Corporate Social Responsibility-Oriented Boards and Employee Welfare: Does Culture Matter?

Abstract

This paper explores the relationship between a board’s corporate social responsibility (CSR) orientation and its company’s labor policies. Using data from 1950 non-financial firms in 21 emerging economies from 2010 to 2023, we found evidence that a more CSR-oriented board (as indicated by high percentages of women and independent directors and the existence of the audit committee’s financial expertise and CSR committee) can result in better employee treatment. In addition, our empirical results suggest that this board attribute–employee welfare relationship is influenced by the national culture. Specifically, the positive impact of the board’s CSR orientation on corporate labor practices is more prevalent in consensus-oriented and indulgent societies. These findings provide useful information that policymakers and regulators can exploit to reform corporate governance regulations to improve the working environment, especially for employees in developing countries.

1. Introduction

Internal corporate social responsibility (internal CSR) is a concept that encompasses companies’ efforts and initiatives aimed to enhance the benefits and well-being of their employees. Turker [1] defined internal CSR practices as those directly related to employee’s physical and psychological working environment, from a safe and healthy workplace, fair salary, equal learning, and development opportunities to job security and effective communication. In recent years, thanks to the greater spotlight put on human capital, internal CSR or employee welfare has emerged as the most important issue within the CSR framework [2]. Chen et al. [3], Fauver et al. [4], and Saeed [5] claimed that employee-friendly practices increase employees’ commitment and companies’ reputation, which affects corporate sales, performance, and borrowing costs. Improving labor conditions is not only a critical value-enhancing strategy for businesses but also the most sustainable solution to combat poverty and achieve economic growth for nations. Considering how much employee treatment impacts economic and social outcomes, it is vital to identify the underlying factors that drive a firm’s labor decision-making.

A growing stream of financial research has shed light on the determinants of employee treatment, including market-governance mechanisms [6], social media [7], family-owned enterprises [8], tax strategies [9], peer effects [10], culture [2,11], and so on. However, a potential antecedent, i.e., the board of directors’ attributes, has not been explored yet. As the main representative of corporate governance, the board of directors determines the organization’s strategic orientation, impacting its sustainability and environmental stewardship policies. Understanding the impact of board-related characteristics on its responses to environmental and social concerns is crucial in promoting sustainable business practices. According to the resource dependence theory, one of the key resource dependence-related contributions of the board is to foster the company’s connection to its stakeholders. Nevertheless, studies that address the potential influence of board attributes—specifically, CSR-oriented characteristics—on how businesses treat their employees are notably lacking. Our research, which examines the relationship between the CSR-oriented board and employee welfare in emerging economies, is carried out to fill these gaps.

In detail, using data from non-financial firms operating in 21 emerging economies between 2010 and 2023, we examine whether a board of directors with a high percentage of women and independent directors, with directors possessing financial expertise sitting on the audit committee, and with a CSR committee, i.e., a CSR-oriented board, can improve the company’s treatment toward its employees. Our research is motivated by previous studies’ suggestion that firms with more CSR-oriented boards tend to impose superior CSR practices [12,13]. However, while these authors investigated how CSR-oriented mechanisms affect firms’ overall CSR performance in developed countries, we focus on the internal CSR aspect within the context of emerging markets. The reason is that labor conditions in emerging economies are typically inferior to those in advanced economies; thus, detecting possible factors to enhance the working environment for employees in these countries is more urgent. In addition, compared to advanced economies, institutional specificities of emerging markets, such as high market volatility, weak shareholder protection, and loose regulatory requirements, might adversely affect CSR practices’ results [5]. Consequently, we check whether our results differ from those related to our research. In addition, as García-Meca et al. [14], Kamran et al. [15], and Peng et al. [16] detected the moderating role of local culture in the relationship between board characteristics and CSR disclosure and performance, we further explore the impact of cultural features on our board attribute–employee welfare nexus.

The findings from our paper have several contributions to the existing literature. Firstly, we claim that a more CSR-oriented board significantly and positively affects corporate employee welfare. By providing new evidence on the undiscovered relationship between board characteristics and employee treatment policies, this research adds to the literature on the determinants of corporate labor decision-making. It also broadens the research stream on the outcomes of CSR-related corporate governance. Moreover, by exploring the board attribute–employee welfare nexus in emerging markets, our study contributes to the literature on economic development, since having stable and well-paying jobs is the most sustainable way to increase national income and consumption. Secondly, we reveal that the association between the board’s CSR orientation and employee treatment is more powerful in consensus and indulgent societies. By demonstrating the variations in the board attribute–employee welfare relationship across countries due to cultural diversity, this study confirms the interconnection between culture and finance and emphasizes the role of national culture in influencing corporate behaviors toward social issues.

The remaining parts of this paper are organized as follows. Section 2 reviews related research and introduces the main hypotheses. The next section presents data, main variables, and analyzed methods. Section 4 discusses the empirical results. The final section summarizes the key findings.

