Another look at corporate social responsibility and reporting: An empirical study in a developing country

Accountin& Organizations and Society. Vol. 9, No. 2, pp. 189--206 1984 Printed in Great Britain

0361-3682/84 $3.00+00 @ 1984 Pergamon Press Ltd.

ANOTHER LOOK AT CORPORATE SOCIAL RESPONSIBILITY AND REPORTING: AN EMPIRICAL STUDY IN A DEVELOPING COUNTRY* HAI-YAP TEOH of Wollongong

University

and GREGORY THONG University of Malaya

Abstract

This paper presents a view of corporate social responsibility accounting and reporting fiorn the standpoint of a developing country. The study is based on a personal interview questionnaire survey conducted by the authors with mainly chief executive officers in one hundred companies operating in Malaysia. Various aspects of corporate social performance, including social reporting, are examined. The findings indicate that social reporting lags behind corporate social involvement and that major corporate attention is focused on activities relating to employees and products/services. In addition, the results show that corporate size and national origin of corporate ownership are relevant in reflecting the extent of social commitments made by companies.

Much of the literature on corporate social responsibility accounting and disclosure has been focused on the experience of companies in the industrialised countries of Europe and the United States. It is the objective of this paper to address the issues of corporate social responsibility and reporting based on an empirical investigation of companies in a developing country like Malaysia, which has been experiencing tremendous economic growth, particularly within the present decade. In the developing and under-developed economies of the world, where problems of poverty and hunger still pose serious threats, efforts to improve the material welfare of the populace may well receive top priority consideration, and the production of material goods becomes the

sole mission of business. But a lesson can be learnt from the industrialised nations which the third-world countries are trying to emulate in other aspects. There is an increasing awareness among industrialised nations that a price has to be paid for unrestrained and unregulated economic growth in the form of a deterioration in the quality of the environment, which in turn affects the quality of life of the people. In Malaysia a similar concern is being voiced about some of the undesirable social outcomes of unregulated development. Evidences of such side effects are provided by a polluted environment, ecological problems and the indiscriminate depletion of scarce natural resources. For example, in recent years there have been many cases of pollution of rivers caused by effluents

The authors gratefully acknowledge the financial assistance provided by The Konrad Adenauer Foundation of West Germany and the technical support from The International Institute for Environment and Society of The Science Center in West Berlin for making this research project possible. The authors also would like to acknowledge the helpful comments of the anonymous reviewers of earlier drafts of this paper. l

190

HAI-YAP TEOH and GREGORY THONG

discharged from palm oil mills and rubber factories which have seriously affected the livelihood of many fishing communities. Indeed it has been estimated that the amount ofpollutants dis-

staff, most of whom were chief executive ers. All these companies were identified

charged by palm oil mills in the country exceeds the sewage discharge of the entire population.

ings ranging from plantations and mining to various types of manufacturing and services. A four-point response scale was employed for a number of key questions. The standard ques-

The need for companies to demonstrate a greater social concern is underscored in a newspaper editorial (New Straits Times, 1980): Malaysians have become more interested in the social aspect of development as reflected by public

CCWK~WI

expressedfor more decent homes, cleaner environment

off~cfrom

various published lists of companies and they represented a cross-section of industrial group-

tionnaire addressed three major issue areas: the concept of corporate social responsibility, the nature and the extent of involvement in socially relevant activities and corporate social reporting.

and increased consumer demand for better quaI@) goods and services. This is logical, for the ultimate goal of societal dvelopment is the enhancement of human social

THE RESEARCH FINDINGS

well being, which is normally taken to include satisfaction of both human physiological and social needs. (Emphasis added)

There is little doubt that economic development has brought about increased affluence and material well being of the Malaysian society. To a significant extent such fruits of economic growth have resulted from the contributions of the business community. Paradoxically, however, increased material wealth has raised the people’s expectations for an even higher quality of life. Under such circumstances, it is not long before people begin to point accusing fingers at the business community and its activities for having caused some of the social ills apparent in the society. This is not surprising because the modus operandi of business in Malaysia. as in all other democratic systems, is one of free private enter-

For a company

A total of one hundred companies was interviewed through a personal interview questionnaire survey. Since corporate social responsibility is associated with management policy issues, the information required was obtained through personal interviews with senior management

involved

in the

social involvement in order to fulfil its social responsibility. This must be followed by social reporting whereby reports are published concerning the company’s social performance. The final step is a social audit where the effectiveness of such social performance can be evaluated. Thus corporate social responsibility may be conceived as consisting of four progressive levels of corporate participation reflecting a hierarchy objectives to be achieved. Such a hierarchy illustrated in Fig. 1. Level 4

prise with achievement of profits as the primary objective. What has frequently been overlooked is that freedom of operation must coexist with self-induced responsibility.

RESEARCH METHODOLOGY

to become

social area there must be first of all an awareness by the company of its social role. Next comes

1 Level 1

of is

Social audit t Social reporting t Social involvement t Social awareness

Fig 1. The hierarchy of social objective.

