Corporate social responsibility, ethics, and

corporate governance
Luu Trong Tuan

Luu Trong Tuan is based at Abstract

the Asian Institute of Purpose – This inquiry into companies listed on the Ho Chi Minh City Stock Exchange (HOSE) in
Technology (AIT), Klong Vietnam seeks to discern whether such constructs as corporate social responsibility (CSR) and ethics
Luang, Thailand. act as antecedents for corporate governance.
Design/methodology/approach – Three hundred and seventeen responses returned from
self-administered structured questionnaires relayed to 1,173 middle level managers were analyzed
via ANOVAs and structural equation modeling (SEM).
Findings – From the results an interplay emerged between the ethics of justice and legal
CSR/economic CSR. The ethics of care, on the other hand, tend to cultivate ethical CSR, which in turn
positively influences corporate governance.
Originality/value – From the results of the research, insight into the linkage pattern of corporate
governance and its antecedents highlights the magnitude of the ethics training program as well as CSR
initiatives in reinforcing corporate governance in listed companies in Vietnam.
Keywords Corporate social responsibility, Ethics of justice, Ethics of care, Corporate governance,
Disclosure, Vietnam
Paper type Research paper

1. Introduction
Companies have recently augmented the allocation of resources to activities termed as
corporate social responsibility (CSR) (Barnea and Rubin, 2010). Corporate social
responsibility, from Gainer’s (2010) stance, refers to a corporate ‘‘movement’’ – a set of
ideas and perspectives about business practice that its advocates anticipate to see widely
implemented through the corporate sector. Through corporate social responsibility
activities, companies can not merely yield favorable attitudes and behaviors from
stakeholders, but also reinforce stakeholder-company bondings and construct corporate
image (Du et al., 2010). Cheung et al.’s (2009) research underscores the importance of
corporate social responsibility in Asian emerging markets.
The interconnection between CSR and corporate ethics has been found in numerous
empirical enquiries (Stanwick and Stanwick, 1998). The impact of ethics on CSR was
revealed in Vitell et al.’s (2009) study. In their investigation into the linkages among core
organizational values, organizational ethics, corporate social responsibility, and
organizational performance outcome, Jin and Drozdenko (2009) found that managers in
both mechanistic and organic organizations which were perceived as more socially
responsible were also perceived as more ethical; and that perceived ethical attitudes and
social responsibility were significantly correlated with organizational performance
outcomes.

Received 9 July 2011

At the crossroads of corporate self-regulation and meta-regulation, researchers have
Accepted 9 July 2011 indicated an evolving interplay between corporate governance and CSR in recent years

DOI 10.1108/17471111211272110 VOL. 8 NO. 4 2012, pp. 547-560, Q Emerald Group Publishing Limited, ISSN 1747-1117 j SOCIAL RESPONSIBILITY JOURNAL j PAGE 547
 (Gill, 2008). Jamali et al.’s (2008) inquiry alerts practitioners to the increasing overlap
between corporate governance and CSR agendas. Furthermore, corporate social
responsibility has focused on corporate governance as a vehicle for integrating social
and environmental concerns into the business decision-making process, benefiting not
purely financial investors but employees, customers, and communities as well (Gill, 2008).
Johnson and Scholes (2002, p. 247) state, ‘‘Corporate social responsibility is concerned with
the ways in which an organization exceeds the minimum obligations to stakeholders
specified through regulation and corporate governance.’’ From a developing country
perspective, Jamali et al.’s (2008) qualitative research highlights the growing
cross-connects or interfaces between corporate governance and CSR through the
findings that most managers conceive of corporate governance as an essential pillar for
sustainable CSR. In the similar vein, good corporate governance provides the foundations of
good CSR by creating value-creating relationships with all stakeholders (Welford, 2007) and
is a critical element for driving excellence in CSR (Shahin and Zairi, 2007). The impact
direction from CSR to corporate governance is found by Charbaji (2009) in both
public-sector and private-sector organizations.
Moreover, in Nwabueze and Mileski’s (2008) standpoint, the ground rules of any corporate
governance structure should reflect such societal norms as ethics. The concept of corporate
governance, by and large, is contained in the ethics of care, justice, rights and utility
(Nwabueze and Mileski, 2008). Hooghiemstra and van Manen’s (2002) inquiry into 2,500 of
the largest companies in The Netherlands also reveals the growing magnitude of social and
ethical issues in the corporate governance discussion.
These three constructs converge into one point, namely the commitment to the interests of
the others, so this study seeks to develop a research framework that examines the linkage
pattern of CSR, ethics, and corporate governance.
This prelude of the paper is pursued by the review of the perspectives and studies on the
variables of the current research. This literature review serves as the foundation for building
the conceptual framework for which the data is then dissected. The paper concludes with
some practical implications and potential research avenues related to the concept
‘‘corporate governance’’ and its independent variables.

