobbying on the integrated reporting framework: An analysis of comment letters to the 2011 discussion paper of the IIRC", Accounting, Auditing & Accountability Journal, Vol. 28 Iss 3 pp. 365-402 http://dx.doi.org/10.1108/AAAJ-03-2013-1289 Access to this document was granted through an Emerald subscription provided by Token:JournalAuthor:79732514-06A9-4369-95A2-D95A09251509:

For Authors If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information.

About Emerald www.emeraldinsight.com Emerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services. Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation.

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

*Related content and download information correct at time of download.

The current issue and full text archive of this journal is available on Emerald Insight at: www.emeraldinsight.com/0951-3574.htm

Management by objectives and corporate social responsibility disclosure First results from Italy

Objectives and CSR disclosure 325

Chiara Mio Department of Management, Ca’ Foscari University Venice, Venice, Italy, and Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

Andrea Venturelli and Rossella Leopizzi Department of Management, Economics, Mathematics and Statistics, University of Salento, Lecce, Italy Abstract Purpose – The purpose of this paper is to examine the relationship between remuneration for the achievement of objectives and sustainability, and – more specifically – the amount of attention that listed companies in Italy devote to defining, and consequently to communicating externally, sustainability as a criterion in establishing the wage levels of managers and directors. Design/methodology/approach – It was decided to ascertain whether the quality of information regarding sustainability provided in connection with the remuneration policies of listed companies tallies with the general quality of information regarding sustainability provided through companies’ main (obligatory and voluntary) reporting procedures. Findings – The results of this research show that the inconsistency between the information provided in voluntary and obligatory reports (between reports on sustainability and remuneration reports) extends to the levels of information provided in the two types of obligatory report (the reports on remuneration and on management); there is also a discrepancy between the levels of information provided in these reports and the evaluation of that information by an external assessor. Research limitations/implications – One of the limitations of this research is that as the data examined were gleaned from public documents, it is not necessarily an accurate reflection of all the information that firms have at their disposal on questions of sustainability and remuneration policies. The existence of internal documents containing other information, and therefore leading to different results, cannot be ruled out. Originality/value – This study is the first in Italy to examine the question of how limited companies report issues relating to management by objectives-corporate social responsibility. It does this through the introduction of a mixed system for ESG information, which counteracts the subjective limitations of the internal evaluation provided by the research group by adding in the authoritative evaluations of an external assessor. Keywords Corporate social responsibility, Voluntary disclosure, Corporate social reporting, Environmental, Social and governance disclosure, Management by objectives, Non-financial information Paper type Research paper

1. Background The recession now affecting the global economy has focussed attention on various aspects of the strategic management of companies, including the idea that corporate social responsibility (CSR) has taken on a key role in the process of rebuilding The authors thank the two reviewers from AAAJ for their supportive and useful feedbacks as well as the paper editor for his guidance in the reviewing process.

Accounting, Auditing & Accountability Journal Vol. 28 No. 3, 2015 pp. 325-364 © Emerald Group Publishing Limited 0951-3574 DOI 10.1108/AAAJ-09-2013-1480

AAAJ 28,3

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

326

confidence in the markets and in economic stability (McGuire et al., 2003; Ducassy, 2013; Alniacik et al., 2011). In this sense, over-emphasis on short-term profits, which many see as the main cause of the current economic and financial crisis affecting the markets, can be tackled through the integration of sustainability into the systems of governance and management of a company (Dahlsrud, 2006) in order to create medium-to-long-term value (Porter and Kramer, 2006; Vilanova et al., 2009). Integrating CSR at the level of strategic management means introducing various environmental and social aims into the system of medium-to-long-term objectives that a company sets itself (Prado-Lorenzo et al., 2009; Manetti, 2011). In order to do this, it is necessary not only to shift from a “passive” to a “proactive” approach to sustainability (Stead and Stead, 2008; Mio, 2009 and 2010) but also to ensure the involvement of the CSR manager, or of whoever within the organisation deals with issues regarding sustainability in the decision-making process and, consequently, in the company’s strategic planning process (Strand, 2013). In order to avoid this integration being only partial, it is crucial that the establishment of social and environmental objectives is accompanied by systematic monitoring of the pursuit of those objectives and by linking achievement of them to managerial bonuses (Cordeiro and Sarkis, 2008). In fact, in a country like Italy, where emphasis on sustainability is certainly not deeply rooted in the business culture, it may be by creating a strong link of this kind that managers will be encouraged to pay proper attention to the pursuit of sustainability objectives. Such objectives, which can be measured using quantitative (monetary and nonmonetary) and/or qualitative indicators, ought to contribute as much as traditional economic performance indicators (turnover, market share, return on company shares, EBIT, EBITDA, surplus value, etc.) to the variable remuneration schemes, both shortand long-term, on which the salaries of managers and directors (though rarely of ordinary workers) of medium-to-large companies are usually based. It goes without saying, however, that the choice to use non-financial indicators implies a need for medium-to-long-term planning, in line with the timescales that social and environmental issues require (Matsumura and Shin, 2005; Mahoney and Thorne, 2005 and 2006). This should be confirmed by results highlighting the presence of sustainability indicators linked mainly to medium-term and long-term incentives such as stock option and stock grant plans (Di Cagno and Venturelli, 2007), instead of to the payment of bonuses for the achievement of short-term performance objectives (Harris, 2009). Moreover, it is essential, against this kind of background, for there to be profound, spontaneous transparency of information pertaining to remuneration systems that goes beyond the legal requirements, which – as we have already seen – are tending to adapt to the demands of the market and of the various categories of stakeholder. Such transparency makes it possible to see the levels of involvement and motivation of those running companies and the relative fairness of treatment, as well as the distribution of wealth created by a company amongst those who, through their work, most contributed to creating it. Ultimately, transparency regarding remuneration is a crucial factor in building consensus and trust, especially at a time like the present when markets are highly unstable, largely owing to the financial scandals of recent years, of which the outstanding example was the Enron affair, the result of deceitful and opportunistic behaviour by top managers (Di Pietra, 2012). A study in the USA analysed the effects of the reforms to incentive schemes that followed the financial scandals there. What emerged was evidence of a serious need for

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

incentive schemes geared to the long term, for remuneration to be overseen by more independent committees with greater experience, and for greater emphasis on transparency, in the sense of an adequate disclosure system to enable effective external communication regarding incentive schemes (Matsumura and Shin, 2005). Transparency on levels of remuneration and incentives is today even more important in the light of the changes introduced by Version 4 of the GRI (Global Reporting Initiative) guidelines published in May 2013, which call for greater transparency on balance sheets as regards both governance and fixed and variable remuneration of managers and directors. Against this background, the main objective of this research is to ascertain whether those companies listed on the Italian Stock Exchange which provided a sustainability report for the year 2011 and which therefore may be considered more sensitive than other listed companies to social and environmental issues, provide information about how sustainability is linked to remuneration, and in particular whether they provide detailed information concerning the definition/inclusion of sustainability indicators in their staff bonus schemes. Having established the existence of a number of “virtuous” companies, the aim of the research will then be to ascertain whether the emphasis these companies place on external communication of how their sustainability policies are linked to the salaries of their managers and directors is reflected in an overall general attitude (on the part of the same companies) to the reporting of sustainability information within documents containing specific auditing information (Da Silva Monteiro and Aibar-Guzman, 2010) such as the report on remuneration, which was made obligatory for listed companies from 2012 (for the financial year 2011) and the report on management, along with the balance sheet, or (where groups are concerned) consolidated balance sheet, for the financial year 2011. To ensure a more rigorous analysis, it was deemed useful to compare – as regards the virtuous companies – the qualitative level of information regarding sustainability in the two above-mentioned documents, using both subjective parameters designed independently by the research group (Marston and Shrives, 1991) and evaluative parameters established by an external assessor (Dixon and Coy, 1995) of indisputable international renown and authority (BLOOMBERG). The external evaluative parameter is useful to ascertain whether the level of consistency/inconsistency of sustainability information in the management report and remuneration report is verifiable through comparison of those two reports and the quality of sustainability information assigned by Bloomberg to the various obligatory and voluntary company reporting tools. 2. Regulations and relevant guidelines The content of such documents has, moreover, been a subject of particular interest to European Community legislators, who have introduced the requirement to include non-financial information specifically pertaining to the environment and personnel in the management report (Accounts Modernisation Directive (AMD)), and to include in the remuneration report details of the criteria used to determine salary and bonuses paid and of the relevant remunerative policies (EC recommendations 2004/913 and 2009/385), though without making specific reference to environmental and social issues. Implementation of the AMD in Italy was through Legislative Decree 32/2007, which, for all listed and unlisted companies, with the exception of small businesses, introduced

Objectives and CSR disclosure 327

AAAJ 28,3

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

328

changes to that part of the management report subject to art. 2428 c.c.; the second paragraph states: The analysis referred to in the first paragraph is consistent with the volume and complexity of corporate affairs and contains, to the extent necessary for an understanding of the company, the business trend and the operating results, indicators of the financial results and, where appropriate, non-financial aspects pertaining to the firm’s specific business activity, including information pertaining to the environment and employees. The analysis contains, where appropriate, references to the amounts reported in the balance sheet and additional commentary about them.

In March 2009, the National Council of Accountants and Bookkeeping Experts (CNDCEC) issued a supplementary/interpretative document, “The management report for annual reports in light of the changes introduced by Leg. Dec. 32/2007. Disclosure on the environment and employees, 2009”, which is Italy’s primary reference point in every respect for the implementation of Legislative Decree 32/2007. Employing a typically rule-based approach, the CNDCEC indicated the precise aspects of nonfinancial information to be included in the management report, subdividing disclosures on environmental and personnel issues into two distinct categories: mandatory and voluntary. To this end, it makes it evident that non-financial information refers specifically to sustainability-related information and, in particular, to the environment and employees, and does not cover other kinds of information that could be applicable such as reputation or intellectual capital. Table II of Section 4 summarises all the information that needs to be provided in the management report in order to conform with the regulations and guidelines. The aim of the research was to ascertain, in a first analysis, the level of compliance in the provision of that information. As far as the report on remuneration is concerned, it has to be acknowledged that in Italy the question of directors’ and managers’ pay in listed companies has produced numerous legislative and regulatory responses to the two EC recommendations 2004/913 and 2009/385 concerning remuneration. In Italy the transposition of these non-binding recommendations involved legislation: more specifically, modifications to the Finance Consolidation Bill (primary legislation) and the CONSOB (Commissione Nazionale Società Borsa) Resolution 18049/2011 (secondary legislation), and the introduction of Paragraph 7 of the Self-Regulation Code. The basic EC requirements concern the criteria used to determine pay levels, the individual payments made to directors, binding or advisory votes by a board on remuneration plans, and prior approval by company partners of share incentive plans. Many of the key points of the 2004 Recommendation had already been transposed into Italian law (Law 262 of 28 December 2005, n. 262) for prior shareholder approval of remuneration plans based on financial tools; Legislative Decree 58 of 24 February 1998 for information on remuneration made. The parts of the 2004 recommendation that had not yet been implemented were the publication of remuneration policy and the approval of that policy by the board of partners. Paragraph 7 of the Self-Regulation Code transposed into Italian law the 2004 EC recommendations and some of the 2009 regulations, namely: •

the introduction of criteria for establishing director remuneration policy;



the production, by the board of directors, of a report on remuneration policy to be presented at least once a year to the board of shareholders; and



the reform of the make-up and brief of the remuneration committee.