The empirical results of the study are discussed by examining the following aspects of a company’s commitments to social responsibilities: (a) (b)

Social Social ified areas

awareness involvement with respect to identsocially relevant activities in the of:

CORPORATE SOCIAL RESPONSIBILITY AND REPORTING

(c)

( 1) human resources; (2) product/service to consumers; community involvement; and (3) (4) physical environment. Social reporting.

Social auditing is not included in this discussion because companies in Malaysia have not yet reached this final stage in the practice of social responsibility. Social awareness Table 1 lists the circumstances leading to corporate social awareness, with the responses being ranked in order of importance. An interesting observation is the large proportion of companies indicating that the philosophy of top management is the primary factor contributing

191

to awareness. Any commitment to social action appears to stem from the initiative of top management. The second highest score is ascribed to legislation relating to social performance areas. Such legislation includes the Employment Ordinance, Trade Descriptions Act, Sale of Food and Drugs Ordinance, and in particular the Environmental Quality Act, which is intended to protect the interests of parties like employees, consumers and the community at large. As a factor contributing to social awareness, alignment with parent company practice receives the third highest score. This is more evident among foreign-owned subsidiaries especially of American and European origin. This finding is not unexpected because experience and experimentation with corporate social responsibility accounting have gained most

TABLE 1. Ranked responses concerning circumstances leading to awareness Rank according to importance* Circumstances leading to awareness

I

2

3

5

Total

6

8

7

number of responses

Legislation e.g. Environmental Quality Act

26

I9

13

3

1

Suggestions from individual employee

6

12

7

2

1

Suggestions from employee groups e.g. union

I3

16

Suggestions from customers

2

4

3

3

-

-

-

69 1

45

-

47

4

2

-

27

8

1

-

30

Suggestions from organised outside groups e.g. Consumer Associations and Environmental Protection Society

4

4

7

Suggestions from communities in which company operates

4

8

Philosophy of top management

56

6

Alignment with parent company practice

17

Others

3

l

1 is most important and 8 is least important.

1 -

1

1

-

89 2

-

32

50 6

192

HAI-YAP TEOH and GREGORY THONG

headway in the United States (Moskowitz, 1977) and in Europe (Be@, 1976). In fact several companies interviewed were able to produce social responsibility policy guidelines prepared by parent companies overseas. The significance of these three factors contributing to social awareness is further emphasized when the second most important ranking is reviewed using the Spearman rank correlation coefficient analysis. An analysis of the Bank 1 scores by industry also reveals that these awareness factors are found among companies across the industries. In order to enable responding companies to indicate their understanding of corporate social responsibility, the three most commonly expressed views were defined in the questionnaire form as follows (a) The only responsibility of business is to produce abundant goods and services guided by the profit motive. In this way business will be contributing to the material well-being of society. (b) The social responsibility of business is evidenced by an active concern for the social impact of the economic activities of business. This is a responsibility for social performance of business operating as an economic unit, (c) The social responsibility of business extends beyond its responsibility for the social side effects of its economic

activities as given in(b) and includes active involvement by business in activities of broad social concern, Social responsibility is thus conceived along two dimensions: social performance of business as an economic unit and social performance

when business assumes a broader

role as a social unit.

It was considered that the major ownership variable would have a bearing on social issues that each company adopts. Thus analysis of Table 2 indicates that, despite the small number of companies in the sample subscribing to view (a), 83% of these companies had Malaysian major ownership. The row percentage figures further support our conclusion that companies with Malaysian major ownership holding view (a) are above average in representation. None of the companies with major ownership from Britam, the United States, Japan, Singapore, Australia and the Netherlands was inclined to take this view. View (b) was supported by 49% of the respondents. This view received above average representation by companies with major ownership from countries like Australia, the Netherlands and Singapore. It is interesting to note that 39% of the companies subscribed to view (c). Six out of seven companies with United States major ownership supported this view. Companies with major ownership from Britain and Japan also achieved

TABLE 2. Views on corporate social responsibility by major ownership by country Major

Percent

ownership

View

by country

(a)

Malaysia

Percent

Row Column

View

Percent

Row Column

(b)

View

Row Column

Total

(cl

10

18.9

83.3

26

49.1

53.1

17

32.1

43.6

53(53.1)

Britain

0

0.0

0.0

9

50.0

18.4

9

50.0

23.1

18( 18.0)

lJSA

0

0.0

0.0

1

14.3

2.0

6

85.7

15.4

7(7.0)

Japan

0

0.0

0.0

2

50.0

4.1

2

50.0

5.1

4(4.0)

Holland

0

0.0

0.0

1

100.0

2.0

0

0.0

0.0

l(l.0)

Australia

0

0.0

0.0

1

100.0

2.0

0

0.0

0.0

1( 1.0)

