Research Question: Corporate Social Responsibility in Public Management
Added on 2021-05-10
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Candidate Number: Word Count: Essay title: Choose a topic dealing with some aspect of the regulation ofpublic management or public administration. Formulate a researchquestion about the topic around which you can create a researchdesign.1 IntroductionCorporate social responsibility (CSR) becomes a common practice worldwide forboth developed and emerging countries. However, the phenomenon of reportingin countries may vary depending on their stakeholder, legitimacy andaccountability theory (Tilt, 2016). The country’s social, political andenvironmental issues have also been taken into the consideration of CSRreporting in public, meaning that there are different variables regarding the CSRreporting with the integration of public management in different countries. Stern(2011) stated that China has placed more emphasis on its public reform of CSRreporting to improve social objectives regarding education, health care andenvironmental protection etc. However, whether China has performedsuccessfully in relation to the CSR public reform is a controversial issues as thereare numerous perceptions of how the Chinese company integrates the CSRactivities within the country after the public reform on adopting the CSRreporting. This is because the bureaucratical culture and stated-ownedenterprises is deep-rooted in China even though there is evolving public reformin CSR reporting in China (Zang, 2017). Therefore, a research question ‘Is publicreform in relation to the public management of CSR reporting successfullyimplemented in China?’ has been set for discussion. The next section providesliterature review on empirical research similar to this topic. Section 3 generatestestable hypotheses mainly based on the previous literature review and my owncontribution to the literature which is supported by various theories. Section 4uses dependent and independent variables to conduct the analysis and providesa plan on how data will be collected. The last section draws conclusion on thisresearch and why it is important to study this research question.2 Literature Review 2.1 Public reform of CSR in ChinaThe economic reforms and opening in China since 1978 had been changed fromplanned economy to socialist economic system. The corporate socialresponsibility (CSR) reporting has been evolving in China for approximately 40years in a unique way (Lau, 2015). During 1978 to 2008, China had implemented‘black and white cat’ theory to encourage citizens to produce as much aspossible but social problems such as producing low-quality products had beenoccurred at that time (CGTN, 2014). China had then enhanced its legal systemby implementing protection on environment, customer rights and employeesrights (Brødsgaard and Li, 2014). This had infused the CSR framework in Chinaand more Chinese entities had incorporated CSR in their businesses nationally.China gradually changed the public management to people-oriented strategy in1
company which aimed to adopt rule of law, right and justice to the economy andthe ideology of the CSR reporting in China increased significantly after somemajor events occurred in 2000s such as the Chinese tainted milk scandal (Wuand Walker, 2020). The Sanlu Group contaminated the Milk with melamine whichdamaged the kidney of children and even led to death (Xin and Stone, 2008).The scandal illustrates that immoral corporate conduct has eroded the publicconfidence in Chinese corporations. Since then, theShanghaiandShenzhenStockExchanges required the disclosure of CSR reporting for theChinese listed company, in which more Chinese companies have participated inCSR reporting to enhance their corporate profile(Climate Disclosure StandardsBoard, 2021). Another research found that CSR reporting that pressured by thegovernment mainly targeted on tightening the wealth gap in society to eliminatecorruption in China (Xue and Liou, 2012). The Environmental Protection Act wasalso enacted in 2015, imposing penalties on corporations that failed to considerthe environment in operation. Social Responsibility Guidelines and SocialResponsibility Performance Classification Guidelines were published by theAQSIQ1 and the SAC2 to increase the CSR level in Chinese society among allregions to promote practices of CSR reporting (OECD, 2009). 2.2 Different perspectives of CSR in ChinaEmpirical research on the relationship between CSR and value creation in entitieshave identified that there are positive, negative or no correlation among CSR andvalue creation. 