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

The CONSOB resolution 18049/2011 introduced a model for the remuneration report on the basis of the provisions of Paragraph 123-ter of the Finance Consolidation Bill. It is to this that Circular n. 8 of 26 March 2012, issued by Assonime, an Italian association whose objective is to improve the study and handling of problems relating to the question of limited companies, refers. This circular was analysed as part of this research, as it contains a series of guidelines for the drawing-up of remuneration reports. Interpretation of the contents of the circular was necessary in order to obtain a reference model so as to be able to investigate the level of the quality of general information regarding remuneration (obligatory information) and, in particular, of the quality of information regarding sustainability (voluntary information). Table III of Section 4 summarises all the information that needs to be provided in the remuneration report in order to conform with the regulations and guidelines. The aim of the research was to ascertain the level of compliance in the provision of that information. 3. Propositions and literature review The research is part of a scientific debate covering a number of themes and to which scholars have made numerous contributions based on different theoretical approaches. Listed below are certain specific propositions shared by the authors and against the background of which this paper should be seen. It goes without saying that the theories to which we refer are not specific subjects of analysis but constitute starting points for discussion of CSR and the various issues connected to it: P1. The integration of CSR into systems of company governance and management is crucial to the creation of value in the long term. While the specific objectives of this paper do not include an analysis of the various theories regarding CSR, for which the reader is referred to a systematic review of the literature (Garriga and Melé, 2004), it is collocated in the series of studies on instrumental theories. Specifically, the approach adopted in this work is “strategies for achieving competitive advantages” (Husted and Hallen, 2000), whereby the integration of CSR into systems of company governance and management becomes a crucial factor in the creation of value in the long and medium term (Crane et al., 2014; Porter and Kramer, 2006). In addition, against the background of the wide-ranging review of different definitions of CSR (Dahlsrud, 2006), this paper adopts a definition of CSR that includes the theme of governance and, as a result, that of strategic planning: “[…] CSR is defined as the integration of business operations and values, whereby the interests of all stakeholders including investors, customers, employees and the environment are reflected in the company’s policies and actions”. In conclusion, we fully agree with the theory propounded by Eccles (Eccles et al., 2012), that “the organizations that voluntarily adopt environmental and social policies represent a fundamentally distinct type of modern corporation characterized by governance structure that accounts for the environmental and social impact of the company in addition to financial performance, a long-term approach towards maximizing inter-temporal profits, an active stakeholder management process, and more developed measurement and reporting systems”. To be more precise, and taking account of the existing debate in the literature on the subject of social environmental accounting reporting (SEAR) (Contrafatto, 2011), this work is part of a more specific trend which analyses the potential and actual possibilities of SEAR to stimulate, activate and produce some kind of organisational

Objectives and CSR disclosure 329

AAAJ 28,3

change in practices, structures, performance and values (Adams and McNicholas, 2007): P2. Hard incentive schemes are a means of steering managers towards meeting company objectives through the achievement of higher levels of productivity.

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

330

This work takes as its starting point established studies on the control system and on the role of incentive schemes as a means of encouraging managers to achieve company aims. It is concerned, then, with the sphere of the consolidated neoclassical theory of homo oeconomicus, on the basis of which managers pursue the objectives for which they are paid. While well aware that managers are also driven by psychological and other motivational factors, and that, especially as regards such aspects as CSR, the incentive scheme may not be necessary on account of individuals’ intrinsic motivation (Frey and Oberholzer-Gee, 1997), or may even bring about the opposite effect and actually reduce individual motivation, undermine the principle of reciprocity and create a hostile climate characterised by control, threat and suspicion (Fehr and Gachter, 1998; Dohmen et al., 2009), the authors do not intend in this work to focus either on research into the motivational factors that drive managers towards higher production or on the different kinds of incentives found in companies’ remuneration policies. For an in-depth look at the various kinds of incentives, like the soft types (Frey and Oberholzer-Gee, 1997) mentioned above, the reader is referred to the leadership literature (Chemers, 2008). This study will restrict itself to noting the specific types of hard incentive emerging from the analysis of the reports published by Italian listed companies. This analysis revealed that almost all the companies use incentives based on economicfinancial indicators and only in rare cases based on sustainability indicators. It is important to underline that it is therefore with such hard-type indicators that our analysis deals: P3. Planning systems designed to monitor results are more effective than those designed to measure behaviour. It should be pointed out that our work, in dealing with the hard incentives referred to in P2, is collocated in the field of approaches to planning and strategic control systems, namely the systems designed to measure behaviour and those designed to monitor results, such as management by objectives (MBO), (Lambert et al., 1991; Oliver and Anderson, 1995; Ferreira and Otley, 2009; Lillis and Van Veen-Dirks, 2008), more specifically the latter, these being, in the opinion of the authors of this research, the only ones consistent with the spirit of the control system, especially in this particular context (Merchant et al., 2003). There are three reasons for this: (1) The control system is based on the delegation and utilisation of human resources (Davila et al., 2009; Chenall, 2007). If a priori restrictions are placed on the behaviour of managers, the latter are limited in the actions they can take and are obliged to comply with (audit) procedures that are not at all suited to ever-changing day-to-day situations. Improving managers’ skills and competences, on the other hand, leads to empowerment and the acknowledgement of abilities, which in turn creates positive motivation (Abernethy et al., 2010). (2) Owing to the constantly changing variables, it is difficult (if not impossible) to define retroactively desired forms of behaviour. Focussing on behaviour and ignoring results leads to the risk of creating approaches which are too closely bound to procedure and which, although useful in the pursuit of specific limited

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

targets, fail in terms of the achievement of company objectives. Moreover, the influence of non-financial aspects on overall performance is now widely recognised and has been the subject of numerous studies and empirical analyses (Bhimani and Langfield-Smith, 2007; Ittner, 2008), starting from value created by the relationship with the client (Gupta and Lehmann, 2005). Against the background of these developments, control systems have also been redesigned as a result of awareness of the contribution they can make to corporate social responsibility (Durden, 2008; Campbell, 2008). (3) Sustainability strategy leads to reflection on results, not on performance, since it requires an integrated approach (Maon et al., 2009 and 2010; Mirvis and Googins, 2006; Zadek, 2004) and does not allow for aggregation, or in other words the simple addition of the social or environmental dimension to the economic side. Managers’ energy must therefore be channelled towards overall results, as it becomes extremely risky to measure only specific behaviours and to believe it possible to treat in isolation, in each circumstance, the economic, environmental and social repercussions. Integration is key to the role of sustainability, even if alternative approaches were once mooted (Lothe et al., 1999). The approach suggested by the latter study, like others, was strongly influenced by the historic period from which it emerged; today opinion converges on the need for a unified strategy driven by sustainability, and on the idea of sustainability as an influential element (Porter and Van der Linde, 1995). Of the three types of incentive schemes – namely, those which allow the manager to become an owner of the company and thus share its objectives and interests; those which tie management pay to company performance; and those which use the threat of dismissal in the case of poor performance (Jensen and Murphy, 1990; Murphy, 1999) – we prefer to focus on the second type: P4. The use of performance measurement tools facilitates the integration of economic, social and environmental performances. This work does not analyse the link between CSR and corporate financial performance (CFP), for which the reader is referred to the results of the series of empirical studies in the literature, which in most cases revealed a positive relationship between the two (Mallin et al., 2013; Margolis et al., 2003; Eccles et al., 2012); nor is it concerned with the links between sustainability indicators, accounting and reporting, given that an in-depth review of the literature on this topic has already been carried out by Hahn and Kuhnen (2013) and by Burritt and Schaltegger (2010). It should be pointed out, however, that this study is based on the interpretation of social responsibility as a process that is an integral part of a company’s decision-making mechanisms (Adams and Frost, 2008; Gond et al., 2012). As a consequence, the balanced scorecard (BSC) could be adopted, as a multidimensional framework for strategic performance measurement that combines financial and non-financial measures with its advanced use as an integrated strategic management system that describes strategy by a cause-and-effect logic and that is linked to the reward system, which is now more complete and geared to multidimensional reality, as proposed by Speckbacher et al. (2003): company strategy is implemented through plans of action and objectives that are defined and linked to an incentive scheme. In particular, company performances in those three areas – economic, social and environmental – tend simultaneously to improve (Figge et al., 2002). In this way, apart

Objectives and CSR disclosure 331

AAAJ 28,3

332

from monetary and quantitative information also qualitative and physical information and indicators are considered and linked to the monetary information. In fact, even though social and environmental information is often qualitative it can somehow be linked to key monetary figures which are used in incentive systems. There is a considerable amount of literature on the subject of the adoption of the BSC to link incentive schemes to performance (Kaplan and Norton, 1996; Otley, 1999; Ittner and Larcker, 1998; Malmi, 2001). One recent study (Yuan et al., 2011) develops a new company organisational model capable of fully integrating CSR initiatives into the business:

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

P5. Sustainability indicators in incentive schemes can overcome certain limitations and difficulties of MBO. Again with reference to the hard incentives mentioned in P2, and in relation to what was said in P3, this work belongs in that strand of the literature which deals with certain difficulties in the system connecting performance and pay (Varian, 2002; Kanagaretnam et al., 2009; Hall and Murphy, 2002; Murphy, 2003; Perel, 2003; Moriarty, 2005; Wilhelm, 1993). First of all, in order to be able to link payment to performance, it is necessary to have a means of measuring, as objectively as possible, the result of the activity carried out by the manager. Generally, the parameters used are the economicfinancial parameters of the company itself. Second, account must be taken of the perspective from which performance will be viewed; obviously, this ought to be long term (Matsumura and Shin, 2005) but this makes measurement more difficult, with the result that perspective often tends to be short term. For these reasons too, a well-designed sustainability approach could be valuable. In fact, those companies which are more sensitive to the issue of sustainability are usually more concerned with long-term objectives and, consequently, using the incentive scheme as a means of encouraging socially responsible behaviour may be in the interests of both the stakeholders (in the global sense) and of the shareholders (Marens, 2002). This is partly confirmed by a recent study (Manner, 2010) which showed a negative correlation between sustainability performance and short-term pay levels for managers. Literature dealing specifically with correlations between incentive schemes and company performance, starting with agency theory (Tosi et al., 2000), has, over time, emphasised the limitations of merely financial measurements (Coombs and Gilley, 2005); subsequently, Mahoney and Thorne (Mahoney and Thorne, 2005 and 2006), measuring in particular sustainability profiles, highlighted the correlation between overall company performances and long-term payment of top managers. The positive correlations observed are related to long-term economic equilibrium and, therefore, cannot be the result either of manipulation of accounts or of possible opportunistic behaviour. It should be pointed out, moreover, that analyses of this kind necessarily focus on the long term, since such a timescale offers two advantages: on the one hand, the reliability of the measurements; on the other hand, the opportunities it provides for the measurement of results (which in the case of sustainability are necessarily long term). McGuire (McGuire et al., 2003) affirmed that the relation between corporate social performance and CEO compensation becomes increasingly relevant as the direct impact of social performances on the executive’s personal wealth increases. The few studies which have already been carried out on this question highlight different types of evidence. On the one hand, as underlined by Baron (2007), the incentives the firms provided for social performance necessarily interact with incentives for financial performance, and providing incentives for social performance can affect the incentives

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

for financial performance and hence the operations of the firm. Moreover, it has been asserted that going beyond financial performance and including additional effectiveness measures produces better results (Hillman et al., 2001). On the other hand, Mahoney and Thorne affirmed that rather than encouraging more social responsibility, long-term compensation may serve to deter potentially damaging actions. In addition, as a number of CEO’s have already pointed out, strong corporate social performance is an important investment leading to a sustainable competitive advantage for the firm (Kang, 2009). Cai et al. (2011) provide a further contribution to this subject: they investigate the differences between CEO pay in socially responsible firms and in other companies, and they conclude that CEO remuneration in the former group is lower than in the latter; they conclude that this lower remuneration is symptomatic of greater care for employees and values such as justice, transparency and democracy. Furthermore, proceeding with the analysis of the limitations of the incentive scheme, it is not a given that there is a direct cause-and-effect link between manager behaviour and the performance achieved (Eisenhardt, 1985 and 1988). In fact, performances achieved may depend on other random and external factors. It is therefore necessary to establish accurately the amount of variable remuneration linked to performance, so as to ensure there is no interference by random factors. In particular, where social and environmental performance are concerned, there is no doubt that many aspects are influenced by external factors beyond managers’ control. It is precisely in relation to some of these limitations that sustainability indicators might prove useful. In fact, as has already been pointed out, the parameters on which incentive schemes are normally based are essentially of an economic-financial nature (turnover, market share, returns on stocks, gross operating margin, contribution margin, surplus value). It is evident that the choice of parameters is a delicate one because it is necessary for there to be a direct correlation between what the manager does and the parameter itself, so that the incentive is only paid when the manager contributes with his own work to improving a given level of performance. There is no doubt that hitherto those indicators used as reference points have rarely been of a qualitative type, or at least of a non-financial type, as those pertaining to sustainability might be. Previous research has shown that even amongst those companies which have implemented a sustainability strategy, very few have adopted an incentive scheme based on the achievement of environmental objectives; one reason for this might be a lack of appropriate indicators (Lothe et al., 1999). Another explanation might be the presence of other motivational factors, as mentioned in P2. The choice to use only economicfinancial indicators can certainly be attributed to the difficulties involved in applying qualitative indicators as well as in correlating them directly to what a manager actually does and in assessing in concrete terms whether they have been achieved or not. Nonetheless, in spite of the obvious difficulties, it is not appropriate to evaluate a manager’s actions and achievements in purely economic-financial terms while neglecting social and environmental aspects and, as a consequence, sustainability (in the global sense), all of which actually appear to be crucial to ensuring a lasting competitive advantage. The social dimension of a company is in fact now seen unequivocally as a variable that is strategically relevant to both the achievement and maintenance of a competitive advantage. As such, it is integrated into the planning process and, as an inevitable consequence, into the incentive scheme. A first step in this direction can be a role in the