Singapore

0

0.0

0.0

3

75.0

6.1

1

25.0

2.6

4(4.0)

2

16.7

16.7

6

50.0

12.1

4

33.3

10.3

12

12.0

49

49.0

39

39.0

Others Total

12(12.0) 100

CORPORATE SOCIAL RESPONSIBILITY AND REPORTING

With regard to product/service to consumers, the response pattern is very similar with the majority of respondents (70) indicating “major” and 16 indicating “moderate” involvement; this contributes to an overall mean score of 3.6. (The difference between the overall mean scores for human resources and product/service to consumers is not significant, see Table 4.) However, this pattern of response was not found for the other two major social performance areas, namely, community involvement and physical environment. As indicated by the two-tailed t tests, the differences between the first two and the latter two social performance areas are significant. It is also relevant to point out that consideration of social performance cannot be completely dissociated from that of economic performance for, in many ways, these two activities complement each other in contributing to a company’s long term profits. Greater emphasis is thus given to major social performance areas like human resources and product/service to consumers, where the potential impact from these activities can be associated, directly or indirectly, with the profitability of a company. Together with financial and physical resources human resources represent one of the most vital inputs in the economic production process. Hence interest in the welfare of employees is very much driven by a desire to develop a loyal, capable and dedicated work force that can demonstrate a high level of productivity, as it is motivated by a sense of social concern. In the same way, the survival of a company hinges very much on ensuring that its products are relatively safe in application, of

an above average overall score. It appears therfore that those companies associated with parent companies overseas, particularly in more industrialised countries, are better exposed to developments relating to social responsibilities. Social involvement Four major social performance identified and described as follows

areas were

(a) Human resources cover that aspect of social performance which is directed to the well being of employees.

(b) Product/service to consumers reflects the concerns of a company for generating and maintaining customer satisfaction over and above that of a caveat emptor attitude.

(c)

193

Community involvement includes those socially

oriented activities which tend primarily to benefit the general public. (d) Physical environment includes those activities which are directed toward alleviating or preventing environmental deterioration.

Table 3 shows the distribution of scores by companies and the overall mean score for each social performance area. For human resources, the overall mean is 3.7 based largely on 71 respondents who have indicated this as a “major” area of active social involvement, and 28 other respondents who have considered that their companies were moderately active in this area.

TABLE 3. Degree of overall involvement in socially relevant activities

Overall

Distribution of scores by companies Social performance areas

None

Minor

Moderate

Major

mean

(1)

(2)

(3)

(4)

score

Human resources

0

1

28

71

3.70

Product/service to consumers

2

5

16

70

3.65

Community involvement

6

39

37

18

2.67

13

15

37

32

2.90

Physical environment

194

HAI-YAP TEOH and GREGORY THONG

t values

TABLE 4. Computed

Social performance

areas

Human resources

of two-tailed

test

Product!

Community

service to

involvement

Physical environment

consumers

Human resources

Product/service

Community

0.63

11.54’

7.64t

(dj=92)

(dJ=99)

(dJ=96)

to consumers

8.33’

5.919

(dj=92)

(dJ=90)

involvement

-1.75t (dJ=96)

Physical environment

* pso.01 tpso.10

acceptable quality and reasonably priced. On the other hand, community involvement which can only be remotely related to profitability has been given the least consideration. The marginally higher overall mean score for the physical environmental activity is attributed to the effect of legislation which, as noted earlier, is an important factor in inducing social awareness. Social performance areas considered as major TABLE 5. Social performance

areas of involvement are also examined against major ownership by country in Table 5. Two observations can be made. Firstly, emphasis on human resources and product/service to consumers as major areas of social involvement applies to all companies irrespective of national origin. Secondly, although this might be so, companies with foreign major ownership appeared more inclined to accept their social respon-

areas given “major” score an d distribution

according

to major ownership

by country

Physical

Human

Product/service

Community

resources

to consumers

involvement

environment

Malaysia

34(64%)’

36(68%)

5(9%)

16(30%)

Britain

15(83%)

15(83%)

6(33%)

8(44%) 3(43%)

Majorownership by country

USA

6(86%)

7(100%)

2(29%)

Japan

$( 100% )

2(50%)

O(O%)

2(50%)

Holland

1 ( 100% )

l(lOO%)

O(O% )

O(O%)

Australia

1(100%

I(lOO%)

O(O%)

O(O%)

Singapore

3(75%)

2(50%)

2(50%)

O(O%)

Others

7(58%)

6(50%)

3(25%)

)

71

Total

70

18

Refer to Table 3 * Percentage

based on number

of companies

according

to major ownership

by country.

3(250/o) 32

CORPORATE

SOCL4L RESPONSIBILI’IY

sibilities, which is consistent with our findings on the different views on social responsibilities as indicated by Table 2.