2. Literature Review and Hypothesis Development

A CSR-oriented board is a corporate board type that prioritizes and incorporates the CSR concept into its company’s strategy and decision-making processes to ensure that the business operations benefit society, the environment, and its stakeholders while maintaining financial success. Previous studies, such as Helfaya and Moussa [12], Shaukat et al. [13], and Zubeltzu-Jaka et al. [17], found that board CSR orientation can enhance CSR performance. Shaukat et al. [13] claimed that the greater the CSR orientation of the board (as measured by the board’s independence, gender diversity, and financial expertise on the audit committee), the more proactive and comprehensive the firm’s CSR strategy and the higher its environmental and social performance. Similarly, CSR-oriented directors have a positive and significant impact on the quality of environmental sustainability disclosure, as stated in Helfaya and Moussa [12]. Using a different approach—meta-analysis—the study of Zubeltzu-Jaka et al. [17] also provided robust empirical evidence of the positive effect that CSR-oriented boards have on social performance. Our study follows these authors by using several board attributes, namely board gender diversity, board independence, and the audit committee’s financial expertise, while adding the CSR committee to capture the board’s CSR orientation.

Board gender diversity

As stated by Kassinis et al. [18] and Naciti [19], the presence of women on a board can play a vital role in promoting sustainable practices. This statement can be explained from various perspectives. Firstly, because of women’s psychological traits, female directors are likely to be more stakeholder-oriented and sensitive to others’ welfare [20]. Consequently, a gender-diverse board can understand and address the needs of a broader range of stakeholders, from employees and customers to communities. Secondly, female directors tend to have different backgrounds and experiences from their male counterparts, enabling them to contribute different perspectives and values to the board’s decision-making processes [21], which in turn promotes a wider and more inclusive approach to CSR. Accordingly, we argue that a gender-diverse board might positively affect employee welfare due to female directors’ stronger empathy toward stakeholder issues.

Board independence

From the stakeholder theory perspective, the participation of independent directors on the board brings various benefits to CSR initiatives as independent directors are likely to be more applicable in overseeing and monitoring management [22] and more aware of strengthening stakeholder relationships, and may tend to consider social and environmental issues during their decision-making process [23]. From the resource dependence theory perspective, independent directors can attract valuable resources, including human capital, to their companies by establishing external links with stakeholders and other organizations [24]. Hence, we argue that a higher proportion of independent directors is associated with better employee treatment.

The audit committee’s financial expertise

According to the legitimacy theory, members of the audit committee with financial expertise can improve the transparency and accountability of CSR reporting, minimizing the information asymmetry between the company and its stakeholders. They might be involved in ensuring that CSR practices are not symbolic but genuine and credible, enhancing the company’s legitimacy in the eyes of its stakeholders and the public [25]. In addition, financial experts help to guarantee that CSR initiatives are properly funded and executed without conflict between profit-making and social responsibility. They also assess and advise the board in reducing risks associated with CSR programs, especially in labor practices or environmental maintenance [26]. Consequently, we argue that financial expertise within the audit committee can positively contribute to corporate labor policies.

CSR committee

A CSR committee is a specialized mechanism established within a business organization to align corporate activities with regulatory requirements and social norms and to ensure that those activities meet their ethical, environmental, and social responsibilities. Thus, this committee plays an important role in monitoring and maintaining quality CSR strategies and practices [27]. Córdova et al. [28] and Orazalin [29] claim that the CSR committee positively impacts CSR disclosures and performance. Accordingly, we argue that the existence of such a committee might enhance the company’s internal CSR.

Based on the above discussion, we expect a positive relationship between the board’s CSR orientation and its company’s labor policies. As a result, we propose the first hypothesis as follows:

H1. 

A CSR-oriented board positively affects corporate employee welfare.

Furthermore, the relationship between the CSR-oriented board and employee welfare might be influenced by national culture. Hofstede et al. [30] stated that countries differ in ethical standards and social norms due to variances in national cultural dimensions. These cultural settings affect personal traits, such as opinions, attitudes, and values, and so do the directors’ orientations toward CSR. Within a business organization, the local culture might be a vital element in forming corporate culture, influencing the communication style between seniors and juniors, the information sharing in the decision-making process, and hence, the corporate decision in CSR-related policies [31]. The differences in national culture among societies are reflected by the 6-Dimension (6-D) model, which was first introduced by Hofstede [32] and then expanded by Hofstede and Minkov [33] and Minkov and Kaasa [34]. These cultural dimensions include the following:

Power distance

Power distance (PD) is defined as the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally. In a high-power distance society, subordinates tend to follow their superiors’ orders, even when such arrangements are unethical [35], weakening the benefit of diverse perspectives from a CSR-orientated board.

Individualism

Individualism (IC) is the degree of interdependence a society maintains among its members. Hofstede et al. [30] argued that people in low individualist societies pay more attention to collective interests, thus valuing teamwork and collaboration. Such characteristics might stimulate the effect of board CSR orientation on stakeholder management.

Motivation towards achievement and success

The motivation towards achievement and success (DC) dimension is established based on the fundamental issue of what motivates people, such as wanting to be the best or liking what you do. A high-score society of this dimension, i.e., a decisive society, emphasizes competition, success, and high material achievement. Consequently, managers in decisive societies are more likely to focus on short-term financial performance, lessening their attention to other stakeholder issues [36].

Uncertainty avoidance

Uncertainty avoidance (UA) represents the extent to which the members of a culture feel threatened by ambiguous or unknown situations and have created beliefs and institutions to try to avoid these. Ringov and Zollo [37] argued that a society with high uncertainty avoidance is rule-oriented, making it more difficult to adapt to new requirements and practices. Hence, the potential advantages of CSR-oriented boards in addressing stakeholder welfare might be weakened in such a society.

Long-term orientation

Long-term orientation (LO) describes how every society must maintain some links with its past while dealing with the challenges of the present and future, and societies prioritize these two existential goals differently. Individuals with short-term orientation tend to focus on the near future, follow traditions, and view changes skeptically [14]. These characteristics might intensify the hardship of the board in adopting new CSR practices.