Objectives and CSR disclosure 333

AAAJ 28,3

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

334

decision-making process and in company planning for the CSR manager or for whoever (whatever his or her title may be) deals with sustainability within the company. Previous studies have shown that companies with a CSR manager are those most likely to be listed in the Dow Jones sustainability index (Strand, 2013). In order for this kind of integration not to be merely superficial, the establishment of objectives has to be linked to subsequent monitoring of the pursuit of those objectives and to manager remuneration. Only then can the integration be described as complete and only then will managers be as focussed on sustainability objectives as on economic aims. Otherwise, good intentions in the approach to sustainability may not be matched by concrete action by the company, especially when there is conflict between profit and social-environmental performance (Welford, 1995): P6. Voluntary and mandatory disclosure quality is a determining factor in reducing information gaps. As partly explained also in P1, this work avoids the more general topic of accounting and sustainability accounting (Schaltegger and Burritt, 2010), as well as the debate on the relationship between sustainability accounting and sustainability reporting, in order to focus on the issue of voluntary disclosure and, more specifically, on the evaluation of the quality of the reporting and environmental, social and governance (ESG) disclosure tools. The notion of disclosure is based on the explanatory-descriptive aspect of communication. In particular, it is important to distinguish the concept of obligatory disclosure (which concerns information that regulations compel the release of) from voluntary disclosure (communication of additional information) (Meek et al., 1995). There are a variety of frameworks (e.g. Atkinson, 1997; Eccles et al., 2001; Epstein and Birchard, 2000; Gray, 2002; Healy and Palepu, 2000; Jaggi and Low, 2000) and institutional guidelines (for sustainability, in particular the GRI) that can be used to classify, record and evaluate the information contained in the voluntary disclosures made by a company as a part of its stakeholder management efforts. Studies have approached the subject from a variety of angles: the effects produced by disclosure quality (Barry and Brown, 1984; Bhushan, 1989; Lang and Lundholm, 1996; Botosan, 1997; Leuz and Verrecchia, 2000; Botosan and Plumlee, 2002; Francis et al., 2008; Reverte, 2012); factors determining disclosure quality (Singhvi and Desai, 1971; Buzby, 1974; McNally et al., 1982; Andrikopoulos and Kriklani, 2013); variables that influence disclosure policy (Barry and Brown, 1986; Aboody et al., 2000); and the contribution made by the institutions that regulate disclosure (Watts and Zimmermann, 1978 and 1990). As regards voluntary disclosure, one study (Boesso and Kumar, 2007), taking account of the demands of the financial markets, analyses the factors that influence the drafting of voluntary disclosure in companies. In particular, the objective of this latter work was to identify the quantitative and qualitative determinants of voluntary disclosure in Italy and the USA. The results show that in addition to the demands for information by investors – which were noted by most previous studies (Healy, 2001; Han and Wild, 2000; Leuz and Verrecchia, 2000; Verrecchia, 2001) – other factors, such as emphasis on stakeholder management, the importance of intangibles and the complexity of the market, affect both the quantity and quality of voluntary disclosure. One recent study analysed the relationship between corporate governance and social and environmental disclosure (SED), focussing on both the quantity and quality of the latter (Mallin et al., 2013; Khan et al., 2013). Empirical evidence in this work shows

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

that the stakeholders’ orientation of corporate governance is positively associated with CSP and SED. Moreover, they find that CSP in the “product” dimension is positively associated with the extent and quality of SED whilst CSP in the “people” dimension is negatively associated with the extent and quality of SED. Other studies have also examined this relationship (Khan et al., 2013). They find a positive relationship between board independence and the level of CSR disclosures. Also, the presence of an audit committee is found to have a significant positive relationship with CSR disclosures. In social and environmental accounting literature, many researchers concur that CSR disclosures can be employed by an organisation to mitigate legitimacy threats and reduce the legitimacy gap (Chen et al., 2008; Deegan et al., 2000 and 2002). According to legitimacy theory, it is the top management of an organisation which is responsible for recognising the legitimacy gap and implementing the necessary social practices, and then disclosing its actions to stakeholders to ensure accountability. Thus corporate governance, in particular the internal governance structure (such as ownership and board composition), is likely to play a vital role in reducing the legitimacy gap through extended CSR disclosures. Disclosure quality, in fact, appears to be a determining factor in closing the information gap between companies and stakeholders, who are interested in quantitative-qualitative data. Quality disclosure further reduces information gaps of this kind and fully meets the demands of the stakeholders, both as regards obligatory documents, such as those of an economic-financial nature, and voluntary documents, such as sustainability reports. The concept of “quality” is a delicate one, both in terms of the variables to be taken into consideration and of measurement. In basic terms, the concept of quality can be linked with all the requisites for the document itself, namely availability, accessibility, comprehensibility, rapidity, relevance, significance, completeness, clarity, exhaustiveness, truth, verifiability, correctness, neutrality, impartiality and objectivity. To evaluate quality it is important to be able to indicate concisely the presence of these requisites through a measurement. This is actually difficult to do, and as a consequence the term “inherently immeasurable” (Botosan, 2004) has emerged. Measurement is therefore a question of the best possible approximation. Many studies consider the quantity of disclosure a good approximate measurement of the quality (Horngren, 1957; Robb, 1980; Dye, 1985; Barron et al., 1998; Penman, 2003; Barth et al., 2003; Bushman and Smith, 2003; Mensah et al., 2006). On the other hand, there are those who, while admitting that there is a relation between quantity and quality, do not accept that the first is a correct approximation of the second, and maintain that quality depends also on other factors such as the “richness” of the contents (Baettie et al., 2004; Beretta and Bozzolan, 2008). Measurement of disclosure quality can be carried out either through an analysis of the content by researchers (Marston and Shrives, 1991), or by interpreting indicators that they have designed (Baettie et al., 2004), or by using indicators provided by others (analysts, rating agencies or financial institutions) (Dixon and Coy, 1995). The first type of analysis is either thematic content analysis (Guthrie and Abeysekera, 2006) or syntactic content analysis ( Jones and Shoemaker, 1994). Content analysis requires a greater amount of work on the part of the researcher compared to analysis using indicators designed by external analysts. Measuring the level of disclosure quality by using indexes is also a valid approach; nonetheless, it too can lead to a degree of researcher subjectivity, especially when the index is the result of research into the

Objectives and CSR disclosure 335

AAAJ 28,3

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

336

opinions and expectations of the stakeholders (Healy and Palepu, 2001). One requisite which undoubtedly renders more objective the three types of analysis is that of repeatability or the possibility of obtaining the same results by repeating the analysis performed (Baettie et al., 2004). Evaluations of this kind are even more difficult where “voluntary” disclosure is concerned, given that it is not a question of verifying compliance – whether it be merely formal or real – with mandatory regulations governing the quantity and quality of the information required. In these cases there is a risk of more or less subjective assessments by the researcher, even when using principles of reasonableness and rationality. This study therefore specifically analyses the qualitative level of non-financial information regarding remuneration policies in companies’ reports. 4. Methodology The preliminary aim of this research was to establish which of the 328 companies listed on the Italian Stock Exchange (as of 31.12.2011) included sustainability indicators for their variable remuneration scheme for staff in their 2011 sustainability report. From amongst all the listed companies, 44 were identified as having produced a voluntary sustainability report for 2011, and thus as demonstrating greater sensibility to environmental and social issues; for each of these 44 companies, analysis was made of the contents of the said document beginning with a search for the following key words: remuneration, MBO, incentives, bonus, variable part, executive compensation, manager, directors, employees. The analysis also focussed on the content of the section regarding personnel in each sustainability report. In order to avoid overlooking relevant information about remuneration policy, analysis was also carried out, using the same method – searching for key words (those mentioned above plus the following: sustainability performance, safety, injuries, environment, sustainability, indicators, key performance indicator (KPI)) and examining the section specifically dealing with remuneration for managers and executive directors in the content of the 2010 governance report (or differently-titled report on governance) – for the 44 companies which produced a sustainability report in the course of 2011. This approach was chosen because the intersection between obligatory and voluntary information regarding a subject such as the relation between MBO and sustainability is one of the defining elements of this research and of other studies carried out on different types of information at an international level. It goes without saying, moreover, that all 44 companies had also produced a sustainability report during 2010. The decision to analyse the contents of the governance report for 2010 was based on the fact that, for that year, the document in which Italian law required the inclusion of information regarding remuneration was the governance report itself. The obligation for listed companies to draw up a remuneration report was in fact only introduced in Italy in the course of 2012. Owing to the small number of cases analysed, the methodology employed is that of multiple case studies (Yin, 1994, 2005; Fattore, 2005), and the only statistical analyses carried out are therefore necessarily reliant on descriptive rather than inferential tools. This entails shifting from a deductive approach, of the kind used in the field of construction of econometric models, to the type of inductive method typically used in multiple case studies; it is a method that is particularly useful not only in investigations

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

of a qualitative nature but also in the field of construction of data-gathering tools (Corbetta, 2003). A criticism that can be made of multiple case studies is that they are limited as regards the empirical-statistical generalisation of results owing to the fact that the sample may be considered too small to be representative. However, it should be remembered in this case that the sample, although not large, is made up of all those listed companies that include sustainability indicators in their own reports. From the analysis it emerged that 22 companies declared that they had used sustainability indicators in their incentive scheme in order to define the variable part of salaries paid to employees with strategic responsibilities and to directors with executive roles. The companies in question operate in a range of different sectors; for cataloguing purposes, the methodology adopted was that used by the Italian Stock Exchange, namely the Industry Classification Benchmark (ICB), developed by Dow Jones and the FTSE. Table I provides a summary of the sample analysed, including details of the number of companies in each sector and their respective sizes in terms of the average number of employees. The next step in the research involved the attempt to ascertain, on the basis of the evidence gathered, whether for these 22 listed companies the qualitative level of information in the 2011 sustainability report – a voluntary reporting tool – was consistent with the quality of information (again regarding remuneration) included in the 2011 remuneration report. From the comparison of the two documents serious inconsistencies emerged. In other words, the large amount of information provided in almost all 22 sustainability reports on sustainable practices where remuneration is concerned was only partially mirrored in the respective remuneration reports. In the light of this discovery, it was decided to ascertain whether there was a similar level of inconsistency in the quality of information provided in two obligatory reporting documents, specifically:

Objectives and CSR disclosure 337

(1) The remuneration report – the document in which firms are required to provide detailed information regarding the remuneration of managers and directors, and also information concerning the application of sustainable practices to company remuneration policies. (2) The management report, which is appended to the balance sheet or to the consolidated balance sheet (in the case of a group) – the document which requires the reporting of more general sustainability information, in full conformity with the principle of the materiality/significance of non-financial information; in line with this principle, information regarding social and environmental questions which might have a significant effect on company reputation and on the decision-making process for those in receipt of the information is also to be included.

Activity (ICB) Basic materials Consumer services Industrials Financials Oil and gas Number of firms

Firm

Media employees

Min.

Max.