2. Literature review
2.1 Corporate social responsibility (CSR)
Corporate social responsibility (CSR) is currently a crucial element of the dialogue between
companies and their stakeholders and continues to reap attention atop the corporate
agenda (Bhattacharya et al., 2008). Corporate social responsibility, from Jamali’s (2008) and
Jamali et al.’s (2008) perspectives, is concerned with the commitment of companies to
contribute to sustainable development, stakeholder interests and enhancement of societal
conditions.
Also centering on stakeholders’ interests, Hopkins (2007) defines CSR as being ‘‘concerned
with treating the stakeholders of the firm ethically or in a responsible manner. ‘Ethically or
responsible’ means treating stakeholders in a manner deemed acceptable in civilized
societies. Social includes economic and environmental responsibility. Stakeholders exist
both within a firm and outside. The wider aim of social responsibility is to create higher and
higher standards of living, while preserving the profitability of the corporation, for peoples
both within and outside the corporation’’ (pp. 15-16). Regarding business firms as the
economic engine of society, Carroll (1979) and Henderson (2005) also highlight profits
making is a social responsibility.
Carroll’s (1979) model of CSR also incorporates profitability as a dimension among the four
responsibilities:
1. The economic responsibility to generate profits.
2. The legal responsibility to conform to local, state, federal, and relevant international laws.

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3. The ethical responsibility to meet other social expectations, not written as law
(e.g. avoiding harm or social injury, respecting moral rights of individuals, doing what
is right, just, fair).
4. The discretionary responsibility to meet extra behaviors and activities that society finds
desirable (e.g. philanthropic initiatives such as financial contribution to various kinds of
social or cultural enterprises).
Carroll’s ‘‘pyramid of corporate social responsibility’’ indicated a hierarchy of responsibilities
ascending from economic and legal to more socially oriented responsibilities, i.e. ethical and
philanthropic (Carroll, 1991). Finding this implicit hierarchy in the pyramid as its limitation,
Schwarz and Carroll (2003) placed the dimensions of CSR in a Venn diagram as well as
deleted the discretionary dimension as not justifiable as a ‘‘social responsibility’’.

Lantos (2001) classified CSR into three types predicated on their nature (required versus
optional) and purpose (for stakeholders’ good, for the company’s good, or for both): ethical
CSR, altruistic CSR, and strategic CSR. Ethical CSR is ‘‘morally mandatory and goes beyond
fulfilling a firm’s economic and legal duties, to its responsibilities to avoid social injuries, even
if the business might not benefit from this’’ (Lantos, 2001, p. 605). Partially based on this
definition, the author of the current study maintains that ethical CSR is the highest level of
CSR and depicted as the outermost circle, and economic CSR is the lowest level a company
reaches (Figure 1). Acting within the law is analogous to acting ethically (Carrigan and
Attalla, 2001), so ethical CSR is depicted to embrace legal CSR. Moreover, as Gaski (1999)
wrote: ‘‘the ethics of one day may be the law of the next’’, some ethical CSRs will gradually
consolidate into legal CSRs and new ethical CSRs will surface.