Indulgence

Indulgence (IR) is defined as the extent to which people try to control their desires and impulses based on the way they were raised. According to Hofstede and Minkov [33], members of indulgent societies are optimistic and aware of their desires. Hence, businesses in such societies are expected to pay more attention to various stakeholder needs, enhancing the impact of CSR-oriented boards on CSR issues.

Empirically, Cui et al. [38], García-Meca et al. [14], Kamran et al. [15], and Peng et al. [16] found a significant impact of national culture on moderating the association between board characteristics and CSR outcomes. In detail, García-Meca et al. [14] argued that the positive effects of independence and the diversity of banks’ boards on CSR reporting are reduced in countries with a weaker cultural system, that is, individualist, masculine, and vertically stratified societies that are not indulgent, are short-term oriented, and show high levels of uncertainty avoidance. Similar results were concluded in the study of Cui et al. [38] and Peng et al. [16] for corporate social disclosure data of multinational corporations (MNCs) from China, Japan, the United Kingdom, and the United States. Meanwhile, Kamran et al. [15] provided empirical evidence on the moderating role of tough and tender societies in the relationship between board gender diversity and ESG (environmental, social, and corporate governance) scores. Accordingly, we propose our second hypothesis as follows:

H2. 

The board attribute–employee welfare relationship is influenced by local culture.

3. Data and Methodology

To fulfill the study’s goals, we collected data from all non-financial companies of emerging economies for which financial and ESG information was accessible from the LSEG Datastream database (Refinitiv Eikon version 4.0.65101) from 2010 to 2023. Countries were categorized as emerging economies based on the International Monetary Fund (IMF)’s classification. Even though ESG data have been available on Datastream since 2002, we chose 2010 as the starting year of our research due to the database’s extensive coverage of developing countries, which began in 2009. Subsequently, companies with less than three years of data were eliminated. We also removed countries that did not have at least five eligible firms. This data screening process led to a final sample that included 1950 companies from 21 countries with 27,300 firm-year observations. Data at the national level were downloaded from the World Bank’s website. Continuous data were then winsorized at the 1st and 99th percentiles to reduce the impact of outliers [39].

The dependent variable was the employee welfare index (EWI), which indicates how well the businesses treat their workers. Among LSEG ESG indicators, we chose the workforce score, which measures a company’s effectiveness in maintaining job satisfaction, a healthy and safe workplace, diversity and equal opportunities, and development opportunities for its workforce as the representative for our EWI. The EWI takes values from 0 to 100. The larger the EWI scores, the better employee treatment. Another proxy for the employee welfare index in our study—EWI_Ex—is the difference between the EWI of a company and its industry average each year.

The independent variable, the CSR-oriented board index (CBI), is a composite index of four board attributes. Unlike most studies that investigated the impact of different board characteristics on CSR performance separately, in this research, we created a comprehensive index to evaluate the aggregate effect of CSR-oriented boards on labor treatment, following Helfaya and Moussa [12] and Shaukat et al. [13]. These authors’ CBIs were constructed from board gender diversity, board independence, and the audit committee’s financial expertise, which have been confirmed among governance mechanisms as being able to lead to superior CSR practices [17,40]. We further expanded and enhanced their index by adding the component of the CSR committee, which prior studies, such as Mallin et al. [24] and Orazalin et al. [29], suggested can positively impact social and environmental performance. In our research, board gender diversity and independence were dummy variables that take a value of 1 if the company’s percentages of women and independent directors equal or exceed the industry median, and 0 otherwise. Similarly, we assigned a score of 1 for firms with a CSR committee or an audit committee with at least three members, one of whom qualifies as a financial expert, and and assigned a score of 0 otherwise. Each company’s CBI value was calculated using the sum score of these four dummy variables. The CBI ranges from 0 to 4, with a higher score implying more CSR orientation.

To examine how the CSR-oriented board affects corporate employee treatment, we first applied the following baseline model:

$${\mathit{EWI}}_{i,t}={\alpha }_i+{\beta }_1{\mathit{CBI}}_{i,t-1}+\sum _{k=1}^n{\beta }_{1+k}{\mathit{CV}}_{k,t-1}+{\epsilon }_{i,t-1}$$

(1a)

$${\mathit{EWI\_Ex}}_{i,t}={\alpha }_i+{\beta }_1{\mathit{CBI}}_{i,t-1}+\sum _{k=1}^n{\beta }_{1+k}{\mathit{CV}}_{k,t-1}+{\epsilon }_{i,t-1}$$

(1b)

where EWI_i,t and EWI_Ex_i,t represent the employee welfare index’s scores of the company i at time t; CBI_i,t−1 represents the CSR-oriented board index’s score of the company i at time t−1; CV_k,t−1 is the vector of control variable k at time t−1, including both firm and country-level variables; and ε_it includes an independent idiosyncratic error term u_it and unobserved corporate characteristics c_it.

We included several control variables in our analyzed models that might influence the board attribute–employee welfare relationship. They consisted of firm-level variables, namely firm size (SIZE), leverage (LEV), profitability (ROA), and board size (BSize), as well as country-level variables, namely GDP per capita (GDPC) and governance quality (GQ) [4,40]. The details of all variables used are summarized in

Table 1. Definition of variables.