6 5 3 7 1 22

17.587 25.131 71.636 23.010 40.388 177.753

552 728 1.886 767 – 552

81.208 62.500 197.021 81.997 – 197.021

Table I. Sampling

AAAJ 28,3

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

338

In order to analyse the level of information in the documents under examination it was necessary to adopt an assessment method to measure, as objectively as possible, the level of compliance of the information provided in the two documents, the remuneration report and the management report. Regarding Section 2, Table II (compiled by us) contains all the information required as far as the report on management of regulations/procedures is concerned. Specifically, the requirement is for six different disclosure sections, some concerning

Disclosure section

Disclosure sub-section

Section (I) Mandatory disclosure on employees

Deaths at work Serious injuries at work Charges to the company for occupational diseases verified in employees or former employees of the company Potential liabilities for the company due to occupational diseases verified in employees or former employees or due to collateral violence and the related court proceedings Damage caused to the environment (verified events or potential risks) Lawsuits for damage caused to the environment Fines or penalties imposed on the company for environmental offences or damage Emissions Investments in employees (safety) and related operating costs Initiatives designed to change previous forms of “temporary” work into permanent employment contracts Environmental investments and environmental costs (pursuant to Rec. 453/2001), i.e., investments that improve environmental impact, as distinguished from the costs of complying with legally-imposed parameters Waste recycling and disposal policies, when relevant Certifications (SA8000; EMAS; ISO 14000; etc.) Emissions and green certifications Environmental protection programs and strategies (with a special focus on pollution prevention) Improvements in key environmental protection sectors Degree of implementation of environmental protection measures (already adopted or about to be adopted) to achieve compliance with current laws or to anticipate future legal requirements Disclosures about the company’s degree of environmental efficiency in terms of, for instance, consumption of energy, materials and water, emissions and waste disposal (when appropriate and pertinent for the specific activity, volume of business and type of environmental impact) References to any separate environmental reports containing environmental information - quantitative or qualitative, supplementary or in greater detail Work safety risks: threats to the health and safety of workers, as provided in art. 28 of Leg. Dec. 81/2008 Risks deriving from environmental damage lawsuits and the existence of insurance policies Risks specific to company business, known as “internal” risks, as determined by production type and by specific environmental impacts”

Section (II) Mandatory disclosure on the environment

Section (III) Voluntary disclosure on employees Section (IV) Voluntary disclosure on the environment

Section (V) Disclosure on the environment, formerly Rec. 2001/453/EC

Table II. Disclosure sections concerning the environment, employees and risks within the management report

Section (VI) Potential risks to be included, when relevant

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

mandatory disclosure and others concerning voluntary disclosure. Mandatory disclosure is required by the company when events such as deaths at work, serious injuries at work, diseases verified in employees and so on (as indicated in the Table II below the heading “disclosure sub-section”) occur, regardless of the size of the company. Voluntary disclosure may concern what is deemed important or necessary in order to provide a truthful and correct representation of operational performance, or what facilitates proactive communication to third parties of the corporate and environmental policies of the corporation. Table III (compiled by us) shows – in terms of what is required by the regulations and guidelines – the information that is supposed to be included in the remuneration report and that we use in order to ascertain the level of compliance in the documents under analysis. It should be pointed out that the reference model was, therefore, the result of an interpretation of the type of information that the research group adapted to the structure of the model for the remuneration report defined by the CONSOB resolution 18049/2011. The document (as can be seen from Table III), was broken down into two categories according to the type of information concerned: the first, relating to obligatory information, included a general description of remuneration policies for 2012 and the individual items going to make up those remunerations, as well as payments made during 2011; the second, relating to voluntary information, included information on sustainability both in remuneration policies for 2012 and in the individual items going to make up payments made during 2011. This methodology, which was previously employed in the assessment of the qualitative level of sustainability information in the management report (Mio and Venturelli, 2013; Venturelli, 2012), was also used to evaluate the level of compliance in the remuneration report. To this end, specific evaluation grids (P5 and P6, respectively), each containing a check-list for information included, were created for the remuneration report and the management report. Subsequently, these grids were completed for each individual company in order to ascertain whether, for each specific category, the information required was provided or not. Table IV provides a summary of this data. The evaluation tool which was adopted includes specific examples of the information required, respectively, by the CNDCEC document for the management report, and by the circular Assonime for the remuneration report. Below is an example table used as an evaluation grid to detail the presence and/or completeness of the information required. More specifically, the example provided is the evaluation grid used for the analysis of the section containing voluntary information on the remuneration policies envisaged for the following year (Table V). For each section, therefore, the level of information provided was ascertained. In each case a score was assigned to express the degree of the completeness of the information in the reports in question. These scores range from 0 to 2, 0 being equivalent to the total absence of information, 1 indicating that information is provided but is not exhaustive, and 2 equating to the provision of exhaustive information. It was then possible to assign a specific score to the reports on remuneration and management, and, as a consequence, to determine for each of these the level of completeness of general information and, in particular, of the information relating to sustainability. This last value was calculated in percentage terms by comparing the score assigned to the specific information section with the maximum score attainable in

Objectives and CSR disclosure 339

Table III. Disclosure sections concerning remuneration policies and sustainability within the remuneration report

Section (II) Mandatory disclosure on remuneration items– first part

(continued )

Disclosure sub-section Bodies and persons involved in the preparation, approval and implementation of the policy Role, composition and functioning of the Compensation Committee Independent experts who took part in the preparation of the policy Purposes of the remuneration policy, its underlying principles Fixed and variable component (short and long-term) on total compensation The policy on non-monetary benefits Performance targets (short, medium, long term) Assessment of performance targets Consistency assessment between the remuneration policy and the Company’s long-term targets Deferred payments Clawback Indemnity for the termination of the office Specific insurance policies Remuneration policy for indipendent directors, for partecipation in committees and for particular offices Reference to other companies’ remuneration policy Items of the remuneration Agreement on the termination of the office Standard for indemnity for each person Performance targets linked to indemnity Effects of termination of the office on incentive plans Events for indemnity Agreements on non monetary incentives for the termination of the office Remuneration for non competition agreements Differences between projected and accrued indemnity Determination of accrued indemnity in case of no agreements

340

Disclosure section Section (I) Mandatory disclosure on the remuneration policy (for the following year)

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

AAAJ 28,3

Section (II) Voluntary disclosure on the remuneration items

Sustainability disclosure section Section (I) Voluntary disclosure on the remuneration policy (for the following year)

Section (II) Mandatory disclosure on compensation paid in the previous year – Second part

Partecipation of CSR manager in the preparation, approval and implementation of the policy Sustainability information within the purposes of the remuneration policy Sustainability information within the composition of total retribution Sustainability information within the performance targets (short, medium and long-term) Sustainability information within the consistency between the remuneration and the Company’s longterm targets Sustainability information within the remuneration paid Sustainability information within performance target linked to the indemnity Sustainability information within differences between projected and accrued indemnity

Table 1: Compensation paid to members of the Board Directors, the Board of Statutory Auditors, to the General Manager and to Executives with strategic responsibilities Table 2: Stock options awarded to members of the Board of Directors, to the General Manager and to other Executives with strategic responsibilities Table 3a: Incentive plans based on financial instruments different from stock options Tabel 3b: Monetary incentive plans in favor of members of the Board of Directors, of the General Manager and of the Executives with strategic responsibilities

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

Objectives and CSR disclosure 341

Table III.

AAAJ 28,3

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

342

Table IV. Disclosure sections within the remuneration report and the management report

Remuneration report

Management report

Mandatory general disclosure

Mandatory disclosure on employees and environment Section (I) Mandatory disclosure on the remuneration Section (I) Mandatory disclosure on policy (for the following year) employees Section (II) Mandatory disclosure on the remuneration Section (II) Mandatory disclosure on the items – first part environment Voluntary disclosure on employees and environment Section (II) Mandatory disclosure on the compensation Section (III) Voluntary disclosure on paid during the previous year – second part employees Section (IV) Voluntary disclosure on the environment Sustainability voluntary disclosure Section (V) Disclosure on the environment, formerly Rec. 2001/453/EC Section (I) Voluntary disclosure on the remuneration Risks section policy (for the following year) Section (II) Voluntary disclosure on the remuneration Section (VI) Potential risks to be included, items – first part when relevant

Voluntary disclosure policy on the remuneration (for the next year) Information

Table V. Example of the disclosure assessment grid in the remuneration report

Partecipation of CSR manager among persons involved in the preparation, approval and implementation of the policy Sustainability information inside purposes of the remuneration policy Sustainability information in the composition of total retribution Sustainability information inside the performance targets (short, medium and long-term) Sustainability information in the link between the remuneration and the company’s long-term interests

Rating Not Present Description present scale 0/1/2

that same section. Thus, for each company the level of sectional compliance, indicating the quality of information in the reports on remuneration and management, was established. These compliance levels are illustrated in the two figures below (Figures 1 and 2). The level of compliance established for each informational element in the two documents – such as employees, environment and potential risks (in the management report); remuneration policy and remuneration items (in the remuneration report) – is determined by aggregating the percentage values assigned to the specific information sections. The decision to introduce, for the remuneration report, a general section (obligatory information) and a sustainability section (voluntary information) derived from the need to highlight that a company should be considered virtuous as regards its remuneration policies when it complies both in terms of general information and of sustainability information.

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

% mandatory disclosure on remuneration

% sustainability disclosure on remuneration

% mandatory disclosure on items which comprise remuneration

% voluntary disclosure on compensation paid

% mandatory disclosure on remuneration policy

% voluntary disclosure on remuneration policy

Objectives and CSR disclosure 343

Figure 1. Compliance disclosure within the remuneration report

% disclosure in the management report % risks disclosure

% disclosure on the environment

% disclosure on employees

It should be pointed out that the evaluation criterion adopted in the qualitative analysis of the information is not the same as that used in previous empirical studies. There is therefore an element of inherent subjectivity which may preclude the possibility of extending the applicability of the results to all listed companies. To remedy this, alongside the above-mentioned (potentially subjective) values, the research group examined the values obtained by Bloomberg regarding the quality of ESG information for the financial year 2011 for the 22 listed companies in the study. The set of indicators extrapolated from Bloomberg’s ESG databank takes account of all the information communicated by the firms using obligatory and voluntary reporting tools for ESG issues.

Figure 2. Compliance disclosure within the management report

AAAJ 28,3

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

344

The indicators examined concern: the environmental disclosure score, the social disclosure score, the governance disclosure score, and the ESG disclosure score and are the result of the analysis, using an indexed scale ranging from a minimum of 0.1 to a maximum of 100, by Bloomberg of the information communicated by the listed companies to the market. Each of these indicators is designed to reflect the diverse importance in terms of materiality of certain kinds of information and the significance that each kind of information has in the sector to which the company belongs. It is clear, therefore, that information on green house gas emissions assumes greater importance than other types of information such as that regarding green investments, for example, if for no other reason than that reporting information on gas emissions might have direct effects on the stock market and indirect effects on the market for socially responsible investments. If account is also taken of the fact that such information is of varying importance according to the sector of the commodities market concerned, it becomes evident how critically important it is in the definition of the indicators. On the basis of the above observations, we proceeded to compare the scores assigned by Bloomberg and the level of information compliance established, and to analyse – from a dual perspective: that of the external assessor and that of the researcher – the different qualitative levels of information (Figure 3). The aim was to ascertain whether the level of consistency/inconsistency of sustainability information included in the management report and the remuneration report can be established through a comparison between the content of the said documents and the quality of the sustainability information as assessed by Bloomberg in investigations of the ESG information included in obligatory and voluntary reports. For reasons of methodological rigour, it is important to point out that in order to corroborate the analysis of the level of inconsistency of the ESG information,

ESG disclosure % Mandatory and voluntary disclosure

% Global disclosure

ESG disclosure score

Remuneration report

Management report

Bloomberg

Disclosure on the environment % Voluntary disclosure

% Disclosure on the environment

Environmental disclosure score

Remuneration report

Management report

Bloomberg

Social disclosure % Voluntary disclosure

% Disclosure on employees

Social disclosure score

Remuneration report

Management report

Bloomberg

Governance disclosure

Figure 3. Sustainability disclosure quality according to an internal and external perspective

% Mandatory disclosure

% Disclosure on employees

Governance disclosure score

Remuneration report

Management report

Bloomberg

Internal perspective

External perspective

alongside the traditional descriptive statistical tools used for a fuller understanding of the meaning of the data relating to the best and worst performers, a T-test was employed. This served to obtain a clearer understanding of whether the level of inconsistency identified between the quality of ESG information from an internal and external perspective, expressed in terms of standard deviation, is statistically significant.

Objectives and CSR disclosure

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

345 5. Results 5.1 ESG information in the comparison between the sustainability report and the remuneration report As previously mentioned, analysis of the documents consisted first in an examination of the contents of the information included in the sustainability report regarding variable incentive schemes; from this it emerged that 13 of the 22 companies are firms that, in addition to providing general statements on the use of sustainability indicators in incentive plans, also specify the kind of indicators used. Among the most widely used indicators are those of the quantitative type, the most important of which are: index of frequency and seriousness of injuries, reduction of energy consumption, number of pro-capita safety training hours and other less frequently used indicators that can be extrapolated from Table VI. Qualitative indicators are mostly concerned with customer satisfaction tools. In some cases the short-term incentive scheme is integrated into a multidimensional strategic planning system based on the BSC. The weight that the sustainability indicators carry within the short-term incentive scheme is quantified in only two cases; in both of these instances, however, reference is made only to the frequency of injury index. None of the quantitative and qualitative indicators are associated with long-term variable incentive schemes; stock option plans are still linked to traditional economic indicators such as: EBITDA, turnover, etc. The inclusion of this information in the sustainability report is not mirrored in the remuneration report, where analysis of the contents of the information, especially that concerning payments made in 2011, is almost completely lacking.

