The influence of firm type on the degree of
transparency about CSR
The reason behind not publishing CSR information
Master thesis, MSc Accountancy
University of Groningen, Faculty of Economics and Business
June, 2017
Sjoerdtje Visser
s2202395
Paterswoldseweg 158a
9727 BM Groningen
06 11 50 22 68
s.visser.22@student.rug.nl
Supervisors
prof. dr. D.A. (Dick) de Waard RA MA
drs. L.M. (Leo) Wielens RA
ABSTRACT
The Netherlands is progressive in sustainability reporting compared to other countries. Nevertheless, half of the most active firms in the Netherlands did not publish information about their corporate social responsibility (CSR). This study investigates the influence of firm type on the degree of transparency about CSR. The data used in this study are firm types that participated in the transparency benchmark. Listed companies, family firms, cooperatives, public limited companies, private limited companies, state holdings, universities and university medical centers (UMCs) and public-interest entities are investigated in this explorative study. The results show that private limited companies, family firms and public limited companies are associated with the group of companies with a score of zero. State holdings and listed firms on the stock exchange at the AEX have the highest degrees of transparency. UMCs have a below-average degree of transparency. Listed firms trading on the AScX stock exchange and entities of public-interest from other sectors than bank and insurance companies show the lowest degrees of transparency. Banks and insurance companies of public interest which cannot be classified as another firm type are either included in the top tier degree or to the bottom tier degree of transparency. Cooperatives, companies listed at the AMX and universities are not associated with a certain degree of transparency about CSR, their ratings are widely dispersed. Additionally, the results show that each firm type either increased their average score on the transparency benchmark or increased their proportion of firms that decided to report on their CSR activities over the past three years.
TABLE OF CONTENT
1. INTRODUCTION ... 4 1.1 Inducement ... 4 1.2 Contribution ... 5 1.2.1 Scientific contribution ... 5 1.2.2 Social contribution ... 6 1.3 Research question ... 6 2. THEORETICAL FRAMEWORK ... 7 2.1 Firm type ... 7 2.2 Isomorphism ... 8 2.3 Agency theory ... 9 2.4 Stakeholder theory... 92.5 Transparency of firm types ... 9
2.5.1 Listed companies ... 10
2.5.2 Family firms ... 10
2.5.3 Cooperatives ... 11
2.5.4 Public limited companies and private limited companies ... 12
2.5.5 State holdings ... 12
2.5.6 Universities and University Medical Centers ... 13
2.5.7 Public-interest entities ... 14
2.6 Development over the past three years ... 14
2.7 Summarized transparency expectation ... 15
3. METHODOLOGY ... 16
3.1 Sample design and data collection ... 16
3.2 Variables... 16
3.2.1 Firm type... 16
3.2.2 Degree of transparency about CSR in a report ... 17
3.3 Testing ... 17
4. RESULTS AND ANALYSIS ... 19
4.1 Score of zero... 19
4.2 Results ... 20
4.2.2 Family firms ... 20
4.2.3 Cooperatives ... 21
4.2.4 Public limited companies and private limited companies ... 22
4.2.5 State holdings ... 23
4.2.6 Universities and University Medical Centers ... 24
4.2.7 Public-interest entities ... 25
4.2.8 Comparison between firm types ... 26
4.3 Development over the past three years ... 27
5. CONCLUSION ... 31
5.1 Conclusion of the results ... 31
5.2 Limitations and recommendations ... 33
REFERENCES ... 34
APPENDIX A: Distribution of firms ... 38
APPENDIX B: Firms TB 2016 ... 39
4
1. INTRODUCTION
1.1 Inducement
“We moeten weten wat elk bedrijf doet”, said European Commissioner Michel Barnier1
. We need to know what every company is doing, because transparency can provide responsibility by reporting not only about financial numbers. Sustainability, human rights and social policy should be part of the report of a company. Managers and bankers should serve the economy, not only themselves1. The Dutch government attempts to encourage a higher degree of transparency in business operations and their consequences in non-financial reports2. The increasing amount of sustainability reporting standards indicates the importance of disclosure about Corporate Social Responsibility (CSR) as well (International Integrated Reporting Council, 2013; Alonso‐Almeida, Llach & Marimon, 2014). Despite the governmental initiatives, many companies do not disclose information about their contribution to CSR2.