In Figure 1, the circles of internal stakeholders and external stakeholders will intersect the
circle of a type of CSR if that CSR type is fulfilled. The circle of discretionary CSR is not
displayed due to its integration into ethical CSR type.
Carroll’s (1979) model of CSR with the merge of ethical and discretionary dimensions is used
as a basis in this study as these three dimensions display an extensive spectrum relating to
all stakeholders, both internal and external, as well as the triple bottom line.

2.2 Ethics of justice versus ethics of care

From Potocan and Mulej’s (2009) stance, ethics is an integral sentimental part of human
characteristics and the subjective portion of the starting points of any human behavior
process encompassing business.

Figure 1 CSR types and stakeholders

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 Business ethics deals with the linkage between business goals and approaches to specifically
human ends (Tran, 2008). It denotes the special responsibilities which a person and a citizen
consents to when he becomes a part of the business world. Business ethics is portrayed by
Preuss (2008) as part of a ‘‘veritable explosion of concepts that aim to explain what the proper
role of business in society should be,’’ encompassing such terms as corporate citizenship,
corporate social responsibility (CSR), triple bottom line, and sustainability.
This paper looks at two types of ethics, ethics of care and ethics of justice, which tend to
contrast each other (Plot, 2009). Whereas Strike (2003) discerns in ethics of justice the
dualistic tension between benefit maximization and esteem for individual rights, Begley
(2006) views ethics of justice as a foundation for deciding on the actual deeds that will
augment benefits for all while respecting individual rights. Ethics of justice revolves round
such notions as rationality, rights, and justice, while ethics of care is concerned with
consideration, sentiments, and responsibility (Plot, 2009). Ethics of care tilted the focus on
ethics from individual rights to relational prerequisites (French and Weis, 2000). That the
identity of the self – who one is – is predicated on the caring relationships the self has with
others, serves as the basis for ethics of care (Lantos, 2002). Ethics of care is a way to sustain
the focus of the process on people rather than on policies (Begley, 2006).
Three crucial attributes differentiating ethics of care from ethics of justice, as Tronto (1993,
p. 79) observe, include: first, ethics of care focuses on responsibility and relationships rather
than rights and rules; second, it is embedded in specific circumstances rather than being
abstract, formal, and universal; and third, it is best expressed not as a set of principles but as
an activity, the ‘‘activity of care’’.
Whereas ethics of justice is embedded in fairness – the equitable allocation of resources and
implementation of rules, ethics of care looks toward the dignity and intrinsic value of each
person, and ‘‘desires to see that persons enjoy a fully human life’’ (Starratt, 2003, p. 145) as
well as ‘‘focuses on the demands of relationships, not from a contractual or legalistic
standpoint, but from a standpoint of absolute regard’’ and ‘‘love’’ (Starratt, 2003, p. 145).
Ethics of care is categorized by Nell Noddings into two types of caring: ‘‘caring for’’ and
‘‘caring about’’. ‘‘Caring for’’ stands above ‘‘caring about’’ and denotes direct encounters in
which one person cares for another, whereas ‘‘caring about’’ refers to care as a virtue and
take us to a more public realm, and may be foundation of justice (Debeljak and Krkac, 2008).

2.3 Corporate governance

As Monks and Minow (2004, p. 1) remark in their research, due to corporate frauds and
meltdowns, corporate governance is surfacing as a more and more critical domain of
modern management. In most of the early definitions on corporate governance, corporate
governance is viewed as a system utilized to shield investors’ interests. Corporate
governance is defined by Shleifer and Vishny (1997) as the ways in which suppliers of
finance to companies assure themselves of getting a return on their investment. La Porta
et al. (2000) refer to corporate governance as ‘‘a set of mechanisms through which outside
investors protect themselves against expropriation by [managers and controlling
shareholders].’’ Corporate governance guidelines are a mechanism a company can enact
which should diminish agency costs and better align the interests of boards and the
suppliers of capital (Picou and Rubach, 2006). To maximize the investment of the
shareholders, who risk their capital in the company, corporate governance mechanisms
exist to provide accurate information to shareholders so that they may determine whether to
continue their contracts with management (Wheeler, 2002). However, through its definition of
corporate governance as ‘‘a set of relationships between a company’s management, its
board, its shareholders and other stakeholders’’, the OECD (2004) looks beyond the
relationship between shareholder and director into a wider network of relationships including
other stakeholders. The above definitions discuss those who contribute to the value chain of
the company in the context of corporate governance. Moreover, the first two definitions look
at corporate governance mechanistically as ways or mechanisms, whereas the last
definition turns the look toward relationships among stakeholders, highlighting ethics of care
rather than ethics of justice reflected in the first two definitions.