2.2a Positive correlationHu, Chen, Shao and Gao (2018) found that there is positive relationship betweenCSR and corporate value in stated-owned entities by using numerous linearregression as the corporations obtain more stakeholder feedback positively. Thispositive comment is also supported by Freeman that the profits generated in thecorporations will be enhanced by CSR activities which help to gratifystakeholder’s interests of the entities in long term (Freeman, 2021). Sun YoungByun (2014) collected data of Chinese stated-owned listed companies anddemonstrated that there is positive relationship between CSR and value creationas there is increasing number of the stakeholders in the companies who pursuethe importance of CSR activities when evaluating the corporations’ performanceand because as stated by Mattlin (2007), these enterprises help to controlstrategic parts of the economy for government that they focus more on theneeds for all the stakeholders’. This can be explained by the stakeholder theorythat the firm should take into the consideration of stakeholders, not justshareholders (Freeman, 2015). It indicates that all stakeholders’ interest will thengo together when the entities’ owners are working out to place the interest ofthe stakeholders such as employees, suppliers, customers and the general publicon the same line. 2.2b Negative correlationHowever, some empirical research found that there are agency conflicts betweenthe controlling shareholders (the Chinese government) and minorityshareholders which have led to less efficiency on adopting CSR in businessoperation if political goals are being emphasised by the government in stated-owed entities (SOE) as direct pressure is being posed on the disclosure of theCSR(Chen, Hung and Wang, 2018). As the government focused more on1The General Administration of Quality Supervision2 The Standardisation Administration of China 2
implementing political strategy, the manager of the SOE took the advantages ofhaving political benefits to participate in destructive CSR activities such asenaging in charitable events but are in fact engaging in a corruptive deal(Hung,Shi and Wang, 2013). This explains that the managers in SOE who are notinfluencing by the market competition perform at the expense of the minorityshareholders that will rise the agency problem. Another research stated thatbureaucratic structure in the Chinese companies have hindered the relationshipbetween the CSR and value creation in the corporations(Rjiba, Jahmane andAbid, 2020). Bureaucratic system includes huge division of work responsibilitieswith a complex hierarchy structure in the company. It is difficult for employees toraise ideas as most of the decision-making are solely made by the boards whohas power to decide which stakeholders in particular they would like to place infirst priority(Gupta and Krishnamurti, 2019). Smith and Ronnegard (2013)indicated that the boards may in turn place shareholders’ interests at first whenintegrating the CSR in business operation because the primary goal of thecorporation is to maximise profits for their shareholders as the shareholders arethe owners of the company.2.2c No correlationA few research on the other hand found that there are no relationship betweenCSR and return on assets. Kim, Cho and Park (2019) studied the correlationbetween value creation and environmental protection for around 20 listedstated-owned Chinese company, pointing that no relationship has been foundbetween them and it is hard to determine the reason for this experiment. 3 Theory/Hypotheses From the empirical research, it has been found that there are positive, negativeor no correlation between CSR and value creation in Chinese corporations. Thisquestion is controversial because even though there is public reform on adoptingthe CSR in business activities, the implementation of the CSR activities dependon varies aspects such as individual, professional, social and cultural factors. Thecompany’s intention for integrating CSR in business is also one of the factors toillustrate the above 3 relationships between CSR and value creation. Toformulate a hypothesis for this research question, ‘If, Then’ hypothesisframework is being used in this research. It is being assumed that company maynot be successful when operating in shareholder primacy as the companiespursue their financial return for shareholders at the expense of otherstakeholders and is not regarded as operating sustainability in long-run. Beingsustainability means that the company is considering the business’s social andenvironment impact other than only focusing on the economic impact (Luke,2013). Purvis, Mao and Robinson (2018) stated that there are 3 pillars ofsustainable development: Social, environmental and economic. It used thecollapse of the GFC to demonstrate that weakness in 1 pillar may bring adverseresults for the other pillars. This shows that companies with shareholder primacytheory is difficult to achieve value creation when integrating CSR to theircompanies as the focuses on economic pillar may outweigh the other 2 pillars.However, it comes to another question of what value creation actually means.Randers et al., (2019) provided 17 sustainable development goals that helpcorporations to develop the CSR reporting framework. For example, thecompanies may use the guidelines to consider the relationship between theiroperation and the capitals that the corporations have used as their integratedthinking process for establishing business strategies. Stakeholder theory alsoindicates that corporations have a fiduciary duty to all stakeholders rather than3
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