Firm Generic information

Specific information

Inclusion indicators in MBO Balanced scorecard

22

13

2 5

Indicators Quantitaive indicators Hours per employee safety training % non compliance found Numbers of safety controls Reducing production waste Reducing in water consuption Reducing in energy consuption Index of accidents severity Accidents ferquency rate

23 2 2 2 1 1

Indicators Qualitative indicators Policy no accidents

1

Customer satisfaction

6

7

5 3 7 Table VI. Indicators within incentive plans

AAAJ 28,3

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

346

In fact, from the internal assessments of compliance relative to “Section II: Voluntary Information” by the 22 listed companies, as can be clearly seen in Table VII, the average percentage which emerges is 3 percent, which corresponds to the inclusion in just four cases of some non-exhaustive information. In the other 18 cases no sustainability information at all is provided regarding remuneration paid, let alone on the subject of quantitative and qualitative indicators to which the variable part of salaries might be linked. On the other hand, as regards the analysis of wage policies for the financial year 2012 or, more specifically, the contents of “Section I: voluntary information” in the remuneration report, the average level of compliance was 31 percent with peaks of 80 and 70 percent in some cases, which together with others, give a higher overall percentage of 50 percent in 7 of the 22 cases. It is also worth noting that only one of the listed companies stated that the CSR manager participated in the decision-making process for wage policy. 5.2 ESG information in the comparison between the remuneration report and the management report Table VIII compares the different percentage indicators of the qualitative level of information inferable from the two obligatory reports: the report on management and the report on remuneration. It goes without saying that the compliance percentage being compared is, in both reports, the expression of partly obligatory and partly voluntary information; in this case the meaning of obligation/discretion is more in line with that in the guidelines

Table VII. Compliance sustainability disclosure in the remuneration report

Firm

% voluntary disclosure on remuneration policy for the next year

% voluntary disclosure on remuneration paid

Total

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Mean

10.00 60.00 20.00 50.00 40.00 20.00 10.00 70.00 20.00 60.00 60.00 0.00 0.00 0.00 20.00 40.00 30.00 0.00 20.00 20.00 80.00 50.00 30.91

0.00 0.00 0.00 0.00 0.00 0.00 16.67 0.00 0.00 0.00 0.00 0.00 0.00 0.00 16.67 16.67 0.00 16.67 0.00 0.00 0.00 0.00 3.03

6.25 37.50 12.50 31.25 25.00 12.50 12.50 43.75 12.50 37.50 37.50 0.00 0.00 0.00 18.75 31.25 18.75 6.25 12.50 12.50 50.00 31.25 20.45

40.91 40.91 47.73 43.18 6.82 13.64 56.82 4.55 47.73 63.64 45.45 47.73 38.64 50.00 61.36 59.09 54.55 22.73 34.09 27.27 4.55 15.91 37.60 18.84 4.55 63.64

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Media SD Min Max

15.38 0.00 0.00 0.00 0.00 0.00 7.69 0.00 3.85 3.85 3.85 0.00 3.85 7.69 23.08 23.08 3.85 7.69 3.85 7.69 0.00 0.00 5.24 6.98 0.00 23.08

0.00 33.33 58.33 58.33 25.00 50.00 33.33 0.00 50.00 58.33 16.67 33.33 33.33 25.00 50.00 50.00 50.00 33.33 83.33 16.67 0.00 0.00 34.47 22.76 0.00 83.33

Firm

53.85 53.85 53.85 46.15 0.00 0.00 73.08 7.69 53.85 76.92 65.38 65.38 46.15 65.38 57.69 53.85 65.38 15.38 15.38 30.77 7.69 26.92 42.48 24.88 0.00 76.92

Management report % % % Total Empl Envir Risks % 50.00 80.00 23.33 70.00 80.00 50.00 26.67 60.00 23.33 70.00 80.00 50.00 26.67 60.00 33.33 93.33 93.33 56.67 36.67 16.67 63.33 36.67 53.64 23.55 16.67 93.33

% remuneration policy 35.71 35.71 39.29 53.57 42.86 46.43 28.57 25.00 39.29 53.57 50.00 39.29 71.43 35.71 42.86 35.71 60.71 85.71 21.43 14.29 28.57 21.43 41.23 16.78 14.29 85.71

General % remuneration paid 43.10 58.62 31.03 62.07 62.07 48.28 27.59 43.10 31.03 62.07 65.52 44.83 48.28 48.28 37.93 65.52 77.59 70.69 29.31 15.52 46.55 29.31 47.65 16.35 15.52 77.59

Total % 10.00 60.00 20.00 50.00 40.00 20.00 10.00 70.00 20.00 60.00 60.00 0.00 0.00 0.00 20.00 40.00 30.00 0.00 20.00 20.00 80.00 50.00 30.91 24.67 0.00 80.00

% remuneration policy

Remuneration report

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

0.00 0.00 0.00 0.00 0.00 0.00 16.67 0.00 0.00 0.00 0.00 0.00 0.00 0.00 16.67 16.67 0.00 16.67 0.00 0.00 0.00 0.00 3.03 6.58 0.00 16.67

Sustainability % remuneration paid

6.25 37.50 12.50 31.25 25.00 12.50 12.50 43.75 12.50 37.50 37.50 0.00 0.00 0.00 18.75 31.25 18.75 6.25 12.50 12.50 50.00 31.25 20.45 14.96 0.00 50.00

Total %

Objectives and CSR disclosure 347

Table VIII. ESG disclosure within the remuneration report and the management report

AAAJ 28,3

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

348

for international auditing than that defined by law, or in other words in line with international recommendations for good practice in accounting rather than with actual legal requirements. .From the comparison there emerges, preliminarily, an average percentage for compliance that is not hugely different where the values being compared are total compliance in the management report (37.60 percent) and total compliance in the general part of the remuneration report (47.65 percent). What is striking, however, is the gap in percentage terms between total compliance in the management report and total compliance in the sustainability part of the remuneration report (20.45 percent); this figure is even more striking given that the figure of 20.45 percent is almost entirely due to the contribution of Section I, which consists of voluntary information on wage policies for the following year, while the score for Section II, dealing with remuneration paid in 2011, is almost nothing (3.03 percent). 5.3 ESG information in the comparison between the remuneration report and the management report and Bloomberg’s data Table IX compares the results described in Section 5.2. with the ESG scores determined by Bloomberg. It should be pointed out that the reason Bloomberg did not have data available for four of the 22 was partly because data could not be extrapolated, and partly because of the listed companies not providing information. As no details were available on the relative influence of each of these two factors, it was decided to take no account of their respective statistical impact. A first interpretation of Bloomberg’s analysis reveals a certain homogeneity in terms of the scores assigned to the firms in the study for the levels of the four information sections (environmental, social, governance, ESG); only in two cases is there a total lack of homogeneity (cases 6 and 11). The four score levels assigned reveal, moreover, more or less clear inconsistency between the different levels of sectional compliance in the two reports: the report on management and the report on remuneration. This lack of alignment is confirmed by the fact that the best performers in the obligatory documents do not coincide with Bloomberg’s best performer, which, moreover scored highest in all four information sections; such consistency is not found, however, in the management report, let alone in the remuneration report. From the combined analysis of the different qualitative levels of information available internally and externally (Table X) there also emerges an evident discrepancy between the best and worst performer. Viewed from the two different perspectives, the two performance values are different and as a consequence the identification number (the names of the companies have been removed and replaced by numbers) for the two firms in question also changes. In the analyses reported in Table X, the companies indicated as best performer and worst performer are in fact different. It should be noted that as regards the aforementioned evaluation indicators, no account was taken of those firms for whom no score data were available to the Bloomberg study. The analysis also sought to ascertain which particular factors might in some way have influenced the more or less compliant level of quality regarding MBO-CSR. In order to do this, a correlation analysis was carried out to compare the qualitative levels in the individual information sections to a number of independent

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Media SD Min Max

Firm

0.00 33.33 58.33 58.33 25.00 50.00 33.33 0.00 50.00 58.33 16.67 33.33 33.33 25.00 50.00 50.00 50.00 33.33 83.33 16.67 0.00 0.00 34.47 22.76 0.00 83.33

53.85 53.85 53.85 46.15 0.00 0.00 73.08 7.69 53.85 76.92 65.38 65.38 46.15 65.38 57.69 53.85 65.38 15.38 15.38 30.77 7.69 26.92 42.48 24.88 0.00 76.92

15.38 0.00 0.00 0.00 0.00 0.00 7.69 0.00 3.85 3.85 3.85 0.00 3.85 7.69 23.08 23.08 3.85 7.69 3.85 7.69 0.00 0.00 5.24 6.98 0.00 23.08

40.91 40.91 47.73 43.18 6.82 13.64 56.82 4.55 47.73 63.64 45.45 47.73 38.64 50.00 61.36 59.09 54.55 22.73 34.09 27.27 4.55 15.91 37.60 18.84 4.55 63.64

50.00 80.00 23.33 70.00 80.00 50.00 26.67 60.00 23.33 70.00 80.00 50.00 26.67 60.00 33.33 93.33 93.33 56.67 36.67 16.67 63.33 36.67 53.64 23.55 16.67 93.33

35.71 35.71 39.29 53.57 42.86 46.43 28.57 25.00 39.29 53.57 50.00 39.29 71.43 35.71 42.86 35.71 60.71 85.71 21.43 14.29 28.57 21.43 41.23 16.78 14.29 85.71

43.10 58.62 31.03 62.07 62.07 48.28 27.59 43.10 31.03 62.07 65.52 44.83 48.28 48.28 37.93 65.52 77.59 70.69 29.31 15.52 46.55 29.31 47.65 16.35 15.52 77.59

10.00 60.00 20.00 50.00 40.00 20.00 10.00 70.00 20.00 60.00 60.00 0.00 0.00 0.00 20.00 40.00 30.00 0.00 20.00 20.00 80.00 50.00 30.91 24.67 0.00 80.00

0.00 0.00 0.00 0.00 0.00 0.00 16.67 0.00 0.00 0.00 0.00 0.00 0.00 0.00 16.67 16.67 0.00 16.67 0.00 0.00 0.00 0.00 3.03 6.58 0.00 16.67

6.25 37.50 12.50 31.25 25.00 12.50 12.50 43.75 12.50 37.50 37.50 0.00 0.00 0.00 18.75 31.25 18.75 6.25 12.50 12.50 50.00 31.25 20.45 14.96 0.00 50.00

– 34.32 53.48 34.37 – 49.11 21.71 – 56.69 63.57 – 58.14 39.53 44.96 49.61 71.32 42.53 – 49.61 62.50 45.54 29.46 47.44 13.06 21.71 71.32

– 42.11 71.93 42.10 – 60.00 39.60 – 80.79 73.68 7.02 57.89 50.88 61.40 49.12 82.46 64.06 – 71.93 81.67 73.33 58.33 59.35 19.00 7.02 82.46

– 48.21 69.64 50.00 – 14.29 42.86 – 51.78 67.85 39.29 60.71 58.93 50.00 58.93 69.64 60.71 – 48.27 60.71 69.64 44.84 53.68 13.75 14.29 69.64

– 40.67 61.57 40.67 – 3.51 30.57 – 62.81 66.94 10.74 58.68 56.69 50.00 51.65 73.55 53.91 – 54.55 67.11 58.77 40.79 49.07 18.77 3.51 73.55

Remuneration report General Sustainability Management report Financial statment analysis bloomberg % % % % % % % Total remuneration remuneration Total remuneration remuneration Totale Env disc Social Gov disc ESG disc Empl Envir Risks % policy paid % policy paid % score disc score score score

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

Objectives and CSR disclosure 349

Table IX. Compliance disclosure and disclosure score compared

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

AAAJ 28,3

350

Table X. The best and the worst performer

variables mostly connected to the structure and the functioning of the board of each listed company in the study. The choice of these variables was made against the background of an ongoing scientific debate: according to some studies there is a direct link between disclosure quality and the make-up of a company’s board (Khan et al., 2013; Mallin et al., 2013). The independent variables adopted for this research concern:

Objectives and CSR disclosure

(1) the existence within a company’s decision-making machinery of a committee for sustainability; and

351

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

(2) information regarding the structure and workings of the board of directors/ management board, including: •

percentage of independent board members;



number of directors (members of the board of directors/management board);



duration of directors’ mandate;



average age of directors;



percentage of women on the board of directors; and



number of annual meetings.