Human resources Human resources have been regarded by many companies as their most valuable asset. For this reason it is only logical to expect a business corporation to consider the interests and welfare of its employees. The various attention factors concerning human resources were identified in the questionnaire. Each respondent was required to indicate the degree of commitment given to these attention factors. The results are tabulated in Table 6. The overall mean score values indicate that on average companies tended to give quite signihcant attention to employee safety on the job; “moderate” attention to facilities that will improve the well-being of employees; job enrichment in job design; supplementary financial assistance for housing, transportation and sustenance; “minor” attention towards overcoming problems associated with drug abuse and alcoholism; and very minimal attention to the employment of physically handicapped individuals; pre-retirement counselling; and adjustments to post-pension payments. The F tests on differences of mean scores by industry and the overall mean scores for each of the attention factors, show that four sets of values are significant at acceptable levels. The differences in mean scores for job enrichment in job design, supplementary financial assistance for housing, transportation and sustenance, and assistance in overcoming problems associated with drug abuse, are all signiticant at the 5% level, whereas pre-retirement counselling is signihcant at the 10% level. For supplementary financial assistance for housing, transportation and sustenance, the highest mean score is attributed to the textiles and footwear industry. This industry is labour intensive and employs mostly female workers who are normally paid lower wages than their male counterparts. Companies in this industry compensate low direct wages by indirect financial payments.

AND REPORTING

195

Product/service to consumers Table 7 shows the mean scores by industry for each identified attention factor relating to product/service to consumers. It is interesting to note that, except for consumer education which has an overall mean score suggesting “moderate” involvement, all other factors relating to product quality, responsiveness to consumer complaints, product safety, completeness and clarity of labelling, warranty provisions, and content and quality of advertising, receive overall mean scores of above moderate involvement. The two highest scores relate to product quality and responsiveness to consumer complaints. Four sets of mean scores of attention factors according to industry are found to be significantly different at the acceptable level based on the F test results. These sets involve attention factors like product safety, content and quality of advertising, warranty provisions and consumer education. For content and quality of advertising, the highest mean scores are recorded by companies in the food, beverages and tobacco industry. It is apparent that companies in these industries are highly competitive and therefore extensive advertising in the mass media is of paramount importance in promoting sales. The lowest mean score is recorded by the plantation industry. This is not surprising because the produce of plantations, for example, rubber and palm oil, is sold to large institutional buyers and, consequently, no advertisement is required. With respect to warranty provisions, the highest mean scores are recorded by companies in the metal products industry, the other machinery and transport equipment industry and the service sector. Companies in these industries considered it important to offer guarantees for the quality of their products or services. In consumer education the lowest mean score is attributed to companies in the plantation industry. Product informaton about the produce of plantations has already been widely disseminated so that consumer education was considered unnecessary. Community involvement Attention towards activities associated with

l

Numbers TPSO.05 +p
1.000(6)

3.250(3)

1.714(6) 1.500(7)

1.2Oq8 ) 1.667(7)

2.250(5)

3.545(2)

2.091(5)

1.900(7)

1.286(8)

2.000(b)

indicate

l.OOq6)

1.667(7)

3.5Oq2)

3.818(l)

l.OOq6)

1.000(6)

3.000(3)

1.000(6)

2.000(5)

3.000(3)

4.000(l)

1 is most important

1.850(4)

LOOO(6)

relative rankings,

2.000(b)

2.286(5)

3.000(2)

3.857( 1) 3.000(2)

1.800(5)

3.429(2)

3.25q3)

3.429(2)

Manufacturingrubber products

Manufacturingchemicals and petroleum

Manufacturingnon-metal

2.167(7)

2.333(6)

1.25q8)

3.143(4)

3.375(2)

2.750(5)

3.250(3)

2.800(2)

3.300(3)

1.5Oq5)

l.oOq6)

l.OOq6)

l.Ooq6)

1.400(6)

1.2Oq7)

1.2Oq7)

2.625(5)

3X%7( 1) 3.100(4)

2.OOq4)

2.333(3)

Manufacturingothers

Serviceothers

Others

Overall mean score

1.750(6)

1.000(7)

1.000(7)

3.25q2)

3.000(S)

2.75q5)

3.000(3)

1.833(5)

1.250(7)

l.OOqS)

1.8Oq6)

3.167(3)

3.333(2)

3.167(3)

1.100(8)

1.500(6)

1.429(7)

1.556(5)

3.364(2)

3.OOq4)

3.182(3)

1.821(6)

1.424(8)

2.143(8)

2.400(7)

1.560(7)$

2.122(5)t

3.330(2)

3.111(4)?

3.143(3)t

2.444(6)

2.625(5)

3.500(3)

3.444(4)

3.556(2)

4.000( 1) 3.500( 1) 3.500( 1) 3.900( 1) 3.707( 1)

Manufac- ManufacturingturingElectrical other machinerymachinery application etc.