The Ministry of Economic Affairs performs an annual transparency benchmark (TB) on the sustainability reports of the largest active firms in the Netherlands (Ministerie van Economische Zaken, 2016). The TB 2016 considered 512 firms and investigated the content and quality of the sustainability reports of 2015. Companies can achieve a maximum score of 200 points, 100 for both the content as well the quality (Ministerie van Economische Zaken, 2016). Firms with certain characteristics such as being listed, having a certain turnover and/or having more than 500 employees had mandatory participation in the benchmark report. Furthermore, organizations can voluntarily participate in the TB. The amount of companies with a “nulscore”, meaning a score of zero on the TB, increased from 46.85% in 2015 to 47.83% in 2016. Despite this, the average score of the companies that publish a sustainability report increased from 99 in 2015 to 104 in 2016 (Ministerie van Economische Zaken, 2016). Nevertheless, 231 active firms in the Netherlands did not publish information about their CSR.
Dutch law mandates the deposit of the financial statements for different types of organizations (Camfferman, 2000). However, this obligation does not exist for sustainability reports. Firms are free to decide whether they will publish non-financial information in a report. Transparency is a well-known subject in research (Alberici & Querci, 2016; Chen, Chen & Cheng, 2006; Marston & Shrives, 1991; Chau & Gray, 2010; Langberg & Sivaramakrishnan, 2008). Consequences of transparency, such as firm performance, were investigated (Momeni, Mohseni & Pirineh, 2015; Tang & Luo, 2016), as were firm determinants such as firm size, which can cause a higher degree of transparency (Eng & Mak, 2003; Chau & Gray, 2010). The reason behind a firm’s decision to not publish information about their CSR is still uninvestigated.
The TB compares the degree of transparency of all different participating sectors, including the number of firms in a sector that have a score of zero (Ministerie van Economische Zaken, 2016). However, a comparison of firm types is missing, as is an explanation for any possible differences in
1 http://www.volkskrant.nl/archief/-we-moeten-weten-welk-bedrijf-wat-doet~a3446199/, retrieved on December 28, 2016 2 http://www.rvo.nl/onderwerpen/internationaal-ondernemen/mvo/mvo-themas/verslaglegging-en-transparantie, retrieved
5
their score on the TB. The goal of this study is to discover to what extent the firm type influences the degree of transparency of CSR in a report. This study will focus on listed companies, family firms, cooperatives, private limited companies, public limited companies, state holdings, public-interest entities, and universities and university medical centers established in the Netherlands. Moreover, emphasis will be placed on understanding the reasons behind not publishing CSR information, and if a firm type can be related to the score of zero.
1.2 Contribution
1.2.1 Scientific contribution
This study contributes to the growing literature about CSR disclosure in several ways, by drawing on prior studies. Prior studies show that characteristics such as size, profitability, leverage and the role of the board affect the degree of CSR disclosure (Chan, Watson & Woodliff, 2014; Muttakin, Khan & Subramaniam, 2015; Fuente, García-Sánchez & Lozano, 2017). However, these studies included only one or two firm types in their research, even though business type is an aspect that is contextual for corporate sustainability (Asif, Searcy, Santos & Kensah, 2013). The Netherlands is progressive in sustainability reporting compared to other countries (Asif et al., 2013; Wolniak & Habek, 2013); however, the content and structure of sustainability reports of firms in the Netherlands varies widely (Asif et al., 2013). Therefore, the aim of this study is to compare CSR disclosure of eight different kinds of firms and to find an explanation for the degree of transparency of CSR in the Netherlands. The TB 2016 includes the 512 most active firms of the Netherlands; this sample gives a unique opportunity for this study. In the following section, the scientific contribution for each business type will be discussed.