The analysis revealed no correlation for the various information levels under examination, except for the information in the management report, chiefly regarding the environment, which is positively correlated with the directors’ years of experience and the duration of their mandate. In Table XI, which compares the data relative to the best and worst performer, the lack of statistical significance is a logical consequence of the very limited nature of the sample. The comparison reveals some consistent data as regards the number of board members, their average age, the percentage of women board members; this consistency is lacking with regard to the percentage of independent directors and the number of annual meetings. Finally, to provide statistical support for the comparative analysis on ESG disclosure, the Student t-Test was used to compare average compliance values and scores considered proxy values for the quality of sustainability information. The aim was to ascertain whether: •

the average for the specific levels of compliance in the remuneration report are statistically different from the average for the corresponding levels in the management report;



the average for the specific levels of compliance in the remuneration report are statistically different from the average for the corresponding scores determined by Bloomberg; and

Worst Best Mean Min Max

Size

Duration

Meetings

Independent

Age

% women

23 9 14 9 25

3 3 3 1 3

26 9 12 6 26

69.57 55.56 57.87 23.08 100

53.25 52.66 57.08 51 63

13.04 11.11 5.23 0 18.18

Table XI. The best and the worst performer

AAAJ 28,3

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

352



the average for the specific levels of compliance in the management report are statistically different from the average for the corresponding scores determined by Bloomberg.

We performed the test with a confidence interval of 95 percent. Table XII highlights a significant difference (Sig. o 0.05) in six cases, two of which relate to different information sections within the same documents. The other two cases of information discrepancies are particularly interesting as they confirm the existence of statistically significant differences both between the average values for levels of compliance in the remuneration report and the management report (regarding the environment), and between the compliance values for those same two documents and the scores assigned by Bloomberg (regarding social, environmental and governance issues). The presence of statistical significance in the averages for the qualitative indicators determined by our research is, moreover, supported from an empirical point of view by the presence of statistical significance also in the comparison between the averages for the qualitative indicators provided by an external analysis. The data shows, in fact, that the quality of information regarding the MBO-CSR relationship provided in the remuneration report is different not only from the quality of ESG information provided in the management report, but also from the quality of information regarding social, environmental and governance issues – and sustainability generally – as communicated by market-listed companies. Conclusions This work, following on from a number of studies which have established that it is essential for businesses to fully integrate CSR into their operations, and starting from the proposition that in order to achieve this full integration it is necessary to take action on management incentive schemes, has as its main aim the comparison of the quality of more specific information on sustainability provided in connection with listed companies’ remuneration policies and the quality of more general information on sustainability provided in the main obligatory and voluntary company reports. The starting point for this was the 328 (as of 31 December 2011) Italian companies listed on the Italian Stock Exchange, from which 44 firms were then selected, as they had voluntarily published their own sustainability report (for the year 2011) on their own company web sites; of these, 22 stated that they had used sustainability parameters in their incentive schemes for managers and directors. The method employed to measure the levels of compliance of the sustainability information provided had previously been used in another study (Mio and Venturelli, 2013), and it confirmed a total lack of consistency between the information given by the 22 companies in their own sustainability reports and that provided by those same companies both in their remuneration reports and their management reports. The latter documents, like the sustainability reports, are those for the financial year 2011 (although the remuneration reports also make partial reference to wage policies for 2012). In particular, the research has established the following: •

13 of the 22 listed companies that declared, in their sustainability report, the use of specific quantitative and qualitative indicators as a basis for their remunerative/ incentive systems policies do not provide any confirmatory information of this type in their remuneration reports.

Pair 13

Pair 12

Pair 11

Pair 10

Pair 9

Pair 8

Pair 7

Pair 6

Pair 5

Pair 3 Pair 4

Pair 2

Pair 1

Management report. % total vs remuneration report.% total mandatory Management report. % employees vs remuneration report.% total voluntary Management report. % total vs bloomberg.esg.score Remuneration report. % total mandatory vs remuneration report. % total voluntary Remuneration report. % total voluntary vs bloomberg.esg.score Remuneration report. % total voluntary vs bloomberg.esg.score Management report. % employees vs remuneration report part 1 mandatory Management report. % employees vs remuneration report. part 2 mandatory Management report. % employees vs bloomberg.soc. score Remuneration report. part 1 mandatory vs remuneration report. part 2 mandatory Remuneration report. parte 1 mandatory vs bloomberg.soc.score Remuneration report. part 2 madatory vs bloomberg. soc.score Management report. % environment vs remuneration report. part 1 voluntary −5.81565 28.65561

18.77289 −16.34523 −40.94371 −33.88598 −17.67488 −33.12789 1.34729 −24.71832 −33.12212 −5.51106

27.19500 18.99546 4.04985 −2.99167 26.85275 6.32925 −28.57944 24.86337 5.86035 −19.16773 33.19593 7.07740 −6.76500 24.60642 5.24611 −20.46222 25.46948 6.00321 12.40273 24.93472 5.31610 −7.49833 34.62777 8.16184 −19.46889 27.45537 6.47129 11.57227 38.53020 8.21467

9.72165

23.45816

−7.79655

4.14488

−4.44948

−16.21518

10.36189

35.61711

27.34815 3.37693

0.68003 −17.92027

14.01409 30.07399 6.41180 −7.27167 21.41333 5.04717

0.39420

−20.48420

SD

−10.04500 23.54484 5.01978

Mean

Paired differences 95% confidence interval of the difference SE mean Lower Upper

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

0.000 0.642 0.000 0.013 0.211 0.003 0.030 0.371 0.008 0.174

21 −0.473 17 −4.877 17 −2.708 21 −1.290 21 −3.409 17 21 −0.919 17 −3.009 17 21

1.409

2.333

(continued )

0.040 0.168

2.186 21 −1.441 17 6.715

0.058

df Sig. (two-tailed)

−2.001 21

t

Objectives and CSR disclosure 353

Table XII. t-Test disclosure compliance score

Table XII. 28.45749 −14.17176 15.84057 −32.17457 −51.99851 −18.07574 −42.51458

−0.83294 25.94330 6.29217 27.87818 27.14994 5.78839 −18.02647 27.51731 6.67393 −44.49647 14.59107 3.53885 −7.60944 21.04674 4.96076 −33.19722 18.73634 4.41620

SD

39.45045 24.79381 5.28606

Mean

−23.87986

2.85685

−36.99444

−3.87838

39.91579

12.50587

50.44342

21

21

−7.517 17

−1.534 17

−12.574 16

−2.701 16

4.816

0.000

0.143

0.000

0.016

0.000

0.896

0.000

df Sig. (two-tailed)

−0.132 16

7.463

t

354

Pair 14 Management report. % environment vs remuneration report. part 2 voluntary Pair 15 Management report. % environment vs bloomberg. env.score Pair 16 Remuneration report. part 1 voluntary vs remuneration report. part 2 voluntary Pair 17 Remuneration report. part 1 voluntary vs bloomberg. env.score Pair 18 Remuneration report. part 2 voluntary vs bloomberg. env.score Pair 19 Remuneration report. % total mandatory vs bloomberg.gov.score Pair 20 Remuneration report. % total voluntary vs bloomberg.gov.score

Paired differences 95% confidence interval of the difference SE mean Lower Upper

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

AAAJ 28,3

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)



The information section in the remuneration report that should include sustainability information regarding payments made and/or KPIs used in 2011 is practically non-existent (average compliance 3 percent).



On the other hand, for the information section in the remuneration report that includes sustainability information regarding future pay policies, average compliance is about 31 percent, not very different from the average qualitative level for ESG information in the management report (average compliance about 38 percent).



Total compliance in the remuneration report (general part) is not very different from that relating to the management report.



In contrast, there is a remarkable difference between the total compliance for quality of information in the remuneration report (sustainability part) and the same information in the management report.



This discrepancy is even more striking when comparison is made with the qualitative scores assigned by the external assessor, Bloomberg. The values assigned by the latter to the four levels of sectional information (environmental, social, governance, ESG) are strikingly different from the different levels of sectional compliance in two documents, the remuneration report and the management report.

The data shows, in fact, that the quality of information regarding the MBO-CSR relationship provided in the remuneration report is different not only from the quality of ESG information provided in the management report, but also from the quality of information regarding social, environmental and governance issues – and sustainability generally – as communicated by market-listed companies. In short, it can be asserted that Italian listed companies, suffer from a kind of splitpersonality syndrome when it comes to providing voluntary and obligatory sustainability information. Sustainability, according to what Italian listed companies declared in their reports, is not used as a strategic stimulus, it is not integrated and it is not subjected to regulation or control by the listed companies, to the extent that it is lacking in any consistent way in the KPIs) that form the basis for establishing staff remuneration policies and bonus schemes. This study, which continues a line of research into the quality of voluntary disclosure and of the integration of CSR into company procedures, is the first in Italy to examine the question of how limited companies report issues relating to MBO-CSR. It does this through the introduction of a mixed system for ESG information, which counteracts the subjective limitations of the internal evaluation provided by the research group by adding in the authoritative evaluations of an external assessor. The results that emerged, especially in the light of what was discussed above with reference to P2, seem to suggest that the lack of sustainability indicators in remuneration plans and the inconsistency of the information regarding these provided through the various reporting tools analysed may be justified by the use of soft incentives that encourage virtuous CSR behaviour in managers. Against that background, the fact that sustainability indicators are not included in the reports from 22 out of the 44 companies examined in the study would appear to confirm the theory that hard incentives are not necessary to promote the pursuit of sustainability objectives. This

Objectives and CSR disclosure 355

AAAJ 28,3

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

356

theory is in line with that part of the literature and those empirical studies which maintain that for the pursuit of objectives in certain areas, such as CSR, monetary incentive schemes are not necessary, on account of individuals’ pre-existing intrinsic motivation (Frey and Oberholzer-Gee, 1997). In fact, as is pointed out elsewhere in this paper, one of the limitations of this research is that it is based on the specific types of incentives that are revealed by analysis of the published reports. These incentives – namely those affecting pay, which are of interest to the financial markets – make up only a part of those used by companies and cannot be considered representative of the whole range of incentives employed to orient manager behaviour. To address this issue, further research in this field might be carried out, using models and going beyond the kind of exclusively document-based analysis employed in this study, in order to ascertain, through specially devised questionnaires for those companies which are most active in terms of CSR, the deeper-lying motives for sustainable behaviour. It should also be stressed that another limitation of this research is that, as the data examined were gleaned from public documents, it is not necessarily an accurate reflection of all the information that firms have at their disposal on questions of sustainability and remuneration policies. The existence of internal documents containing other information, and therefore leading to different results, cannot be ruled out. In order to overcome these limitations it would be necessary to interview the company managers or decision-makers, so as to obtain insights into the perception of the importance of ESG and to compare these with the data collected for the research. The spread of a greater sensitivity and greater awareness in this area would be an important starting point since it is only by a change in business culture that it will be possible to achieve full integration of sustainability. It follows that direct contact with the managers of the individual companies would lead to knowledge of the premises on which strategic company planning is based and thus of the possible existence of CSR variables affecting that planning process. Monitoring would be useful in order to ascertain whether CSR objectives are pursued as vigorously as those of an economicfinancial nature. Against such a background, it would also be appropriate to repeat this study on the same sample in a future year. There are two reasons for this: first, to ascertain whether what the companies have declared on the issue of sustainability in the “2012 remuneration policies section” of the 2011 remuneration report is borne out by what they declare in the “2012 remunerations paid section” of the 2012 remuneration report; secondly, to ascertain whether, one year on from the introduction of the obligation to produce a remuneration report, there has been a kind of learning effect among Italian listed companies. References Abernethy, M.A., Boouwens, J. and Van Lent, L. (2010), “Leadership and control system design”, Management Accounting Research, Vol. 21 No. 1, pp. 2-16. Aboody, D., Kasznik, R. and Williams, M. (2000), “Purchase versus pooling in stock-for-stock acquisitations: why do firms care?”, The Journal of Accounting & Economics, Vol. 29 No. 3, pp. 261-286. Adams, C. and McNicholas, P. (2007), “Making a difference: sustainability reporting, accountability and organizational change”, Accounting, Auditing and Accountability Journal, Vol. 20 No. 3, pp. 382-402.

Adams, C.A. and Frost, G.R. (2008), “Integrating sustainability reporting into management practices”, Accounting Forum, Vol. 32 No. 4, pp. 288-302. Alniacik, U., Alniacik, E. and Genc, N. (2011), “How corporate social responsibility information influences stakeholders’ intentions”, Corporate Social Responsibility and Environmental Management, Vol. 18 No. 4, pp. 234-245. Andrikopoulos, A. and Kriklani, N. (2013), “Environmental disclosure and financial characteristics of the firm: the case of Denmark”, Corporate Social Responsibility and Environmental Management, Vol. 20 No. 1, pp. 55-64.