3.667( 1) 3.900(l)

Manufacturingmetal products

and 8 is least important

1.733(6)

1.154(S)

1.429(7)

2.067(5)

3.438(2)

2.625(4)

3.438(2)

3.800( 1) 4.000( 1) 3.875( 1) 3.750( 1)

Manufac turingwood products

2.600(4)

Manufacturingtextiles and footwear

3.000(4)

Manufacturingfood etc.

3.091( 3)’ 3.750(l)

Plantation

in parentheses

Employee safety on job Job enrichment in job design Supplementary financial assistance for housing/ transportation/ sustenance Facilities that improve the well-being of employees Assistance in overcoming problems associated with drug abuse and alcoholism Pre-retirement counselling Adjustments to post pension payments Employment of physically handicapped individuals

Attention factors

Industry

TABLE 6. Human resources

CORPORATE

SOCIAL RESF’ONSIBILITY AND REPORTING

HAI-YAP TEOH and GREGORY THONG

198

the well-being

of the community

has been given

less consideration by companies compared with the previous two social performance areas. The computed mean score values of types of community activities against industry are tabulated in Table 8. The overall mean each of the community-related

score values for activities show

that companies are only involved in these activities to a “minor” to “moderate” extent. Greater involvement can be observed specihc*types of community activities,

in four namely

games and sports; health; handicapped people and senior citizens; and culture, literary works and education. Two sets of mean scores for communityrelated activities are significant according to the F test. Firstly for games and sports the highest mean score and tobacco

is recorded by the food, beverages industry and the lowest mean score

natural resources. The responses, by industry, are summarised in Table 9. Concerning equipment costs incurred by companies for pollution control, three areas of pollution are identified in the questionnaire: air, water and noise pollution. The mean score values by industry are tabulated in Table 10. It is noted that expenditure on pollution control equipment was mainly concerned with controlling air and water pollution. With regard to water pollution control, the F test indicates that this set of figures is significant at the 1% level. The results also show that a majority of respondents considered meeting legal requirements and fulRlling self-imposed social responsibilities as the primary reasons tion control activities.

for involvement

Relationships between corporate activity in each social performance

in pollu-

size and the area receiv-

by the rubber products, non-metallic mineral products and metal products industries. The high mean scores may be attributed partly to tobacco companies as a result of their sponsor-

ing major attention are given in Tables 11 and 12. Analysis of the results shows that, in general, corporate size is relevant in reflecting the degree of corporate social involvement. For

ship on national television of live telecasts of important matches, particularly where Malaysia is strongly represented. Companies producing

example, in the human resources safety on the job was given major

food and beverages are known to donate food and drinks during occasions where important sports and games are held. The second set of significant scores refers to crime prevention. The highest mean score is attributed to the plantation lowest mean scores to the

area where attention by

84 companies, 30 such companies had annual turnovers of over $50 million but only 8 showed turnovers of less than $5 million. The same kind of observations can also be made in regard to Table 12 where corporate terms of total assets.

size is expressed

in

industry and the rubber products,

metal products, other machinery and transport equipment, and other manufacturing industries. Traditionally companies in the plantation industry employ and maintain security guards. This practice can be traced to the days of the height of communist insurgency during the 1940s. Physical environment The degree of involvement by companies in activities concerned with physical environment is also very limited. With regard to research into ways of mitigating or solving problems affecting the environment, five areas of concern are identified: air pollution, water pollution, noise pollution, energy conservation, and conservation of

CORPORATE

SOCIAL REPORTING

Preliminary informal discussions with key personnel in some Malaysian companies regarding corporate social involvement indicated that involvement was more extensive than was proper social reporting has resulted in criticism from some quarters that the business community has not been performing in a socially responsible manner. This research sought to find out whether a company had reported on any aspect of its social performance in the annual report and, if so, where specifically this reference was located. Where no social reporting was attempted,

+p
indicate

relative rankings

2.571( 1>t

Overall mean score

in parentheses

3.222(2)

3.444( 1)

Others

Numbers

2.455(2)

2.182(4)

Service-others

l

2.400(3)

3.000( 1)

2.439(2)

2.750( 1)

2.500(3)

equipment

and

Manufacturing-others

transport

other machinery

1.700(4)

1.778(6)

1.694( 5)

2.214(4)

2.388(3)

2.545(4) 2.667(4)

1.636(6) 2.111(5)

2.000( 5)

2.778(3)

1.520(6)t

2.600( 2)

1.000(6)

2.364(3)

2.750(

1.000(6)

)

)

1.600( 5)

2.5oq

1.750(4)

1.200(6)

2.333(

1.750(4)

1.400(5)

1.000(5)

2.400( 3)

2.400( 2)

and parts

appliances

2.100(3)

machinery,

electrical

Manufacturing-

Manufacturing-

1.333(4)

1.OOO(5)

2.333( 1)

.2.000( 3)

metal products

Manufacturing-

)

1.313(7) 1.25q6)

1.750(3)

2.625( 1)

1.375(5)

1.750(3)

2.250( 1)

2.000( 2)

1.375(6)

1.625( 5)