Listed companies are increasingly reporting about CSR (Chan et al., 2014). In their research, Asif et al. (2013) included only Dutch corporations that published a report following the Global Reporting Initiative standards. This study will include all Dutch listed companies, and it makes a distinction between stock market quotation on the AEX, AMX or AScX-indexes. Ali et al. (2007) state that family firms have a tendency to not report transparently about CSR. The reason behind it is that family firms tend to prevent external shareholders from becoming part of the firm (Ali et al., 2007). Lybaert (2014) finds that private family firms in Belgium, which keep the power inside their firm, disclose less information about their CSR than family firms that are more open to outsiders and external influences. Despite these findings, research in CSR transparency of Dutch family firms is still missing. Furthermore, research of the 300 largest cooperatives of the world in 2010 pointed out that Dutch cooperatives belong to the most active companies in disclosing sustainable information (Seguí-Mas, Bollas-Aray & Polo-Garrido, 2015). This study will contribute by giving an overview of the degree of transparency about CSR of the largest Dutch cooperatives from recent data from the reports in 2015. A gap in the literature can be found as well for the transparency about CSR of state holdings. Adams & McNicholas (2007) investigated the corporate process of sustainability reports for state holdings in Australia. Furthermore, there has been research conducted regarding CSR reporting of state-owned companies in several countries such as India and China, although the Netherlands is not included (see: e.g. Jain & Winner, 2016; Noronha, Leung & Lei, 2015). This study will extend this by including Dutch state holdings. Some attention has been given to sustainability reporting for
6
universities (Adams, 2013). Sustainable development reports by universities vary in their degree of extensiveness and fidelity (Chatelain-Ponroy & Morin-Delerm, 2016). In Europe, universities are in a further stage of adopting GRI guidelines for sustainable reporting than in other geographical areas (Alonso-Almeida, Marimon, Casani, Rodriguez-Pomeda, 2015). Alonso-Almeida et al. (2015) expect a large growth in disclosure of sustainability reports all over the world; however, there is a lack of information in the degree and motivation of non-financial reporting of universities compared to other firm types in the Netherlands. Until now, to our knowledge research about CSR transparency of Dutch public-interest entities is missing. Research in CSR disclosure of public-interest entities is mainly performed on unique sectors, such as insurance companies and banks (see: e.g. Prusty & Kumar, 2016; Carnevale & Mazzuca, 2014). This study will extend this by using different sectors of public-interest entities. The contribution to the literature of this study is fourfold. Firstly, it investigates if a firm type can be associated with the degree of CSR transparency. Secondly, it investigates the cause of not publishing CSR information for a certain firm type. Thirdly, different categories of firms will be compared. Lastly, the research will be performed for firms established in the Netherlands.
1.2.2 Social contribution
Practical relevance can be found in the goal of the TB. The TB investigates the content and quality of information about CSR in annual reports. The goal of the TB is to motivate firms to take initiative and increase the degree of transparency of different areas of their CSR. The government uses the TB as a policy tool (Ministerie van Economische Zaken, 2016). However, when research indicates that only a specific firm type increases their transparency, the value or effect of the TB can be contested. This will be investigated by comparing the scores of TB 2014, TB 2015 and TB 2016 for each firm type. Altogether, this study may be important for the Ministry of Economic Affairs and will provide insight in the reporting behavior of CSR of different Dutch firm types.
1.3 Research question
This study will investigate the following research question in an explorative study:
To what extent does the firm type influence the degree of transparency about CSR in a report? This research question will be split into four questions:
1. Which firm types does the transparency benchmark report on? 2. To what extent can a firm type be associated with a score of zero?
3. To what extent can a firm type be associated with a specific rating on the transparency benchmark?
4. Which firm types are increasing their degree of transparency?
The next chapter discusses different scientific theories regarding the research question and develops an expectation of the degree of transparency for the eight firm types included in this study. The third chapter explains the methodology and sample size of this study. The results and analysis are described in the fourth chapter. In the fifth chapter, the conclusion, limitations and recommendations for further research will be discussed. References and appendixes can be found after the fifth chapter.
7
2. THEORETICAL FRAMEWORK
Transparency consist of reliable information that is reported in such a way that insight is provided about all relevant business operations, either positive or negative, to their stakeholders (Kaptein & van Tulder, 2003). Transparency can be defined in different ways, but the key element is the role of information accessibility (Sol, 2013). Sustainability reporting can be a form of transparency and can be used as a communication tool to connect with stakeholders (Kaptein & van Tulder, 2003).
2.1 Firm type
The first research sub-question is: Which firm types does the transparency benchmark report on? To answer this question the grouping of the TB will be used. The TB divides the participating firms in six categories (Ministerie van Economische Zaken, 2016):
TABLE 1: Distinguishable categories Transparency Benchmark 2016
1. Listed companies Listed companies are firms that are listed on the NYSE Euronext stock exchange or are included in the AEX, AMX or AScX-indexes.
2. Companies with Dutch
operating activities with substantial turnover and/or amount of employees
This category consists of family firms, cooperatives, public limited companies and private limited companies.
3. State holdings State holdings are all firms where the government
contributes at least ten percent of the venture capital. 4. Universities and University
Medical Centers (UMCs)
All universities that are affiliated with the Vereniging van Universiteiten (VSNU) and university medical centers which are affiliated with the Nederlandse Federatie van Universitair Medische Centra (NFU).
5. Public-interest entities Public-interest entities are companies with 500 employees or more that are not listed.
6. Large companies (more than 250 employees) that voluntarily entered the research group
Large companies that voluntarily entered to the TB are distributed over the other five categories. This could be a first limitation, by assuming that all companies that voluntarily entered to the TB disclose CSR information and bias the results in this way.