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

Atkinson, A. (1997), “A stakeholder approach to strategic performance measurement”, Sloan Management Review, Vol. 38 No. 3, pp. 25-37. Baron, D.P. (2007), “Managerial contracting and corporate social responsibility”, Journal of Public Economics, Vol. 92 Nos 1/2, pp. 268-288. Barron, O.E., Kim, O., Lim, S.C. and Stevens, D.E. (1998), “Using analysts forecasts to measure properties of analysts’ information environment”, The Accounting Review, Vol. 73 No. 4, pp. 421-433. Barry, C. and Brown, S. (1984), “Using informantion and the small firm effect”, Journal of Financial Economics, No. 13, pp. 283-294. Barry, C.B. and Brown, S.J. (1986), “Limited information as a source of risk”, Journal of Portfolio Management, Vol. 12 No. 2, pp. 66-72. Barth, M.E., Clinch, G. and Shibano, T. (2003), “Market effects of recognition and disclosure”, Journal of Accounting Research, Vol. 41 No. 3, pp. 581-609. Baettie, V., McInnes, B. and Fearnley, S. (2004), “A methodology for analysing and evaluating narratives in annual reports: a comprehensive description profile and metrics for disclosure quality attributes”, Accounting Forum, Vol. 28 No. 3, pp. 205-236. Beretta, S. and Bozzolan, S. (2008), “Quality versus quantity: the case of forwardlooking disclosure”, Journal of Accounting, Auditing & Finance, Vol. 23 No. 3, pp. 333-375. Bhimani, A. and Langfield-Smith, K. (2007), “Structure, formality and the importance of financial and non-financial information in strategy development and implementation”, Management Accounting Research, Vol. 18 No. 1, pp. 3-31. Bhushan, R. (1989), “Firm characteristics and analyst following”, Journal of Accounting and Economics, Vol. 11 Nos 2/3, pp. 255-274. Boesso, G. and Kumar, K. (2007), “Drivers of corporate voluntary disclosure a framework and empirical evidence from Italy and the United States”, Accounting, Auditing & Accountability Journal, Vol. 20 No. 2, pp. 269-296. Botosan, C.A. (1997), “Disclosure level and the cost of equity capital”, The Accounting Review, Vol. 72 No. 3, pp. 323-349. Botosan, C.A. (2004), “Discussion of a framework for the analysis of firm risk communication”, International Journal of Accounting, Vol. 39 No. 3, pp. 289-295. Botosan, C.A. and Plumlee, M.A. (2002), “A re-examination of disclosure level and the expected cost of equity capital”, Journal of Accounting Research, Vol. 40 No. 1, pp. 21-40. Burritt, R.L. and Schaltegger, S. (2010), “Sustainability accounting and reporting: fad or trend?”, Accounting, Auditing & Accountability Journal, Vol. 23 No. 7, pp. 829-846. Bushman, R.M. and Smith, A.J. (2003), “Trasparency, financial accounting information and corporate governance”, Economic Policy Review, Vol. 9 No. 1, pp. 65-87.

Objectives and CSR disclosure 357

AAAJ 28,3

358

Buzby, S.L. (1974), “Selected items of information and their disclosure in annual reports”, The Accounting Review, Vol. 49 No. 3, pp. 423-435. Cai, Y., Jo, H. and Pan, C. (2011), “Vice or virtue? The impact of corporate social responsibility on executive compensation”, Journal of Business Ethics, Vol. 104 No. 2, pp. 159-173. Campbell, D. (2008), “Nonfinancial performance measures and promotion-based incentives”, Journal of Accounting Research, Vol. 46 No. 2, pp. 297-332.

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

Chemers, M.M. (2008), “Leadership effectiveness: an integrative review”, in Hogg, M.A. and Tindale, R.S. (Eds), Blackwell Handbook of Social Psychology: Group Processes, Chapter 16 Blackwell Publishers Ltd, Oxford. Chen, J.C., Patten, D.M. and Roberts, R.W. (2008), “Corporate charitable contributions: a corporate social performance or legitimacy strategy?”, Journal of Business Ethics, Vol. 82 No. 1, pp. 131-144. Chenall, R.H. (2007), “Theorising contingencies in management control systems research”, in Chapman, C., Hopwood, A. and Shields, M. (Eds), Handbook of Management Accounting Research, Elsevier, Oxford, pp. 163-205. Contrafatto, M. (2011), “Social adn environmental accounting and engagement research: reflections on the state of the art and new research avenues”, Economia Aziendale on line 2000 Web, Vol. 2 No. 3, pp. 273-289. Coombs, J.E. and Gilley, M. (2005), “Stakeholder management as a predictor of Ceo compensation: main effects and interactions with financial performance”, Strategic Management Journal, Vol. 26 No. 9, pp. 827-840. Corbetta, P. (2003), La ricerca sociale: metodologie tecniche, Il Mulino, Bologna. Cordeiro, J.J. and Sarkis, J. (2008), “Does explicit contracting effectively link CEO compensation to environmental performance?”, Business Strategy and the Environment, Vol. 17 No. 5, pp. 304-317. Crane, A., Palazzo, G., Spence, L.J. and Matten, D. (2014), “Contesting the value of ‘creating shared value’”, California Management Review, Vol. 56 No. 2, pp. 130-153. Da Silva Monteiro, S.M. and Aibar-Guzman, B. (2010), “Determinants of environmental disclosure in the annual reports of large companies operating in Portugal”, Corporate Social Responsibility and Environmental Management, Vol. 17 No. 4, pp. 185-204. Dahlsrud, A. (2006), “How corporate social responsibility is defined: an analysis of 37 definitions”, Corporate Social Responsibility and Environmental Management, Vol. 11 No. 5, pp. 269-284. Davila, A., Foster, G. and Oyon, D. (2009), “Accounting and control, entrepreneurship and innovation: venturing into new research opportunities”, European Accounting Review, Vol. 18 No. 2, pp. 281-311. Deegan, C., Rankin, M. and Tobin, J. (2002), “An examination of the corporate social and environmental disclosures BHP from 1983–1997: a test of legitimacy theory”, Accounting, Auditing & Accountability Journal, Vol. 15 No. 3, pp. 312-343. Deegan, C., Rankin, M. and Voght, P. (2000), “Firms disclosure reactions to major social incidents: Australian evidence”, Accounting Forum, Vol. 24 No. 1, pp. 101-130. Di Cagno, P. and Venturelli, A. (2007), Governance e strumenti di incentivazione azionaria per la componente personale:aspetti gestionali e contabili, Cacucci, Bari. Di Pietra, R. (a cura di) (2012), La disclosure dei compensi agli amministratori nei bilanci delle società italiane quotate, Cedam, Padova.

Dixon, K. and Coy, D. (1995), “Improving accountability”, Chartered Accountants Journal of New Zealand, Vol. 74 No. 9, pp. 22-24. Dohmen, T., Falk, A., Huffman, D. and Sunde, U. (2009), “Homo reciprocans: survey evidence on behavioural outcomes”, The Economic Journal, Vol. 119 No. 536, pp. 592-612. Ducassy, I. (2013), “Does corporate social responsibility pay off in times of crisis? An alternate perspective on the relationship between financial and corporate social performance”, Corporate Social Responsibility and Environmental Management, Vol. 20 No. 3, pp. 157-167.

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

Durden, C. (2008), “Towards a socially responsible management control system”, Accounting, Auditing & Accountability Journal, Vol. 21 No. 5, pp. 671-694. Dye, R.A. (1985), “Strategic accounting choice and the effects of alternative financial reporting requirements”, Journal of Accounting Research, Vol. 23 No. 2, pp. 544-574. Eccles, R.G., Herz, R.H., Keegan, E.M. and Philips, D.M.H. (2001), The Value Reporting Revolution, Price Waterhouse Coopers, New York, NY. Eccles, R.G., Ioannou, I. and Serafeim, G. (2012), “The impact of a corporate culture of sustainability on corporate behavior and performance”, Working Paper No. 12-035, Harvard Business School, 9 May. Eisenhardt, K.M. (1985), “Control: organizational and economic approaches”, Management Science, Vol. 31 No. 2, pp. 34-149. Eisenhardt, K.M. (1988), “Agency and institutional explanations of compensation in retail sales”, Academy of Management Journal, Vol. 31 No. 3, pp. 488-511. Epstein, M.J. and Birchard, B. (2000), Counting What Counts: Turning Corporate Accountability to Competitive Advantage, Perseus Books, Cambridge, MA. Fattore, G. (2005), Metodi di ricerca in economia aziendale, Egea, Milano. Fehr, E. and Gächter, S. (1998), “Reciprocity and economics: the economic implications of ‘homo reciprocans’”, European Economic Review, Vol. 42 Nos 3/5, pp. 845-859. Ferreira, A. and Otley, D. (2009), “The design and use of performance management systems: an extended framework for analysis”, Management Accounting Research, Vol. 20 No. 4, pp. 263-282. Figge, F., Hahn, T., Schaltegger, S. and Wagner, M. (2002), “The sustainability balanced scorecard – linking sustainability management to business strategy”, Business Strategy and The Environment, Vol. 11 No. 5, pp. 269-284. Francis, J., Nanda, D. and Olsson, P. (2008), “Voluntary disclosure, earnings quality and cost of capital”, The Journal of Accounting Research, Vol. 46 No. 1, pp. 53-99. Frey, B.S. and Oberholzer-Gee, F. (1997), “The cost of price incentives: an empirical analysis of motivation crowding- out”, The American Economic Review, Vol. 87 No. 4, pp. 746-755. Garriga, E. and Melé, D. (2004), “Corporate social responsibility theories: mapping the territory”, Journal of Business Ethics, Vol. 53 Nos 1/2, pp. 51-71. Gond, J.P., Grubnic, S., Herzig, C. and Moon J. (2012), “Configuring management control systems: theorizing the integration of strategy and sustainability”, Management Accounting Research, Vol. 23 No. 3, pp. 205-223. Gray, R. (2002), “The social accounting project and accounting organization society”, Accounting, Organization and Society, Vol. 27 No. 7, pp. 687-708.

Objectives and CSR disclosure 359

AAAJ 28,3

Gupta, S. and Lehmann, D.R. (2005), Managing Customer as Investments. The Strategic Value of Customers in the Long Run, Wharton School Publishing, Upper Saddle River, NJ. Guthrie, J. and Abeysekera, I. (2006), “Content analysis of social, environmental reporting: what is new?”, Journal of Human Resource Costing and Accounting, Vol. 10 No. 2, pp. 114-126.

360

Hahn, R. and Kuhnen, M. (2013), “Determinants of sustainability reporting: a review of results, trends, theory, and opportunities in an expanding field of research”, Journal of Cleaner Production, Vol. 59 No. 15, pp. 5-21.

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

Hall, B.J. and Murphy, K.J. (2002), “Stock options for undiversified executives”, Journal of Accounting and Economics, Vol. 33 No. 1, pp. 3-42. Han, J.C.Y. and Wild, J. (2000), “Predisclosure information, firm capitalization, and earnings information transfers”, Journal of Business Research, Vol. 49 No. 3, pp. 273-288. Harris, J.D. (2009), “What’s wrong with executive compensation?”, Journal of Business Ethics, Vol. 85 No. 1, pp. 147-156. Healy, M.P. and Palepu, K.G. (2000), “A review of the empirical disclosure literature”, Prepared for JAE, Rochester Conferenece, April, Rochester. Healy, M.P. and Palepu, K.G. (2001), “Information asymmetry, corporate disclosure, and the capital markets: a review of the empirical disclosure literature”, Journal of Accounting and Economics, Vol. 31 No. 1, pp. 405-440. Hillman, A.J., Keim, G.D. and Luce, R.A. (2001), “Board composition and stakeholder performance: do stakeholder directors make a difference?”, Business and Society, Vol. 40 No. 3, pp. 295-314. Horngren, C.T. (1957), “Disclosure”, The Accounting Review, Vol. 32 No. 4, pp. 598-604. Husted, B.W. and Hallen, D.B. (2000), “Is it ethical to use ethics as strategy?”, Journal of Business Ethics, Vol. 27 Nos 1/2, pp. 21-32. Ittner, C. and Larcker, D. (1998), “Are non-financial measures leading indicators of financial performance? An analysis of customer satisfaction”, J Account Res, Vol. 36, pp. 1-46. Ittner, C.D. (2008), “Does measuring intangibles for management purposes improve performance? A review of the evidence”, Accounting and Business Research, Vol. 38 No. 3, pp. 261-272. Jaggi, B. and Low, P.Y. (2000), “Impact of culture, market forces, and legal systems on financial disclosures”, The International Journal of Accounting, No. 4, pp. 495-519. Jensen, M.C.e. and Murphy, K.J. (1990), “CEO incentives – it’s not how much you pay, but how”, Harvard Business Review, Vol. 63 No. 3, pp. 138-153. Jones, M.J. and Shoemaker, P.A. (1994), “Accounting narrative: a review of empirical studies of content and readability”, Journal of Accounting Literature, Vol. 13, pp. 142-184. Kanagaretnam, K., Lobo, G.J. and Mohammad, E. (2009), “Are stock options grants to CEOs of stagnant firms fair and justified?”, Journal of Business Ethics, Vol. 90 No. 1, pp. 137-155. Kang, J. (2009), “Corporate social responsibility? Not my business any more: the CEO horizon problem in corporate social performance”, Academy of Management Annual Meeting Proceedings, pp. 1-6. Kaplan, R.S. and Norton, D.P. (1996), “Using balanced scorecard as a strategic management system”, Harvard Business Review, Vol. 74 No. 1, pp. 75-85.