2.125(4)

2.250(3)

2.563( 2)

non-metallic

mineral products

Manufacturing-chemicaisandpetroleum

Manufacturing-

1.133(7)

l.lll(7)

l.OOO(7)

1.000( 6)

1.000(b)

1.200(6)

1.OOO(5)

1.000(7)

1.400( 7) l.OOO( 3)

l.OOO( 3)

1.OOO(3)

l.OOO( 3)

l.OOO( 3)

2.000( 1)

2.000( 1)

products

Manufacturing-rubber

1.000(7) 2.000( 5)

2.000( 5)

2.600( 1)

2.600( 1)

2.600( 1)

2.600( 1)

Manufacturing-woodproducts

1.375(6) 1.714(4)

1.143(6)

1.857(3)

2.000(2)

2.286( 1)

1.875( 5) 1.571(5)

2.500(4)

and footwear

2.273(4)

l.OOO( 7)

Others

2.750( 3)

2.364( 3)

senior citizens

people and

Handicapped

types of activities

2.273(4)

1.636(6)

Crime prevention

Public amenities

activities

the following

1.375(6)

WOkS

literary

Culture,

3.000( 2)

Manufacturing-textiles

year?

has made towards

Types of community

2.636( 1)

Health

your Company the last calendar

3.625( 1)

sports

Games and

during

contribution

2.545(2) and tobacco

What is the level of financial

that are of benefit to the community,

Question:

Manufacturing-food,

beverages

involvement.

Plantation

Industry

TABLE 8. Community

3.333(4)

Pollution-

noise

in parentheses

of natural

: na. means not applicable

* Numbers

resources

Conservation

Energy conservation

Pollution-

Pollution-water

3.000(j)

footwear

3.000(3)

and

products

indicate

na.

3.600(3)

4.000( 1)

relative rankings

3.667( 3)

3.250(3)

n.a.

n.a.

3.500(2)

na.

3.200(4)

non-metal

Manufac-

3.666(2)

3.600(Z)

4.000( 1) 3.666( 3) 3.500(3)

4.000(l)

3.000( 3) 3.666( 2) 3.000( 5)

3.833( 1) 3.750( 1)

3.500(5)

petroleum

chemicals

turing-

Manufac-

wood

turing-

Manufac-

to minimising

na.

4.000(l)

n.a.

na.

4.000(

products

metal

turing-

1)

Manufac-

other

turing-

2.500(4)

4.000(l)

3.000(2)

3.000( 2)

n.a.t

etc.

3.500( 2)

na.

na.

n.a.

n.a.

others

na.

3.000( 4)

n.a

3.500( 1) 3.857( 1) 3.500(l)

3.000( 4)

3.500(2)

2.000( 2)

2.000(2)

etc.

turing-

Service-

the environment?

Manufac-

affecting

Manufac-

machinerymachinery

electrical

turing-

Manufac-

or solving problems

Mean scores by industry

orient its research

3.700( 1) 4.000( 1) 3.600( 1) 3.000(3)

3.167(4)’

textiles

food etc.

activities

air

turing-

and

Manufac-

turing-

Does your Company

Manufac-

Environmental

Plantation

Question:

research

TABLE 9. Environment.

mean

Overall

n.a.

3.500(l)

3.000(2)

3.438(3)

3.486(2)

3.385(4)

3.000( 2) 3.575( 1)

3.000( 2) 3.226( 5)

Others

S

: g 0 $j -z

5

:

in parentheses

control

$P
t n.a. means not applicable

* Numbers

Others

Noise abatement

Waterpollution

indicate

ma.

3.25q

petroleum

and

chemicals

turing-

Manufac-

non-metal

turing-

Manufac-

n.a.

3.000(2)

1.000(4)

1.000(4)

n.a.

ma.

3.667( 1) 3.500(2)

3.000( 2) 3.000( 2) 3.000( 3) 3.000( 3)

3.250(2)

others

turing-

Manufac-

etc.

n.a.

3.000(2)

3.5Oq 1)

others

turing-

Manufac-

control?

others

Service-

n.a.

n.a.

n.a.t

1.500(3)

Mean score

3.667(2)

3.481(2)$

3.714( 1) 3.522( 1)

Others

n.a.

n.a.

3.000( 4)

2.000( 4)

2.667( 3) 4.000( 1) 3.600( 3) 3.138( 3)

3.000(2)

3.500( 1) 3.667( 1) 3.000(2)

etc.

machinerymachinery

electrical

turing-

4.000( 1) 3.000(2)

products

metal

turing-

Manufac-

costs for pollution

Manufac-

any equipment

Mean scores bv industrv

incurred

1) 3.667( 1) 3.429(2)

4.000( 1) 2.000(4)

relative rankings

n.a.