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Defining corporate governance as ‘‘the exercise of power over and responsibility for
corporate entities’’, Mallin (2002) places responsibility as an element of ethics or care beside
mechanism of control through laws and rules as reflected in a number of definitions. Gillan
and Starks (1998), for instance, view corporate governance as the system of laws, rules, and
factors that control operations at an company. Meanwhile, corporate governance is
depicted in the Cadbury Report (1992) as ‘‘the system by which companies are directed and
controlled.’’ Cadbury Report (1992) is not merely concerned with the control mechanism but
also the leadership required for that mechanism reflected in the term ‘‘directed’’ in the
definition. One of the reforms in this control mechanism in corporate governance is the
scorecard on corporate governance (Cheung and Jang, 2008) as an attempt to
comprehensively manage and measure the performance of all stakeholders.
Furthermore, taking stakeholder perspective, researchers tend to categorize corporate
governance mechanisms into two typologies: those internal to companies and those
external to companies, which pave the path for two models of corporate governance, the
‘‘shareholder’’ model (‘‘external’’ control exerted by shareholders) and the ‘‘stakeholder’’
model (‘‘internal’’ control exerted by diverse parties having a stake or an interest in the
company). Another model of corporate governance is built on agency theory, in which
shareholders as principals delegate role to managers as agents, where there is risk sharing
between the entities and latent conflict of interest (Eisenhardt, 1989). Agency theory,
nonetheless, is insufficient in explicating how managers must address non-direct
shareholder interests such as political pressures and societal expectations from
companies (Nwabueze and Mileski, 2008).

3. Conceptual framework and research methodology

3.1 Conceptual framework
Predicated on organizations’ voluntary deeds that benefit society, the ethical CSR dimension
denotes ethical or moral standards (Carroll, 1979). Ethics of care shifted the focus on ethics
from individual rights to relational prerequisites (French and Weis, 2000) or the caring
relationships the self has with others (Lantos, 2002). Therefore, the encounter between
ethical CSR and ethics of care is ‘‘beyond contracting’’ responsibility for and caring
relationships with a variety of stakeholders rather than the self. Given this view, a positive
correspondence between ethical CSR and ethics of care is expected to surface:
H1a. A greater degree of ethical CSR corresponds to a greater level of ethics of care.

Ethics of justice revolves around the demands of relationships, from a contractual or

legalistic standpoint, rather than from a standpoint of absolute regard and love (Starratt,
2003, p. 145), so ethics of justice displays a propensity to drive the organization and
organizational members to operate towards profitability as well as within legal framework
(Carroll, 1979), which is consistent with the orientations of economic CSR and legal CSR, as
posited in the following hypotheses:
H1b. A greater degree of legal CSR corresponds to a greater level of ethics of justice.
H1c. A greater degree of economic CSR corresponds to a greater level of ethics of
justice.

Ho’s (2005) study reveals that higher commitments to CSR strongly and positively
correspond to the qualifications and terms of directors, boards that exert strong stewardship
and strategic leadership roles, and the management of capital market pressures, and that
these various attributes combined constitute the hallmarks of good corporate governance.
From Kendall’s (1999) standpoint, good corporate governance involves ensuring that
companies are run in a socially responsible way and that there should be a lucidly ethical
basis to the business complying with the accepted norms of the society in which it is
operating. Ethical CSR actively seeks a greater balance or compatibility between profit and
ethics (Reidenbach and Robin, 1991), which is consistent with corporate governance
mechanism (Ghosh et al., 2011).