Khan, A., Muttakin, M.B. and Siddiqui, J. (2013), “Corporate governance and corporate social responsibility disclosures: evidence from an emerging economy”, Journal of Business Ethics, Vol. 114 No. 2, pp. 207-223. Lambert, R.A., Larcker, D.F. and Verrecchia, R.E. (1991), “Portfolio considerations in valuing executive compensation”, Journal of Accounting Research, Vol. 29 No. 1, pp. 129-149. Lang, M. and Lundholm, R. (1996), “Corporate disclosure policy and analyst behaviour”, The Accounting Review, Vol. 71 No. 4, pp. 467-492.

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

Leuz, C. and Verrecchia, R.E. (2000), “The economic consequences increased disclosure”, Journal of Accounting Research, Vol. 38, pp. 91-124. Lillis, A.M. and Van Veen-Dirks, P.M.G. (2008), “Performance measurement system design”, Journal of Management Accounting Research, Vol. 20 No. 1, pp. 25-57. Lothe, S., Myrtveit, I. and Trapani, T. (1999), “Compensation system for improving environmental performance”, Business Strategy and the Environment, Vol. 8 No. 6, pp. 313-321. McGuire, J., Dow, S. and Argheyd, K. (2003), “CEO incentives and corporate social performance”, Journal of Business Ethics, Vol. 45 No. 4, pp. 341-359. McNally, G.M., Lee, H.E. and Hasseldine, C.R. (1982), “Corporate financial reporting in New Zealand: an analysis of user preferencies of corporate characteristics and disclosure practices for discretionary information”, Accounting & Business Research, Vol. 13 No. 49, pp. 11-20. Mahoney, L.S. and Thorne, L. (2005), “Corporate social responsibility and long term compensation: evidence from Canada”, Journal of Business Ethics, Vol. 57 No. 3, pp. 241-253. Mahoney, L.S. and Thorne, L. (2006), “An examination of the structure of executive compensation and corporate social responsibility: a Canadian investigation”, Journal of Business Ethics, Vol. 69 No. 2, pp. 149-162. Mallin, C., Michelon, G. and Raggi, D. (2013), “Monitoring intensity and stakeholders’ orientation: how does governance affect social and environmental disclosure?”, Journal of Business Ethics, Vol. 114 No. 1, pp. 457-509. Malmi, T. (2001), “Balanced scorecard in Finnish companies: a research note”, Management Accounting Research, Vol. 12 No. 2, pp. 207-220. Manetti, G. (2011), “The quality of stakeholder engagement in sustainability reporting: empirical evidence and critical points”, Corporate Social Responsibility and Environmental Management, Vol. 18 No. 3, pp. 110-122. Manner, M.H. (2010), “The impact of CEO characteristics on corporate social performance”, Journal of Business Ethics, Vol. 93 No. 4, pp. 53-72. Maon, F., Lindgreen, A. and Swaen, V. (2009), “Designing and implementing corporate social responsibility: an integrative framework grounded in theory and practice”, Journal of Business Ethics, Vol. 87 No. S1, pp. 71-89. Maon, F., Lindgreen, A. and Swaen, V. (2010), “Organizational stages and cultural phases: a critical review and a consolidative model of corporate social responsibility development”, International Journal of Management Reviews, Vol. 12 No. 1, pp. 21-38. Marens, R. (2002), “Investing corporate governance: the mid-century emergence of shareholder activism”, Journal of Business and Management, Vol. 8 No. 4, pp. 365-389.

Objectives and CSR disclosure 361

AAAJ 28,3

362

Marston, C.L. and Shrives, P.J. (1991), “The use of disclosure indices in accounting research: a review article”, British Accounting Review, Vol. 23 No. 3, pp. 195-210. Matsumura, E.M. and Shin, J.Y. (2005), “Corporate governance reform and CEO compensation: intended and unintended consequences”, Journal of Business Ethics, Vol. 62 No. 2, pp. 101-113. Meek, G.C., Roberts, B. and Gray, J. (1995), “Factors influencing voluntary annual report disclosures by US, UK and Continental European multinational corporations”, Journal of International Business Studies, Vol. 26 No. 3, pp. 555-572.

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

Mensah, M., Nguyen, H. and Prattipati, S. (2006), “Transparency in financial statements: a conceptual framework from a user perspective”, Journal of American Academy of Business, Vol. 9 No. 1, pp. 47-51. Merchant, K.A., Van Der Stede, W.A. and Zheng, L. (2003), “Disciplinary constraints on the advancement of knowledge: the case of organizational incentive systems”, Accounting, Organizations and Society, Vol. 28 Nos 2/3, pp. 251-286. Mio, C. (2009), “Bilancio di esercizio e sostenibilità: quale intersezione dopo l’introduzione della Modernization Directive in Europa”, Rivista Italiana di Ragioneria e di Economia aziendale, Vol. 109, Nos 11/12, pp. 654-670. Mio, C. (2010), “Corporate social reporting in Italian multi-utility companies: an empirical analysis”, Corporate Social Responsibility and Environmental Management, Vol. 17 No. 5, pp. 247-271. Mio, C. and Venturelli, A. (2013), “Non-financial information about sustainable development and environmental policy in the annual reports of listed companies: evidence from Italy and the UK”, Corporate Social Responsibility and Environmental Management, Vol. 20 No. 6, pp. 340-358. Mirvis, P. and Googins, B. (2006), “Stages of corporate citizenship: a developmental framework”, California Management Review, Vol. 48 No. 2, pp. 104-126. Moriarty, J. (2005), “Do Ceos get paid too much?”, Business Ethics Quarterly, Vol. 15 No. 2, pp. 257-281. Murphy, K.J. (1999), Executive compensation”, in Ashenfelter, O. and Card, D. (Eds), (a cura di) Handbook of Labor Economics, North-Holland, Amsterdam, Vol. 3. Murphy, K.J. (2003), “Stock-based pay in new economy firms”, Journal of Accounting and Economics, Vol. 34 No. 1, pp. 129-147. Oliver, R.L. and Anderson, E. (1995), “Behavior- and outcome-based sales control systems: evidence and consequences of pure-form and hybrid governance”, Journal of Personal Selling & Sales Management, Vol. 15 No. 4, pp. 1-15. Otley, D. (1999), “Performance management: a framework for management control system research”, Management Accounting Research, Vol. 10 No. 4, pp. 363-382. Penman, S. (2003), “The quality of financial statements: perspectives from the recent stock market bubble”, Accounting Horizons, No. 17, pp. 77-96. Perel, M. (2003), “An ethical perspective on CEO compensation”, Journal of Business Ethics, No. 48, pp. 381-391. Porter, M.E. and Kramer, M.R. (2006), “Strategy and society: the link between competitive advantage and corporate social responsibility”, Harvard Business Review, Vol. 84 No. 2, pp. 78-92. Porter, M.E. and Van Der Linde, C. (1995), “Green and competitive: ending the stalemate”, Harvard Business Review, Vol. 73 No. 5, pp. 120-134.

Prado-Lorenzo, J.M., Gallego-Alvarez, I. and Garcia-Sanchez, I.M. (2009), “Stakeholder engagement and corporate social responsibility reporting: the ownership structure effect”, Corporate Social Responsibility and Environmental Management, Vol. 16 No. 2, pp. 94-107.

Objectives and CSR disclosure

Reverte, C. (2012), “The impact of better corporate social responsibility disclosure on the cost of equity capital”, Corporate Social Responsibility and Environmental Management, Vol. 19 No. 5, pp. 253-272.

363

Robb, A.J. (1980), “Interim reports and their qualitative evaluation”, International Journal of Accounting, Vol. 15 No. 2, pp. 77-87.

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

Schaltegger, S. and Burritt, R. (2010), “Sustainability accounting for companies: catchphrase or decision support for business leaders?”, Journal of World Business, Vol. 45 No. 4, pp. 375-384. Singhvi, S.S. and Desai, H.B. (1971), “An empirical analysis of the quality of corporate financial disclosure”, The Accounting Review, Vol. 46 No. 1, pp. 129-138. Speckbacher, G., Bischof, J. and Pfeiffer, T. (2003), “A descriptive analysis of the implementation of balanced scorecard in German-speaking countries”, Management Accounting Research, Vol. 14 No. 4, pp. 361-387. Stead, J. and Stead, W. (2008), “Sustainable strategic management: an evolutionary perspective”, International Journal of Sustainable Strategic Management, Vol. 1 No. 1, pp. 62-81. Strand, R. (2013), “The chief officer of corporate social responsibility: a study of its presence in top management teams Robert Strand”, Journal of Business Ethics, Vol. 112 No. 4, pp. 721-734. Tosi, H.L., Werner, S., Katz, J.P. and Gomez-Mejia, L.R. (2000), “How much does performance matter? A meta-analysis of Ceo pay studies”, Journal of Management, Vol. 26 No. 2, pp. 301-339. Varian, H.R. (2002), Economic Scene, New York Times, 14 March, New York, NY. Venturelli, A. (2012), “L’informativa obbligatoria e la sostenibilità. Evidenze empiriche dall’esperienza italiana”, Rivista dei Dottori Commercialisti, Vol. 63 No. 1, pp. 63-88. Verrecchia, R.E. (2001), “Essays on disclosure”, Journal of Accounting and Economics, Vol. 32 Nos 1/3, pp. 234-347. Vilanova, M., Lozano, J.M. and Arenas, D. (2009), “Exploring the nature of the relationship between CSR and competitiveness”, Journal of Business Ethics, Vol. 87 No. 1, pp. 57-69. Watts, R.L. and Zimmermann, G.L. (1978), “Towards a positive theory of the determination of accounting standards”, The Accounting Review, Vol. 53 No. 1, pp. 112-138. Watts, R.L. and Zimmermann, G.L. (1990), “Positive accounting theory: a ten year perspective”, The Accounting Review, Vol. 65 No. 1, pp. 131-156. Welford, R. (1995), Environmental Strategy and Sustainable Development, Routledge, London. Wilhelm, P.G. (1993), “Application of distributive justice theory to the Ceo pay problem: recommendations for reform”, Journal of Business Ethics, Vol. 12 No. 6, pp. 469-482. Yin, R.K. (1994), Case Study Research: Design And Methods, Sage, Thousand Oaks, CA. Yin, R.K. (2005), Lo studio di caso nella ricerca scientifica. Progetto e metodi (a cura di Pinelli S.), Armando Editore, Roma.

AAAJ 28,3

Downloaded by Doctor ROSSELLA LEOPIZZI At 05:50 10 March 2015 (PT)

364

Yuan, W., Wenlong, Y. and Bao, A. (2011), “Integrating CSR initiatives in business: an organizing framework”, Journal of Business Ethics, Vol. 101 No. 1, pp. 75-92. Zadek, S. (2004), “The path to corporate responsibility”, Harvard Business Review, Vol. 82 No. 12, pp. 125-132. Further reading Margolis, J.D., Elfenbein, H.A. and Walsh, J.P. (2007), “Does it pay to be good? A meta-analysis and redirection of research of the relationship between corporate social and financial performance”, Working Paper, Harvard Business School.

Corresponding author Dr Rossella Leopizzi can be contacted at: [email protected]

For instructions on how to order reprints of this article, please visit our website: www.emeraldgrouppublishing.com/licensing/reprints.htm Or contact us for further details: [email protected]