3.000( 3) 3.5Oq3)

3.636( 1) 3.750(2)

3.400(2)*

4.000( 1) 3.000(2)

control

Air pollution

footwear

wood products

food etc.

activities

turing-

Manufac-

and

turing-

turing-

Has your Company

textiles

Manufac-

Manufac-

Plantation

Question:

control

Pollution

TABLE 10. Environment.

202

HAI-YAP TEOH and GREGORY THONG TABLE 11. Relationship between corporate size measured by annual turnover and social responsibilities

Human

Product/

Community

Physical

resources

service to

involvement

environment

Job

Product

Games and

Water

safety

quality

sports

pollution

Annual turnover* ( VOOO)

control

1

0

0

‘

1

1

0

$l,OOO-<55,000

5

6

0

1

s5,000-<

6

6

1

1

$10,000-<$20,000

21

24

2

7

$20,000-

19

23

5

3

10

9

3

1

6

5

2

4

Less than 5200 $500-<$l.OOO 510,000 < $50,000

9150,000 - < s 100,000 0100,000-

< 5200,000

8200.000 and above

l

14

14

11

10

84

89

25

27

Based on 1980 figures.

TABLE 12. Relationship between corporate size measured by total assets and social responsibilities

Human

Product/

Community

Physical

resources

service to

involvement

environment

Job

Product

Games and

Water

safety

quality

sports

pollution

Total assets* ( S’OOO)

control

JilOO-<$l,OOO

0

2

3

0

$L,OOO-<$5,000

13

12

1

2

s5,000-<$10,000

12

13

1

8

$10,000-<

$20,000

20

22

2

4

$20,000 - < $50,000

14

17

8

3

8

8

4

3

I5

14

9

7

84

89

25

27

$50,000-<$100,000 S100,000 and above

* Based on 1980 figures.

CORPORATE SOCIAL RESPONSIBILITY AND REPORTING

203

social performance information.’ Disclosure was largely in the form of passing references contained in the Chairman’s Statement. In the absence of systematic and formal reporting, companies could find themselves in a difficult position to refute allegations that such ad hoc disclosure was intended as a public relations gimmick and there was no genuine desire to promote the image of good corporate citizenship. Aspects of social performance that are most frequently disclosed in annual reports are shown in Table 14. It appears that social performance areas in which companies indicated greatest involvement are also areas where there is more extensive social reporting. These aspects are human resources and product/service to con-

respondents were asked to state reasons for not doing so. As shown in Table 13, 69 companies did not include any social performance in their annual reports as against 29 that did. Of the companies participating in this study, only 40 were public companies, the others being private companies. Considering that annual reports of private companies are normally prepared for very limited circulation, these companies coud see no tangible benefits for reporting on anything beyond meeting statutory requirements. Consequently, those companies which indicated some form of social disclosure in the annual reports are represented by public limited companies. No formal reporting format was used in disclosing

TABLE 13. Question: Does your Company report on any aspect of its social performance in the Annual Report? Major ownership

Reporting of social performance in annual report

by country Yes Malaysia

(%)

No

(%)

14

48.3

39

55.0

Britain

6

20.7

12

17.4

USA

2

6.9

5

2.3

Japan

0

0.0

4

5.8

Holland

0

0.0

1

1.5

Australia

1

3.4

0

0.0

Singapore

0

0.0

4

4.3

Others

6

20.7

6

8.7

29

100.0

71

100.0

Total

TABLE 14. Question: What aspect of social performance is most frequently reported in the Annual Report? Social performance area reported

Frequency of response

Human resources

26(45.6%)

Product/service to consumers

12(21.1%)

Community involvement

9(15.8%)

Physical environment

lO( 17.5%)

Total

57 ( 100.0% )

’ A number offormats of varying complexity for reporting corporate social performance have been suggested in the literature, viz., the inventory approach, outlay approach, programme management approach, benefit-cost approach and goal-accounting approach. See, for example, Abt (1977).

204

HAI-YAP TEOH and GREGORY THONG

sumers which responses.

make

up

67%

of

positive

nature of ownership.

By comparing Table 3 with Table 14, it is clear that there is a greater degree of corporate social involvement vis-a-vis social disclosure. For example, 1 out of 4 companies involved in the

involvement but only some kind of disclosure.

bly for very much tioned earlier.

of social

reporting

to

all companies

irrespective

as men-

which failed to information in

brief ‘. The second highest number of responses (32) was attributed to the reason that “Company is active in social concerns but can see no reason for telling others what it is doing”. It is then obvious that Malaysian companies on the whole are conservative toward corporate reporting. This is evident even of financial disclosure,2 let alone disclosure of corporate social performance. This is due in part also to the absence of an articulate

by

public, a powerful consumer movement, luential action groups, who normally

companies in terms of major ownership by countries also reveals that this lack of disclosure applies

reasons

just as proba-

responses (47) was recorded against the reason “Annual Reports have always been kept very

areas. These results confirm our hypothesis that corporate social involvement is much greater than companies have indicatd in their annual reports. of the extent