Variable	Description and Calculation	Source
Panel A. Dependent variables
EWI	An index measures a company’s effectiveness towards job satisfaction, a healthy and safe workplace, diversity and equal opportunities, and development opportunities for its workforce.	LSEG ESG
EWI_Ex	The difference between a company’s EWI and its industry average for the same year.	LSEG ESG
Panel B. Independent variable
CBI	The composite index of four board characteristic indicators: board gender diversity, board independence, audit committee’s financial expertise, and the CSR committee.	LSEG ESG
Panel C. Control variables
BSize	Total number of board members	LSEG ESG
SIZE	Natural logarithm of total assets	Worldscope
LEV	Total debt divided by total assets	Worldscope
ROA	Return on assets: Net profit divided by total assets	Worldscope
GDPC	Natural logarithm of GDP per capita (current USD)	World Bank
GQ	The average of six governance indicators: (i) voice and accountability; (ii) political stability and absence of violence; (iii) government effectiveness; (iv) regulatory quality; (v) rule of law; and (vi) control of corruption	World Bank

. All right-side variables were lagged for one year to minimize the effect of reverse causality [3]. In addition to using time dummies to control the time-specific changes in economic conditions, the industry and country fixed effects are also included to account for the time-invariant unobservable industry and country features. Furthermore, we estimated all regressions with robust standard errors clustered by firm.

4. Results

4.1. Descriptive Statistics

Table 2. Sample distribution by country and sector.

Panel A. By Country
Country	No. of firms	%	Country	No. of firms	%
Argentina	44	2.26	Peru	24	1.23
Brazil	96	4.92	Philippines	26	1.33
Chile	30	1.54	Poland	25	1.28
China	774	39.68	Russia	33	1.69
Colombia	12	0.62	Saudi Arabia	30	1.54
Egypt	9	0.46	South Africa	91	4.67
India	185	9.49	Thailand	132	6.77
Indonesia	43	2.21	Türkiye	68	3.49
Malaysia	219	11.23	UAE	28	1.44
Mexico	49	2.51	Vietnam	16	0.82
Morocco	16	0.82
Total			1950
Panel B. By Sector
Sector	No. of firms	%	Sector	No. of firms	%
Basic Materials	269	13.79	Industrials	413	21.18
Consumer Discretion	286	14.67	Real Estate	135	6.92
Consumer Staples	230	11.79	Technology	153	7.85
Energy	106	5.44	Telecommunications	77	3.95
Health Care	142	7.28	Utilities	139	7.13
Total			1950

The study period is from 2010 to 2023.

reports the sample distribution by country and business sector. As can be seen, our sample is geographically diverse. However, firms from Asian economies, especially China (39.68%), Malaysia (11.23%), and India (9.49%) are the most dominant. On the other hand, four countries account for less than 1% of the total sample, namely Colombia, Egypt, Mexico, and Vietnam. Regarding the business sector, the number of industrial companies is the largest (21.18%), followed by those of consumer discretion (14.67%) and basic materials (13.79%). Meanwhile, telecommunication firms contribute the lowest percentage (3.95%).

The descriptive statistics for the main variables are exhibited in

Table 3. Descriptive statistics.

Variable	Obs.	Mean	S.D.	Min	Max
EWI	12,600	53.752	28.550	0.15	99.84
EWI_Ex	12,600	0.007	23.300	−63.821	57.544
CBI	12,599	2.405	1.034	0	4
BSize	12,589	9.883	3.067	3	26
SIZE	25,884	16.791	2.489	9.448	26.818
LEV	25,864	25.013	18.756	0	271.36
ROA	25,864	7.576	7.855	−141.43	47.180
GDPC	27,300	8.973	0.681	7.208	10.891
GQ	25,350	−0.207	0.349	−1.032	1.169

The variables are described in Table 1. The study period is from 2010 to 2023.

. The values of the EWI range from 0.15 to 99.84, with a mean of 53.752. Moreover, there are big differences in employee welfare across the studied companies, given the large standard deviation of 28.550. On the other hand, the CBI’s mean is 2.405, implying that firms that have a board with more CSR-oriented attributes are somewhat dominant in our sample. Regarding the control variables, the average board size is 10 members, the average leverage ratio is 25%, and the average ROA is around 7.5%.

Table 4. Correlation matrix.

	EWI	EWI_Ex	CBI	BSize	SIZE	LEV	ROA	GDPC	GQ
EWI	1.000
EWI_Ex	0.884 ***	1.000
CBI	0.266 ***	0.236 ***	1.000
BSize	0.138 ***	0.126 ***	−0.038 ***	1.000
SIZE	0.305 ***	0.273 ***	0.110 ***	0.305 ***	1.000
LEV	0.026 ***	0.044 ***	0.045 ***	0.087 ***	0.324 ***	1.000
ROA	0.067 ***	0.050 ***	0.010	−0.032 ***	−0.180 ***	−0.362 ***	1.000
GDPC	0.038 ***	0.001	0.068 ***	−0.122 ***	0.207 ***	0.007	−0.049 ***	1.000
GQ	0.008	0.001	0.004	−0.055 ***	0.159 ***	−0.009	−0.028 ***	0.667 ***	1.000

The variables are described in Table 1. The study period is from 2010 to 2023. *** indicates significant levels at 1%.

presents the Pearson correlation matrix. The coefficient between the CBI and the EWI (or EWI_Ex) is positive and significant, implying that the CSR-oriented board is correlated with firm employee treatment policies. In addition, all firm-level control variables also correlate positively with the dependent variables. In addition, except for the one between EWI and EWI_Ex, other coefficients are less than 0.7. As all variance inflation factors (VIFs) are lower than 2 (not reported), it can be confirmed that our models do not suffer from multicollinearity issues.