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 Ethical CSR meets other social expectations, not written as law (Carroll, 1979). Meanwhile,
the concept of corporate governance, by and large, is contained in the notion of ethics
(Nwabueze and Mileski, 2008) and the focus of corporate governance has shifted towards
social and ethical issues (Hooghiemstra and van Manen, 2002), so the hypothesized link
between ethical CSR and corporate governance ensued:
H2a. A greater degree of ethical CSR corresponds to stronger corporate governance.

Corporate governance functions to handle conflicts of interests between internal

stakeholders and external stakeholders on the creation of value by a company;
nonetheless, these conflicts of interests cannot be effectively resolved by contracting
(Pergola and Joseph, 2011). Bhasin (2005) highlights that corporate governance is about
ethical conduct in business; it is beyond the realm of law. Thus, legal CSR, which tends to
guide organizational members within the contracting framework, appears not to build strong
corporate governance. Moreover, the findings from Handley-Schachler et al.’s (2007)
research suggest that non-contractual relationships be considered and the role and
interests of stakeholders be not defined in terms of economic activity only. In other words,
legal CSR and economic CSR may not pave the smooth path for corporate governance. The
subsequent hypotheses were hence proposed:
H2b. A greater degree of legal CSR corresponds to weaker corporate governance.
H2c. A greater degree of economic CSR corresponds to weaker corporate governance.

From Nwabueze and Mileski’s (2008) view, the ground rules of any corporate governance
structure should reflect such societal norms as ethics. Ethics of care takes the focal point of
morality to be a willingness to respond to another’s needs and strive for the good of the entire
community (Gilligan, 1982; Noddings, 1984); therefore, ethics of care tends to cultivate
strong corporate governance, which also cares for interests of both internal and external
stakeholders (Rossouw, 2009).
Additionally, good corporate governance centers on the principles of accountability,
transparency, fairness and responsibility in the management of the organization (Ehikioya,
2009). The principle of fairness in corporate governance is not the form of fairness which
ethics of justice is embedded in, namely the equitable allocation of resources and
implementation of rules, but the equitable care distributed toward all stakeholders. The
principles of good corporate governance focus on the demands of relationships of all
stakeholders from a stance of absolute regard of ethics of care (Starratt, 2003, p. 145).
Ethics of care highlights the primacy of the network of relationships that create the business
enterprise (Freeman, 2004). In a word, ethics of care focuses on responsibility and
relationships (Plot, 2009) rather than rights and rules (Tronto, 1993, p. 79), so ethics of care is
in line with the principles of good corporate governance (Mallin, 2002; Ehikioya, 2009). The
following hypotheses consequently emerge:
H3a. A greater level of ethics of care corresponds to stronger corporate governance.
H3b. A greater level of ethics of justice corresponds to weaker corporate governance.

Figure 2 displays the framework of the links among corporate social responsibility, ethics,
and corporate governance.

3.2 Methodology
3.2.1 Sample. A population of 2,418 listed companies at the Ho Chi Minh City Stock
Exchange (HOSE) in Vietnam serves as a base to derive the sample of 1,173 listed
companies for this study. Through self-administered structured questionnaire dispatched to
a middle level manager such as operations director or manager in each of these 1,173 listed
companies, data on such constructs as corporate social responsibility, ethics, and corporate
governance were gathered. Middle management members were relied on as the
respondents since they would have more opportunities to observe high as well as low
layers of organizational behavior than would lower level members.

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Figure 2 Conceptual framework