This study follows the grouping of categories of the TB; however the second category will be further distinguished. Firms of the second category are included in the TB based on substantial turnover and/or amount of employees. Some of these firms can be designated as family firms or cooperatives. The remaining firms will be classified as public limited companies or private limited companies. Furthermore, firms in this study will be only appointed as a public-interest entity if they cannot be classified as another firm type. The other firm types are prioritized above public-interest entities, except for public limited companies and private limited companies.
8
2.2 Isomorphism
Institutional theory assumes that firms comply with the norms which are imposed on them (Deegan, 2002). This institutional pressure can cause voluntary disclosure of information. When an organization has to change as a consequence of institutional pressure, isomorphism is the phenomenon where organizations have the tendency to change in the same way as organizations in the same “organizational field” do (DiMaggio & Powell, 1983; Scott, 1995). An organizational field can be defined as: “those organizations that, in the aggregate, constitute a recognized area of institutional life: key suppliers, resource and product consumers, regulatory agencies, and other organizations that produce similar services or products” (DiMaggio & Powell, 1983, p.148). It can be noticed that not all companies within a firm type need to be related to the same organizational field. For example, listed companies perform in different sectors that do not correspond one unique “playing field”. However, based on the mechanisms of isomorphism, we think an association between firm types and homogenous behavior can be made.
Three mechanisms of isomorphism can occur: coercive isomorphism comes from the problem of legitimacy and political influences, mimetic isomorphism stems from standard reactions to uncertainty and normative isomorphism results from professionalization (DiMaggio & Powell, 1983). Political influences can be related to CSR disclosure of Dutch firms, because the Dutch government motivates firms to report transparently about CSR3. Coercive isomorphism stems from formal and informal pressures placed on a firm by other organizations on which they are dependent. In addition, cultural expectations of the society can lead to pressure on the organization and ensure that firms become more and more homogenous (DiMaggio & Powell, 1983). Based on the theory of isomorphism, a higher level of similar reporting behavior for a certain firm type can be expected when the government exerts pressure. This could be related to, for example, state holdings, which are financially dependent on the government (Ministerie van Financiën, 2016), or listed companies which are obligated to follow the Corporate Governance Code4.
Scientific evidence for isomorphism of all the firm types that are included in this study is not yet found. Still, we expect that a certain firm type will behave similarly in their degree of transparency. Previous research studied aspects of firm types, without further classification in the sectors where the included companies perform (Peek, Cuijpers & Buijnk, 2010; Hope, Langli & Thomas, 2012; Chan et al., 2014). Companies within a firm type are mandated to follow the same reporting requirements and to manage the same cultural expectations, which lead to homogenous behavior (DiMaggio & Powell, 1983). For example, non-profit organizations have an ethical obligation to report transparently about their activities (Patrizia & Masimo, 2014), while family firms prefer to keep information inside the firm (Lybaert, 2014). In addition, universities are increasingly showing isomorphism and becoming more homogeneous in their reporting about sustainable development (Chatelain-Ponroy & Morin-Delerm, 2016). Asif et al. (2013) showed as well that business type is contextual in relation to corporate sustainability. Taken together, firms in the same category that consist of the same firm type can be expected to act similarly in sustainability reporting.
3 http://www.rvo.nl/onderwerpen/internationaal-ondernemen/mvo/mvo-themas/verslaglegging-en-transparantie, retrieved
on March 28, 2017
9
By using the agency theory, stakeholder theory and previous research, an expectation can be developed regarding the degree of transparency about CSR of the firm types included in this study. Table 2 will be used to relate a type of firm to a degree of transparency about CSR. The specific ratings on the TB (0-200 points) are expressed in degrees of transparency. The classification is composed on the average score of 104 on TB 2016; a further explanation is been given in the methodology.
2.3 Agency theory
The agency theory assumes a relationship between the agent (manager) and principal (shareholder), whereby ownership and control are separated (Jensen & Meckling, 1976; Fama, 1980; Fama & Jensen, 1983). The interests of both parties are not aligned, which can lead to conflicts between them (the so-called agency problem). Information asymmetry will arise when one party has an information advantage over the other party. The principal does not have access to the same information as the agent, which makes it difficult for the principal to monitor the actions of the agent. This information asymmetry can induce agency costs (Jensen & Meckling, 1976; Fama, 1980; Fama & Jensen, 1983).