4.2. Main Findings and Sensitive Analyses

Table 5. CSR-oriented board and employee welfare—baseline regression results.

	Dependent Variable: EWI			Dependent Variable: EWI_Ex
	(1)	(2)	(3)	(1)	(2)	(3)
CBIt−1	0.194 ***	0.190 ***	0.059 ***	0.184 ***	0.192 ***	0.043 ***
	(0.015)	(0.015)	(0.011)	(0.015)	(0.016)	(0.011)
BSizet−1	0.081 ***	0.083 ***	−0.025	0.064 ***	0.068 ***	−0.003
	(0.020)	(0.020)	(0.017)	(0.020)	(0.021)	(0.016)
SIZEt−1	0.359 ***	0.361 ***	0.339 ***	0.333 ***	0.356 ***	0.210 ***
	(0.025)	(0.026)	(0.050)	(0.025)	(0.027)	(0.051)
LEVt−1	−0.027	−0.022	−0.047 *	−0.012	−0.015	−0.014
	(0.020)	(0.021)	(0.024)	(0.021)	(0.022)	(0.024)
ROAt−1	0.123 ***	0.124 ***	0.034 ***	0.103 ***	0.109 ***	0.031 **
	(0.018)	(0.018)	(0.013)	(0.018)	(0.019)	(0.013)
GDPCt−1	0.033		0.038 **	0.034 *		0.042 **
	(0.020)		(0.018)	(0.021)		(0.017)
GQt−1	0.049 ***		0.081 ***	0.028 *		0.054 ***
	(0.017)		(0.015)	(0.016)		(0.015)
Const.	−0.093	−0.081 ***	−0.352 ***	−0.028	−0.095 ***	−0.144 ***
	(0.096)	(0.022)	(0.047)	(0.098)	(0.024)	(0.046)
Country FE	Yes	No	No	Yes	No	No
Industry FE	Yes	No	No	Yes	No	No
Firm FE	No	No	Yes	No	No	Yes
Year FE	Yes	No	Yes	Yes	No	Yes
Country-year FE	No	Yes	No	No	Yes	No
Industry-year FE	No	Yes	No	No	Yes	No
Obs.	10,604	10,604	10,604	10,604	10,604	10,604
R-squared	0.190	0.234	0.139	0.131	0.146	0.059
F-stat.	18.03 ***	107.60 ***	19.33 ***	11.42 ***	95.64 ***	9.53 ***

The variables are described in Table 1. The study period is from 2010 to 2023. Robust standard errors are in brackets. *, **, and *** indicate significant levels at 10%, 5%, and 1%, respectively.

reveals the regression results of three different specifications for Equation (1a,b). For each dependent variable, the baseline model’s results with the country, industry, and year-fixed effects are presented in Column (1). To assess the result consistency, following Fauver et al. [4], we perform and display the results of models with country-year and industry-year fixed effects without macroeconomic control variables (Column (2)) and models with firm and year-fixed effects (Column (3)). As can be seen, the coefficients of the CBI are significantly positive across models, which suggests that the CSR-oriented board can play a critical role in improving employee treatment. Our findings support and broaden previous studies of Helfaya and Moussa [12] and Shaukat et al. [13] about the constructive role of the board CSR orientation on CSR policies and initiatives. They also complement the advantage of having a diverse board on CSR-related outcomes, besides increasing the utilization of clean energy [41], enhancing eco-innovation and emission management [42], or boosting the production of environmentally friendly products [43]. Moreover, the CBI’s coefficients in firm-fixed effects models are considerably lower than others, indicating that the cross-sectional variation in our CBI largely drives its impact on employee welfare. In addition, among control variables, the firm size is the factor that has the strongest influence on labor policies. The results are nearly identical between the two proxies of our employee welfare index. i.e., the EWI and EWI_Ex.

In addition to changing model specifications, we implemented other sensitivity tests to check the robustness of our results. We only report the estimated coefficients of the independent variable (CBI) for brevity. Firstly, as endogeneity issues originated from reverse causality and omitted variables might influence our board attribute–employee welfare regression models, we re-ran Equation (1a,b) with two-stage least squares (2SLS) estimations. In tandem with Saeed [5] and Orazalin et al. [29], we used the industry-year average (CBI_Ind) as an instrument for our CSR-oriented board index. In the first stage, the CBI was regressed on CBI_Ind and other control variables. The fitted values from the first-stage regressions (CBI_Fitted) were then stored and used as the independent variable for the second-stage regressions. In addition, to examine whether CBI_Ind is a valid instrument for CBI, we performed an over-identifying restriction test, following Ben-Nasr and Ghouma [44]. In detail, we regressed the residuals of the second stages on the exogenous variables, i.e., CBI_Ind and the control variables. The results (untabulated) show that the explanatory variables are jointly insignificant, ensuring that CBI_Ind is exogenous. The results of 2SLS estimations with the EWI as the dependent variable are presented in Panel A of

Table 6. CSR-oriented board and employee welfare—robustness tests.