Of 1,173 questionnaires relayed to middle level managers, 317 were returned in completed
form for a response rate of 27.02 percent, which is practically in line with the 15-25 percent
response rate range encountered in several studies (e.g. Baines and Langfield-Smith, 2003;
Lee et al., 2001; Spanos and Lioukas, 2001) where middle and top managers with hectic
working schedules acted as informants.
3.2.2 Quantitative measures. Corporate social responsibility (CSR) – a 22-item instrument
adapted from Aupperle et al. (1985) and Maignan (2001) was utilized to measure CSR
dimensions. However, like Podnar and Golob’s (2007) findings, the exploratory factor
analysis revealed that a three-factor rather than a four-factor solution was more stable.
Therefore, ethical and discretionary dimensions merge, reducing the factors extracted to
economic, legal, and ethical CSRs. The three CSR dimensions then were: economic CSR
which consists of six items; legal CSR – five items; and ethical CSR – 11 items. The 22
statements of the questionnaire were measured with a seven-point Likert-type scoring
system applied to a scale anchored by ‘‘strongly disagree’’ (1) to ‘‘strongly agree’’ (7).
Ethics of justice and care – nine moral dilemmas containing the first component of the
measure of moral orientation (MMO) (Liddell et al., 1992; Liddell and Davis, 1996) were
employed to measure leader inclinations to ethics of justice and care. Each of the nine
dilemmas was pursued by six to nine potential responses, half of which denoted the justice
dimension and half of which denoted the care dimension. Respondents were asked to study
each dilemma and indicate on a four-point Likert scale (1 ¼ strongly agree, 4 ¼ strongly
disagree) how they consented to each of the potential responses. Leaders were supposed
to possess a propensity to justice when the mean score across all dilemmas on responses
reflected a justice orientation and possess a propensity to care when the mean score across
all dilemmas on responses reflected a care orientation). Adequate internal consistencies,
0.73 and 0.84 for the justice and care scales respectively, were found in Liddell et al.’s (1992)
study.
Corporate governance – to measure the strength of the governance mechanisms are for a
firm, an index of composite governance mechanisms developed by Institutional Shareholder
Services (ISS) was utilized. The ISS index consists of 61 separate variables covering the
eight corporate governance categories, with each variable equally weighted by ‘‘1’’. This
governance index composite score was identified as ‘‘GI’’. A higher index score implied
stronger governance effectiveness.

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 With their Cronbach Alpha coefficients exceeding the recommended cut-off point of 0.70
(Nunnally, 1967), the reliability of each construct and its specific dimensions was confirmed.

4. Findings and discussion

4.1 Findings from ANOVAs
As the findings from ANOVAs (see Table I) show, ethics of care is more correlated with ethical
CSR ( p , 0.01) than ethics of justice, and ethics of justice is more correlated with legal CSR
and economic CSR than ethics of care ( p , 0.05). The data, moreover, denotes stronger
corporate governance for ethics of care than for ethics of justice ( p , 0.01).

4.2 Findings from the structural equation model

The findings from Table II reveal positive and significant path coefficients between ethics of
care and ethical CSR ( p , 0.01), ethics of justice and legal CSR/economic CSR ( p , 0.05),
ethical CSR and corporate governance ( p , 0.05), and ethics of care and corporate
governance ( p , 0.01).

4.3 Discussion
Hypothesis H2a is verified through the positive and significant correlation between ethical
CSR and corporate governance (0.162; p , 0.05). A significant association as divulged in
Table II between ethical CSR and ethics of care (0.167; p , 0.01) corroborates hypothesis
H1a. Ethics of care is a way to sustain the focus of the process on people rather than on
policies (Begley, 2006) and ‘‘desires to see that persons enjoy a fully human life’’ (Starratt,
2003, p. 145). Ethics of care, therefore, elevates organizational members to the
accountability and commitment for optimization of benefits for a great number of
stakeholders, beyond the accountability to abide by laws, policies, and rules of the
organization as well as the community where it is located, and beyond the accountability for
such short-term outcomes as productivity and profitability. In other words, ethics of care
tends to cultivate ethical CSR since ethics of care guides organizational members along the
visioning and the long-term strategy to build sense of care and dedication toward
sustainable growth of the organization, rather than sense of exchange or contracting in the
relationship with other individuals as well as the organization as an entity.

