Board meeting, loss, and corporate social responsibility disclosure

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Illustration by jurnal idd

Corporate social responsibility disclosure is an important action that must be taken by the company because it can improve good image or reputation of the company. Companies with good and credible corporate social responsibility disclosure is considered to have good corporate governance related to corporate responsibility. However, corporate awareness to carry out social responsibility is not maximized. Awareness of these obligations cannot be ruled out, so efforts are needed from company management to actively care for environmental problems that occur and then realize them through corporate social responsibility activities.

Conger explained that the board meeting was an important element in increasing the effectiveness of directors and commissioners’ performance in the company. When directors and commissioners hold regular meetings, more information and knowledge obtained related to the company’s performance to influence and direct the company to match the established company goals. Board meetings are good medium to monitor company performance, the more often board meetings are held, problems relating to the duties of directors and commissioners and social and environmental problems faced by the company can be resolved immediately.

The board of commissioners is the organ of the company responsible for carrying out the supervisory function. Board of Commissioners meetings are a medium of communication between members of the board of commissioners that can be used to make decisions about existing policies and resolve problems faced by the company. Based on the Financial Services Authority Regulation (OJK) Number 33 / PJOK.04 / 2014 article 31, the board of commissioners is required to hold a meeting at least once in 2 months. Therefore, the higher the frequency of the board of commissioners in holding meetings, the better decisions are made mainly related to disclosure of corporate social responsibility.

The board of directors is company representatives who have full authority and responsibility in carrying out the company’s operational activities in accordance with the company’s objectives. Based on the Financial Services Authority (OJK) Regulation No. 33 / PJOK.04 / 2014 article 16, the board of directors is required to hold a board meeting regularly at least once a month. Board of directors’ meetings are a great way to effectively communicate their various responsibilities in achieving sustainable company goals. However, board of directors’ meetings cannot always improve the effectiveness and disclosure of social responsibility. Some empirical evidence explains that Indonesians’ concern for the environment is still low, so when too much information is revealed, the investors will not be able to grasp the information effectively.

Hategan explained that the indicators that influence company decisions in reporting corporate social responsibility activities is the maximum profit. However, the size of company is cannot be separated from the risk of loss arising from mistakes in the company’s financial management. This loss will affect the company’s operational activities due to reduced funds managed by the company. Disclosure of corporate social responsibility will be lesser for companies that suffer losses because companies must spend more money to disclose social information.

Corporate losses can affect corporate social responsibility policies because the company does not have funds that can be allocated for these activities. When a loss occurs, a board meeting is needed to discuss the problems facing the company. Ponnu and Karthigeyan explained that in their meeting, directors and commissioners could exchange ideas, provide opinions, and analyze various problems to formulate solutions. Thus, the frequency of board meetings is high when the company suffers losses and can lead to more discussion related to corporate social responsibility, which can lead to more disclosure of social responsibility.

Harymawan, Agustia, Aprilia, and Ratri conducted research in 2019 involving 251 samples from 71 companies listed on the Indonesia Stock Exchange (BEI) in the period 2010-2017. This study used sustainability reports, annual reports, financial reports, and the ORBIS database.

The analysis revealed that the board of commissioners ‘meeting did not affect the disclosure of corporate social responsibility but the board of directors’ meeting had a negative and significant influence on the disclosure of corporate social responsibility. Furthermore, this study found that losses suffered by the company did not affect the disclosure of corporate social responsibility. However, losses suffered by companies can reduce the negative relationship between board of directors’ meetings and disclosure of corporate social responsibility. For companies, managers, and shareholders, this research can show how to effectively manage the frequency of board meetings, especially when a company suffers a loss, and shows that the frequency of board meetings becomes effective when a company faces loss.

Author: Iman Harymawan, Ph.D. Details of research available at: https://jssidoi.org/jssi/uploads/papers/35/Harymawan_Board_meeting_loss_and_corporate_social_responsibility_disclosure.pdf

Harymawan, I., Agustia, D., Aprilia, P., & Ratri, M. C. (2020). Board meeting, loss, and corporate social responsibility disclosure. Journal of Security and Sustainability Issues. https://doi.org/10.9770/jssi.2020.9.J(11)

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