Panel A. 2SLS
	First stage	Second stage	First stage	Second stage	First stage	Second stage
	CBI	EWI	CBI	EWI	CBI	EWI
CBI_Indt−1	0.661 ***		0.649 ***		0.410 ***
	(0.040)		(0.052)		(0.039)
CBI_Fittedt−1		0.447 ***		0.503 ***		0.263 ***
		(0.071)		(0.082)		(0.102)
Country FE	Yes	Yes	No	No	No	No
Industry FE	Yes	Yes	No	No	No	No
Firm FE	No	No	No	No	Yes	Yes
Year FE	Yes	Yes	No	No	Yes	Yes
Country-year FE	No	No	Yes	Yes	No	No
Industry-year FE	No	No	Yes	Yes	No	No
Obs.	10,603	8639	10,603	8638	10,603	8639
R-squared	0.090	0.165	0.108	0.212	0.087	0.121
F-stat.	13.10 ***	12.14 ***	50.27 ***	58.86 ***	22.32 ***	14.16 ***
Panel B. Excluding China
	Dependent variable: EWI			Dependent variable: EWI_Ex
	(1)	(2)	(3)	(1)	(2)	(3)
CBIt−1	0.202 ***	0.197 ***	0.064 ***	0.193 ***	0.197 ***	0.050 ***
	(0.018)	(0.019)	(0.014)	(0.019)	(0.020)	(0.014)
Country FE	Yes	No	No	Yes	No	No
Industry FE	Yes	No	No	Yes	No	No
Firm FE	No	No	Yes	No	No	Yes
Year FE	Yes	No	Yes	Yes	No	Yes
Country-year FE	No	Yes	No	No	Yes	No
Industry-year FE	No	Yes	No	No	Yes	No
Obs.	7298	7298	7298	7298	7298	7298
R-squared	0.207	0.258	0.102	0.135	0.151	0.049
F-stat.	11.84 ***	68.57 ***	9.38 ***	7.74 ***	59.23 ***	5.93 ***
Panel C. Equally Weighted Sample
	Dependent variable: EWI			Dependent variable: EWI_Ex
	(1)	(2)	(3)	(1)	(2)	(3)
CBIt−1	0.254 ***	0.245 ***	0.073 **	0.223 ***	0.226 ***	0.064 **
	(0.031)	(0.034)	(0.031)	(0.034)	(0.038)	(0.031)
Country FE	Yes	No	No	Yes	No	No
Industry FE	Yes	No	No	Yes	No	No
Firm FE	No	No	Yes	No	No	Yes
Year FE	Yes	No	Yes	Yes	No	Yes
Country-year FE	No	Yes	No	No	Yes	No
Industry-year FE	No	Yes	No	No	Yes	No
Obs.	1374	1354	1374	1374	1354	1374
R-squared	0.265	0.234	0.185	0.206	0.198	0.044
F-stat.	8.81 ***	30.72 ***	4.58 ***	5.07 ***	22.09 ***	2.19 ***
Panel D. Excluding Firm-Year Observations with CBI = 0
	Dependent variable: EWI			Dependent variable: EWI_Ex
	(1)	(2)	(3)	(1)	(2)	(3)
CBIt−1	0.196 ***	0.192 ***	0.064 ***	0.187 ***	0.194 ***	0.045 ***
	(0.017)	(0.017)	(0.012)	(0.017)	(0.018)	(0.012)
Country FE	Yes	No	No	Yes	No	No
Industry FE	Yes	No	No	Yes	No	No
Firm FE	No	No	Yes	No	No	Yes
Year FE	Yes	No	Yes	Yes	No	Yes
Country-year FE	No	Yes	No	No	Yes	No
Industry-year FE	No	Yes	No	No	Yes	No
Obs.	10,028	10,024	10,028	10,028	10,024	10,028
R-squared	0.186	0.233	0.138	0.129	0.145	0.061
F-stat.	16.25 ***	97.42 ***	17.73 ***	10.41 ***	87.69 ***	9.02 ***
Panel E. An Alternative Measure of CBI
	Dependent variable: EWI			Dependent variable: EWI_Ex
	(1)	(2)	(3)	(1)	(2)	(3)
CBIt−1	0.216 ***	0.218 ***	0.070 ***	0.195 ***	0.213 ***	0.037 ***
	(0.017)	(0.018)	(0.014)	(0.018)	(0.018)	(0.014)
Country FE	Yes	No	No	Yes	No	No
Industry FE	Yes	No	No	Yes	No	No
Firm FE	No	No	Yes	No	No	Yes
Year FE	Yes	No	Yes	Yes	No	Yes
Country-year FE	No	Yes	No	No	Yes	No
Industry-year FE	No	Yes	No	No	Yes	No
Obs.	10,593	10,593	10,593	10,593	10,593	10,593
R-squared	0.194	0.239	0.139	0.132	0.148	0.057
F-stat.	17.66 ***	108.51 ***	19.42 ***	10.77 ***	91.91 ***	9.12 ***

The variables are described in Table 1. The study period is from 2010 to 2023. Robust standard errors are in brackets. ** and *** indicate significant levels at 5% and 1%.

. The results with EWI_Ex as the dependent variable are similar, so we do not report them for brevity.

Furthermore, as companies from China account for nearly 40% of our sample, we removed Chinese firms in the second robustness check and re-estimated the baseline models to verify that their presence does not affect our results. Similarly, to reduce the bias towards countries with large proportions of companies, we randomly selected thirty firms for each country to create an equally weighted sample. In addition, we re-ran our baseline models after excluding firm-year observations with CBI = 0. The results for these tests are reported in Panels B, C, and D of Table 6, respectively. In the final robustness test, we replicated our results in Table 5, using an alternative measurement method for the CBI. Specifically, the CBI is calculated by the average of four Z-scores of women and independent directors’ percentages, the audit committee’s financial expertise, and the CSR committee [14]. The results for models with the new CBI are presented in Panel E of Table 6. As can be seen from Panel A to E of Table 6, the estimated coefficients of the CBI are still positive and significant, confirming the vital role of the board’s CSR orientation in enhancing employee working conditions.

