Integrated Reports and Board Diversity: An International Perspective

Integrated Reports and Board Diversity: An International Perspective

Ana Isabel Lopes (Business Research Unit, Instituto Universitário de Lisboa, Portugal) and Maria João Braz (Instituto Universitário de Lisboa, Portugal & Caixa Geral de Depósitos, Portugal)
DOI: 10.4018/978-1-7998-2128-1.ch008

Abstract

Organizations currently must report to a broader audience, capturing the attention of several categories of stakeholders, who want to know why, where, and how companies create and add value, and how they deal with responsibility and sustainability issues, contributing to the emerging of integrated reporting (IR). IR is as an innovation in promoting a holistic and integrated vision of the business, where the Board of Directors must play an important role. This chapter covers diversity of directors seated on the board of integrated reporters, comparing two groups: those who are IR references and those that are IR regular reporters. The results show that organizations with larger boards, higher proportions of non-executive directors, and a higher proportion of women on the board have an higher probability of preparing IR reference reports, while the duality role of CEO inverts the probability, and no relationship is found with board experience.
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Introduction

Corporate social responsibility and corporate sustainability are distinct concepts, but the literature exposes a growing tendency towards a more integrated approach to both topics that incorporates social, environmental and economic perspectives. This integrate approach can be potentially achieved through the preparation of the so-called “integrated report,” a recent channel used by Organizations to communicate the way they create value through short, medium and long term. Organizations currently must report to a broader audience than shareholders, capturing the attention of several categories of stakeholders, who want to know why, where and how companies create and add value, and how they deal with responsibility and sustainability issues, contributing to the emerging of integrated reporting. While it is still voluntary in almost all the world, it is indeed gradually encouraged and supported by regulators, institutional investors and organizations, as an innovative nature in promoting a holistic and integrated vision of the organization, where the Board of Directors must play an important role (defining strategies, promoting policies and implementing best practices).

The main issue addressed in this chapter is an analysis of the different characteristics of Directors seated on the Board of Organizations preparing Integrated Reports.” As such, two different groups are created: the main focus, comprising all the organizations that prepared an integrated report that is considered a benchmark or that has obtained a premium; the control group, covering all the other organizations that also prepare an integrated report. The sample includes almost 380 entities all over the world identified as IR preparers, from whom people expect to be accountable for the transparency of their external communication process. Characteristics such has the role duality, the board size, the independence, the gender diversity and the experience of boards members are stressed and compared. Results show that larger Boards, with a larger proportion of non-executive directors and a higher proportion of women as directors on the board have higher likelihood of producing an integrated report that is highlighted as IR reference, while the dual role of the CEO negatively influences the recognition of leading practices of the integrated reports. This last result is not maintained if unlisted entities are removed. Due to the international context of all the entities included in the sample, institutional characteristics of the countries are also used for control issues. The findings will be of practical interest to investors (shareholders) and executives when evaluating the board composition and the perspectives of being engaged with the integrated reporting commitment.

Key Terms in this Chapter

Corporate Reporting: There is no unique definition, but includes the communication helping an organization to demonstrate to shareholders and potential investors its capabilities, opportunities, as well as the management’s ability to deal with changes in the business environment.

Integrated Thinking: Is the active attention by an organization of the relationships between its various operating and functional units and the capitals that the organization uses or affects and leads to integrated decision-making and actions that consider the creation of value over the short, medium and long term.

Board of Directors: A group of people with powers, duties, and responsibilities to decide and supervise the activities (strategic and operational) of an organization.

Integrated Reporter: An organization that prepares and publish integrated reports.

IR Reference Report: It is an integrated report included in the IIRC Examples Database but not considered as IR Reference Report.

Integrated Report: A summarizing communication about how an organization’s strategy, governance, performance and forecasts, lead to the creation of value in the short, medium and long term.

Integrated Reporting: A process founded in integrated thinking resulting in a periodic integrated report published by an organization about the value creation over time and other related concerns.

IIRC: The International Integrated Reporting Council (IIRC) is a global coalition of regulators, investors, companies, standard setters, the accounting profession and NGOs, promoting communication about value creation as the next step in the evolution of corporate reporting.

IR Reference Report: It is an integrated report considered by IIRC as being prepared under best practices or awarded by an external indepe006Edent organization, as included in the IIRC Examples Database.

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