Table I Findings from ANOVAs

Ethics of care Ethics of justice
CSR dimensions/corporate governance Mean SD Mean SD F Significance

Ethical CSR 5.71 0.84 5.28 1.01 5.77 0.00

Legal CSR 4.48 1.02 4.71 0.89 5.15 0.01
Economic CSR 5.37 0.82 5.62 1.05 4.07 0.03
Corporate governance 4.72 0.71 4.41 0.75 9.59 0.00

Table II Findings from the structural equation model

Hypothesis Description of path Path coefficient Z statistics Conclusion

H1a Ethics of care/ethics of justice ! Ethical CSR 0.167 3.47*** Supported

H1b Ethics of care/ethics of justice ! Legal CSR 0.154 2.49** Supported
H1c Ethics of care/ethics of justice ! Economic CSR 0.139 2.17** Supported
H2a Ethical CSR ! Corporate governance 0.162 2.09** Supported
H2b Legal CSR ! Corporate governance 0.146 1.27 Not supported
H2c Economic CSR ! Corporate governance 0.155 1.32 Not supported
H3 Ethics of care/ethics of justice ! Corporate
governance 0.138 3.41*** Supported

Notes: *p , 0.10; **p , 0.05; ***p , 0.01

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Besides the bridge of ethical CSR through which ethics of care is correlated with stronger
corporate governance, ethics of care was found to directly and significantly correspond to
stronger corporate governance from the findings of the structural equation model (0.138;
p , 0.01).
Hypotheses H2b and H2c were confirmed due to no lucid link found between legal
CSR/economic CSR and corporate governance. As the results from the ANOVA and the
structural equation model reveal, ethics of justice is more correlated with legal CSR and
economic CSR than ethics of care, which substantiates hypotheses H1b and H1c. Ethics of
justice refers to fairness in a calculative fashion, denoting the fair exchange between legal/
economic commitment and individual interests.

5. Conclusion and implications

The conceptual framework shown in Figure 2 was passably advocated by the results. Legal
CSR and economic CSR, within expectation, were associated with ethics of justice. On the
other hand, ethics of care tended to cultivate ethical CSR, which in turn positively impacted
the implementation of corporate governance. A direct viaduct between ethics of care and
corporate governance was also detected.
Corporate governance, which is about seeing that business is run properly (Tricker, 1984),
should be initiated, activated, or fortified in the business, for instance in the form of corporate
governance scorecard (Saldana, 2000). As the research findings suggest, the
implementation of corporate governance can be further facilitated with the leverage of
CSR initiatives as well as if it is germinated in the settings of such values as ethical and
caring relationships. Such values may take time to grow, but are not hard to grow, as, though
partly unconscious and historically based, values can be learned (Williams, 1995, cited in
Holbeche, 2006, p. 175). Moreover, purely through planning of ethics can organizational
ethical behavior be attained. For effective adoption of the plan of ethics of care, the plan
should be internalized by all organizational stakeholders (Belak et al., 2010).
Corporate governance is about ethical conduct in business; it is beyond the realm of law
(Bhasin, 2005). Corporate governance needs to become principle based, rather than being
based on rules and regulations (OECD, 2004). In other words, corporate governance should
be structured as a set of guidelines for strategic conducts of organizational members, more
proactive than reactive, rather than a set of laws, rules and policies to prevent deviant
behaviors, even proactive and innovative ones. Corporate governance is a way of life and not a
set of rules (Bhasin, 2005). Di Lorenzo observes that laws are ineffective in making
organizations behave ethically and sustainably and suggests that non-legal factors are more
determinant of organizational conduct (Di Lorenzo, 2007, p. 276). Corporate governance,
therefore, should be seen as a framework for sustainable growth at all levels of the organization.
Produced by code of conducts functioning as boundaries which organizational members
must not step over, ethics of justice, as the findings imply, tends to nurture reactive behaviors
rather than proactive ones. Consequently, ethics of justice seems to build an immediate
harmony among stakeholders’ interests, but not a long-run or sustainable harmony among
them, since ethics of justice is not a fertile land for proactive conducts to emerge for
preventing or confronting new ethical dilemma, which may undermine the organization’s
corporate governance. Svensson and Wood (2004) highlight that there should be a
proactive gap of business ethics performance, i.e. the organization is a step ahead of the
current norms, beliefs, and values in the marketplace and in the society, otherwise, an
unethical situation might develop.
On the other hand, ethics of care, when flowing through all layers of the organization, will ‘‘stir’’ its
members to contribute more initiatives to its corporate governance framework. A superficial
grafting on of an ethical code will not effect organizational change (Potts and Matuszewski,
2004); therefore, managers should integrate code of ‘‘care’’ conducts in the form of ‘‘care’’ KPIs
into corporate governance scorecard, and through training, translate them for their
subordinates’ understanding and implementation. ‘‘Care’’ KPIs should not be static or
reactive, but should be dynamic and proactive. For instance, a ‘‘care’’ KPI in the R&D function in