15 shows

their annual reports, the reasons for non-disclosure were identified. The highest number of

to make activities

and in the physical environment area, only 16% and 18% respectively indicated both involvement in these areas and reporting of their involvement. Moreover, companies also tended to disclose more about employee-related activities compared to other social performance

Analysis

the same

In the case of those companies report any social performance

analysis shows that indicating extensive

12 attempted In community

Table

panies in reporting social performance they were also more socially committed

human resources area reported its performance in this area. In the case ofproduct/service to consumers, the comparative there were 86 respondents

However,

that predominantly foreign-owned companies were marginally ahead of Malaysian-owned com-

and infwould

exert pressure on companies to accept a greater social role. A number of companies (20) how-

of the

TABLE 15. Aspects of social reporting

according

to major ownership

by country

Majorownership

Human

ProducV

Community

Physical

by country

resources

service

involvement

environment

to consumers

12(23%)

8(15%)

5(9%)

5(9%)

6(33%)

2(11%)

2(11%)

3(17%)

USA

2(29%)

O(O%)

1(14%)

1(14%)

Japan

O(O%)

O(O%)

O(O%)

O(O%)

Malaysia Britain

Holland

O(O%)

O(O%)

O(O%)

O(O%)

Australia

l(lOO%)

l(lOO%)

O(O%)

O(O%)

Singapore

O(O%)

O(O%)

O(O%)

O(O%)

Others

5(4%)

1(8%)

1(8%)

12

26

9

1(8%) 10

Refer to Table 14. l

Percentage

based on number

of companies

’ Several studies have shown that corporate frequently

not beyond compliance

according

to major ownership

financial reporting

with legal requirements

by country

in Malaysia LOa great extent

viz., the Companies

Act, 1965.

is limited to minimum disclosure,

CORPORATE SOCIAL RESPONSIBILITY AND REPORTING

ever contended that they did report their social activities mainly through newsletters and company magazines which were produced as evidence. A review of this literature showed a lack of proper reporting format and besides, their circulation was limited to company personnel. It is significant to note though that none of the respondents considered “Cost of preparing social performance information is too high”.3 If this general consensus is accepted, the prospect of increased corporate disclosure of social performance should appear encouraging.

205

beyond the traditional economic pursuits compared to large publicly-based companies. Moreover, those with a predominant Malaysian ownership were less progressive with regard to fulfilling social responsibilities whereas companies with major foreign ownership, particularly those from the United States and Britain, appeared to be more prepared to accept social commitments. The results also showed that, beyond this level of social involvement, there was little evidence of any attempt by all the respondent companies to report social performance on a systematic and formal basis. At best, social reporting has been given passing references, on an ad hoc basis, in the Chairman’s Statement in annual reports and, to some extent, in newsletters or company magazines, both of which are far from satisfactory. The findings on the extent of social involvement apply equally to social reporting. Thus the main focus of disclosure was on employeerelated activities. Also, companies with major foreign ownership were doing marginally better in social reporting vis-a-vis Malaysian-owned companies. Thus, based on the results of this study, it appears that any further progress by companies in undertaking greater social responsibilities and reporting should come from the larger, foreignowned companies. It is these companies which have more experience with various sociallyrelevant activities through their overseas parent company connections and which also, in view of their bigger size, would have the capacity to become more socially-involved.

CONCLUSIONS This research set out to examine aspects of a company’s social commitments in order to fulfll social responsibilities, including social reporting. The empirical results showed that, firstly, all the companies interviewed expressed awareness of the social role of business organisations and, secondly, they have been involved to diIferent degrees in various socially-relevant activities. However, of the social performance areas identified in this study, relatively greater corporate attention was directed to improving human resources and product/service to consumers compared to rendering communityrelated services or alleviating environmental deterioration. Corporate size and national origin of corporate ownership are also relevant in reflecting the extent of social commitment made by companies. Smaller companies were less inclined to assume a social role much

BIBLIOGRAPHY Abt, C. C., TheSociuEAuditforMunugement(AMACOM, 1977) Be@, R. V. D., The Corporate Social Report-The 1976) pp. 57-61.

A Division of American Management Association,

Deutsche Shell Experience, Accountancy (December

’ In an interview conducted by the authors with Deutsche Shell, Hamburg, when they were in West Germany as Visiting Fellows at the International Institute for Environment and Society at The Science Center in West Berlin in September, 1980, it was pointed out that the social report by Deutsche Shell is submitted for audit by a public accounting firm. The audit is however confined to verification of only the statistical data on social activities, The audit fee has increased by 20% with the implementation of social reporting. According to the Deutsche Shell top management, this is well within expectations and, more importantly, they are convinced that the benefits far outweigh the marginal increase in costs.

206

HAI-YAP TEOH and GREGORY THONG New Straits Times, Editorial (Saturday 24 May 1980). Moskowitz, M. R., The Bank of America’s Rocky Road to Responsibility, Business (Summer 1977) pp. 61-64.

and Society

Review