4.3. Additional Analysis

Hofstede et al. [30] argued that ethical standards and rules of conduct vary across countries due to differences in national culture dimensions. Culture trails influence not only individuals’ behaviors but also corporate decision-making [45,46,47]. Consequently, we wondered whether the role of the board’s CSR orientation in enhancing labor treatment is strengthened or weakened under various cultural settings. With a geographically diversified sample, we further examined the moderating effect of culture on the board attribute–employee welfare relationship.

To do so, we first collected the scores of the 6-D cultural model for each country in our sample from The Culture Factor Group’s website. Countries were then divided into below or above-median groups based on each cultural dimension’s median. We ran Equation (1a,b) for each group. Finally, the seemingly unrelated regressions and Chow tests were applied to compare these groups’ differences in the CBI’s coefficients. The results are exhibited in

Table 7. The effect of cultural dimensions on the board attribute–employee welfare relationship.

	PD		IC		DC		UA		LO		IR
	(0)	(1)	(0)	(1)	(0)	(1)	(0)	(1)	(0)	(1)	(0)	(1)
Panel A. Dependent variable: EWI
CBIt−1	0.191 ***	0.191 ***	0.195 ***	0.185 ***	0.232 ***	0.164 ***	0.183 ***	0.206 ***	0.214 ***	0.182 ***	0.156 ***	0.219 ***
	(0.026)	(0.018)	(0.024)	(0.018)	(0.024)	(0.018)	(0.017)	(0.026)	(0.030)	(0.017)	(0.019)	(0.023)
Country FE	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Industry FE	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Year FE	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Obs.	3646	6886	4553	6013	3866	6654	7786	2734	2916	7083	5701	4682
R-squared	0.213	0.194	0.211	0.217	0.228	0.201	0.199	0.269	0.236	0.199	0.193	0.223
F-stat.	27.07 ***	44.60 ***	32.55 ***	44.66 ***	30.63 ***	44.86 ***	50.05 ***	26.83 ***	23.98 ***	48.76 ***	36.50 ***	35.94 ***
Coefficient difference test for CBI
Difference	0.000		0.010		0.068		−0.023		0.032		−0.063
Chi2_stat.	0.00		0.12		5.28 **		0.56		0.88		4.46 **
Panel B. Dependent variable: EWI_Ex
CBIt−1	0.188 ***	0.179 ***	0.187 ***	0.185 ***	0.230 ***	0.154 ***	0.173 ***	0.205 ***	0.213 ***	0.170 ***	0.146 ***	0.226 ***
	(0.028)	(0.018)	(0.025)	(0.019)	(0.026)	(0.019)	(0.018)	(0.029)	(0.032)	(0.018)	(0.019)	(0.024)
Country FE	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Industry FE	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Year FE	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Obs.	3646	6886	4553	6013	3866	6654	7786	2734	2916	7083	5701	4682
R-squared	0.137	0.135	0.119	0.156	0.147	0.135	0.121	0.180	0.171	0.131	0.131	0.153
F-stat.	15.85 ***	28.95 ***	16.48 ***	29.86 ***	17.87 ***	28.00 ***	28.83 ***	16.02 ***	16.01 ***	29.48 ***	23.15 ***	22.59 ***
Coefficient difference test for CBI
Difference	0.011		0.002		0.076		−0.032		0.043		−0.080
Chi2_stat.	0.08		0.00		5.70 **		0.87		1.37		6.70 ***
Median	70		30		52		66		29		42

The variables are described in Table 1. The study period is from 2010 to 2023. Robust standard errors are in brackets. ** and *** indicate significant levels at 5% and 1%, respectively.

. For brevity, we do not present the estimated coefficients of control variables. For each dimension, Column (0) reports the results of the below-median group, while Column (1) shows the ones of the above-median group. As is shown, the results for the EWI and EWI_Ex are similar. The differences in CBI’s coefficients are statistically significant between the below and above-median groups of DC and IR dimensions, while they are insignificant in the other four dimensions.

Regarding DC, a high score (decisive) on this dimension means that competition, achievement, and success will be the driving forces in society. Meanwhile, a low score (consensus-oriented) on the dimension indicates that caring for others and quality of life are society’s major values. The CBI’s coefficients of the below-median group are considerably larger than those of the above-median one, implying that the impact of the CSR-oriented board on employee welfare is stronger in consensus-oriented societies. Regarding IR, people in societies with high scores on this dimension (indulgent societies) have an optimistic attitude and are willing to follow their desires and enjoy life. In contrast, people in societies with low scores (restrained societies) are prone to cynicism and pessimism. Compared to citizens in indulgent societies, they place less importance on leisure time and exercise greater control over their desires. According to our results, the board attribute–employee welfare relationship is more prevalent in indulgent societies. These above findings not only support the significant role of culture in the relationship between the corporate governance mechanisms and CSR-related aspects that were documented in the papers of Cui et al. [38], García-Meca et al. [14], and Kamran et al. [15], but also aid to the studies of Gallego-Álvarez and Ortas [48], Orlando et al. [49], Ringov and Zollo [37], and Xu and Wang [2] about the impact of culture on CSR outcomes.

Finally, to verify the consistency of our results, we created interaction variables between the CBI and cultural dimensions (CBI*CF), and then re-estimated Equation (1a,b) with these variables are included. The results in

Table 8. The effect of cultural dimensions—robustness check.