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 a motorbike producer should immerse members in the proactive care for human safety, and in
the search for innovative technologies to produce more novel components for ever-increasing
level of safety. This instance echoes Machold et al.’s (2008, p. 670) view that ethics of care is a
capacity building strategy that augments the effectiveness and moral quality of an organization.
Morover, ‘‘care’’ KPI can be more proactively expanded into care plan, which can enable an
organization to identify those within the parameters of its care (Wheeler, 2002).
Transparency, as a key component of good corporate governance (Bhasin, 2005), should
not purely be law- or rule-based transparency, but also care-based transparency toward
which CEOs should endeavor to harmonize the interests between shareholders/investors
and the other stakeholders as in the case of Theptarin Hospital in Thailand. Theptarin
Hospital is the hospital for endocrine related diseases founded by the present owner and
CEO, Professor Thep Himathongkam, in 1985, where shareholders voluntarily did not ask for
dividends for 25 years and reinvested all profitability in R&D for the most accurate diagnostic
equipment and the most effective treatment methods for patients (Kantabutra, 2011).
Performance indicators of care for the community as well as ethical CSR should be
integrated into corporate governance scorecard. A multiple case research by Luu and
Venkatesh (2010) demonstrates the integration of an ethical CSR indicator on antibiotics
resistance level in the community health into corporate governance scorecard, whose
implementation reduced the abuse of antibiotics without antibiotic susceptibility testing as
well as the use of broad-spectrum antibiotics.
Ethics indicators should be communicated to organizational members effectively. Progress
towards an ethical organization that is meaningful and real can merely be attained when the
leaders bring about such above changes (Rushton, 2002). Leaders must be seen to make
choices that support the organization’s values regardless of the difficulty of that choice
(Thomas et al., 2004). New members should not be neglected. If new members feel bonded
to their organization they will subsume the ethos of corporate governance scorecard. New
members need to be active participants in the organization (Crane et al., 2004) and
members should not have to compromise their ethical standards to fulfill the organization’s
requirements (Lovell, 2002). They need to be change agents who leverage ethical standards
to reinforce the organization’s corporate governance.
As in every study, limitations of this study have been discerned. Cross-sectional data does
not enable the interpretation of the temporal sequence of the relationships between
corporate governance and its antecedents. Longitudinal study would provide further
insights into potential causalities. In addition, perceptual performance was utilized in the
study instead of objective measures. Although previous studies reflected a positive link
between objective and perceptual performance (Geringer and Hebert, 1991; Powell, 1992),
the latter is incapable of fully demonstrating the actual corporate performance.
A further research path to take is to look at trust as a precursor for corporate governance
since trust, especially knowledge-based trust and identity-based trust, among
organizational members leads to their commitment to corporate governance. Since CSR
demands continuous innovation and value creation which offer the opportunity for
knowledge sharing (Idowu and Louche, 2011), and CSR strategy development and
implementation can be facilitated through information provision and knowledge sharing
(Runhaar and Lafferty, 2008), another avenue for future research can be to discern if
absorptive capacity and knowledge sharing, which enhance CSR implementation, can
contribute to the potency of corporate governance.

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About the author

Luu Trong Tuan is currently a Business Administration (BA) teacher at the University of
Finance-Marketing, Ho Chi Minh City. He received his Master’s degree from Victoria
University, Australia in 2004. His research interests include organizational behavior,
performance management, and business ethics. Luu Trong Tuan can be contacted at:
[email protected]

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