	PD	IC	DC	UA	LO	IR
	Panel A. Dependent variable: EWI
CBIt−1	0.183 ***	0.175 ***	0.231 ***	0.185 ***	0.201 ***	0.167 ***
	(0.026)	(0.024)	(0.024)	(0.017)	(0.027)	(0.018)
CBIt−1*CF	0.017	0.033	−0.058 **	0.032	−0.010	0.055 **
	(0.031)	(0.029)	(0.029)	(0.031)	(0.028)	(0.028)
Country FE	Yes	Yes	Yes	Yes	Yes	No
Industry FE	Yes	Yes	Yes	Yes	Yes	No
Year FE	Yes	Yes	Yes	Yes	Yes	Yes
Obs.	10,604	10,604	10,604	10,604	10,604	10,604
R-squared	0.190	0.190	0.190	0.190	0.190	0.190
F-stat.	18.52 ***	18.65 ***	17.86 ***	17.80 ***	18.02 ***	17.66 ***
	Panel B. Dependent variable: EWI_Ex
CBIt−1	0.179 ***	0.176 ***	0.221 ***	0.176 ***	0.206 ***	0.150 ***
	(0.028)	(0.025)	(0.025)	(0.018)	(0.029)	(0.019)
CBIt−1*CF	0.008	0.015	−0.058 *	0.030	−0.029	0.069 **
	(0.032)	(0.030)	(0.030)	(0.031)	(0.030)	(0.028)
Country FE	Yes	Yes	Yes	Yes	Yes	Yes
Industry FE	Yes	Yes	Yes	Yes	Yes	Yes
Year FE	Yes	Yes	Yes	Yes	Yes	Yes
Obs.	10,604	10,604	10,604	10,604	10,604	10,604
R-squared	0.131	0.131	0.132	0.132	0.132	0.133
F-stat.	11.48 ***	11.55 ***	11.29 ***	11.30 ***	11.27 ***	11.25 ***

The variables are described in Table 1. The study period is from 2010 to 2023. Robust standard errors are in brackets. *, **, and *** indicate significant levels at 10%, 5%, and 1%, respectively.

confirm our previous findings on the moderating effect of local culture on the board attribute–employee welfare relationship.

5. Conclusions

Using data from 1950 companies operating in 21 emerging economies between 2010 and 2023, this study investigated the impact of board attributes on firm employee welfare. Based on a composite CSR-oriented board index, comprising four board characteristics, including board gender diversity, board independence, audit committee’s financial expertise, and CSR committee, we found a significant and positive relationship between a board’s CSR orientation and its company’s employee treatment. These results confirm the critical role of the CSR-tailored mechanism in driving firm labor-friendly decisions and suggest a potential channel to explain how this governance mechanism affects firms’ overall CSR and financial performance, as stated in previous studies of Helfaya and Moussa [12], Mallin et al. [24], and Shaukat et al. [13].

Additionally, our cross-sectional analyses revealed that the board attribute–employee welfare nexus is influenced by local culture. We found evidence that the impact of board CSR orientation on improving corporate labor treatment is more predominant in consensus-oriented and indulgent societies. Since the principal values in a consensus-oriented society are quality of life and care for others, while the people in indulgent societies are more likely to be positive and enjoy life, our results are as expected. This evidence is also in tandem with the outcomes from Cui et al. [38], García-Meca et al. [14], Kamran et al. [15], and Peng et al. [16] regarding the moderating effect of culture on the relationship between board characteristics and CSR disclosure and performance.

Overall, this research sheds light on the relationship between board CSR attributes and labor treatment, which has not been investigated. Theoretically, this paper supports the stakeholder theory, which suggests that a diverse board of directors tends to balance a company’s financial and non-financial goals better while putting more pressure on managers to respond to stakeholder concerns related to environmental and social activities, hence achieving more successful ESG performance. It also supports the resource dependence theory, which emphasizes the importance of a diverse board in attracting critical resources, including human capital, and promoting firms’ long-term sustainability. In addition, our results can act as empirical evidence for the main prediction of the resource-based view theory, which argues that CSR-oriented companies build on their distinct internal CSR competencies and resources to maintain competitive advantages [50]. Practically, this study confirms the CSR-oriented board’s role as one of the antecedents of employee treatment, which policymakers and regulators can exploit to reform corporate governance regulations to improve the working environment, especially for workers in developing countries. Policies to increase the diversification of the boardroom should be beneficial, such as requiring a sufficient proportion of independent directors as in the UK Corporate Governance Code [51]. Furthermore, our elaboration on the impact of local culture provides useful information to managers for creating employee-friendly practices suitable for workers in each country. For example, compared to employees in indulgent societies, those in restrained societies are focused more on work and place less importance on their free time. Therefore, managers in restrained societies should consider career development programs rather than leisure activities as an efficient motivational strategy for their workers [52].

The primary limitation of our study is the subjectivity and heterogeneity of CSR data. Firstly, as each CSR agency has its own CSR assessment criteria, using CSR scores from different agencies might lead to different outcomes. Secondly, even within the same agency, the CSR performance of a company might be rated differently based on each analyst. This drawback is broadly acknowledged among CSR studies. Hence, research using other employee treatment proxies to compare our findings might be interesting. Expanding the sample and performing multi-level analyses, such as regional differences within countries and specific cultural combinations influencing board behaviors is also a potential direction. We will address these matters in future work.