2.4 Stakeholder theory
The stakeholder theory is an important theory about sustainability reporting (Emeseh & Songi, 2014). Stakeholders can be described as: “Any identifiable group or individual who can affect the achievement of an organization’s objectives or who is affected by the achievement of an organization’s objectives.” (Freeman & Reed, 1983, p. 91). Freeman (1984) mentioned the following types of stakeholders as important: shareholders, customers, the government, suppliers and capital providers. The stakeholder theory explains that different types of stakeholders have varying degrees of influence on helping the firm achieve its goals (Guthrie & Parker, 1989). Because of this, it is important for firms to identify their important stakeholders and take their expectations into account. The degree of transparency can be determined by the pressure of stakeholders. Higher pressure can lead to more transparency (Fernandez-Feijoo, Romero & Ruiz, 2014). As mentioned before, sustainability reports can be a form of transparency and they can be used as tool for communication to the stakeholders (Kaptein & van Tulder, 2003).
2.5 Transparency of firm types
TABLE 2: Degree of transparency about CSR in a report
Degree of transparency about CSR Score on the TB
Top tier 160 – 199 Above average 120 – 159 Average 89 – 119 Below average 45 – 88 Bottom tier 1 – 44 Score of zero 0
10
2.5.1 Listed companies
Agency costs can be reduced by shareholder monitoring (Hope et al., 2012). A greater ownership concentration can reduce agency costs, due to the fact that larger shareholders can more effectively monitor managers. When ownership is dispersed, it is less beneficial for the owners to monitor to a high degree, because only a small part of the benefits is allocated to the owner (Hope et al., 2012). Thus, when the actions of the managers cannot be monitored, there will be a higher degree of information asymmetry (Fama & Jensen, 1983). This is a well-known problem at listed companies (Peek et al., 2010). A consequence of information asymmetry is greater demand for explanation in annual reports, whereby non-financial reporting can be an example of extended information. By giving more explanation in annual reports, information asymmetry can be resolved (Healy & Palepu, 2001). The Dutch Corporate Governance Code focuses on the governance of listed companies. This code states that the board has to take CSR into account5. In accordance with Dutch law, compliance with the code has to be mentioned in the annual report, which could be a driver of CSR. In addition to regulation, two other drivers of CSR include moral responsibility to their environment and business interests, such as creating shareholder returns (Chan et al., 2014). It appears that multinationals are taking a leadership role in corporate sustainability and reporting (Asif et al., 2013). Because of this, it can be expected that listed firms will publish information about CSR and are excluded from the zero score group. Auger (2014) indicates that transparency can lead to higher levels of trust from investors and can diminish reputational damage. Furthermore, high quality reporting is important for public firms, because shareholders use these reports to evaluate managerial performance to make compensation decisions (Indjejikian & Matejka, 2009). It can be suggested that listed companies will develop extended reports in order to make a good impression for their shareholders. The degree of transparency is influenced by the size of the company; firms with a larger size will be more aware of pressure to publish CSR information (Chen et al., 2014). Dutch listed companies in this study can be distinguished in size by whether they are listed on the stock exchange at the AEX, AMX or AScX. The AEX includes the largest firms of Euronext Amsterdam6, the AMX includes medium-sized companies7, and both are expected to conform to the top tier degree of transparency about CSR. The AScX includes the smallest listed companies; because of the difference in size, determined by the market capitalization of the listed company8, an above average degree of transparency in CSR reporting will be expected.
2.5.2 Family firms
Dutch family firms can be defined by three groups (Flören, 1998): (1) A single family holds more than 50% of the ownership; (2) A single family has a deciding influence on decisions in succession and strategy, either executive or managerial; (3) A single family has at least two members or a majority of members involved in the daily management. When a firm complies with two out of the three variables, it can be qualified as a family firm (Flören, 1998). Family firms can be related to the agency theory as well. The extent of agency conflicts will be reduced when a greater proportion of the board consist of members of the largest owning family (Hope et al., 2012). When family relationships exist inside a firms, effective monitors are more likely the board members, those inside the firms, rather
5http://www.commissiecorporategovernance.nl/download/?id=609, retrieved on February 9, 2017 6
http://www.aandelencheck.nl/beursindexen/aex, retrieved on February 28, 2017
7http://www.aandelencheck.nl/beursindexen/amx, retrieved on February 28, 2017 8http://www.aandelencheck.nl/beursindexen/ascx, retrieved on February 28, 2017
11
than the controlling owners, or those outside the firm (Hope et al., 2012). Family owners can monitor more effectively because they have knowledge about the primary activities of the organization (Anderson & Reeb, 2004). Chen et al. (2006) confirm that the management of the family firmis more strongly monitored and information asymmetry is lower in comparison with non-family firms. Non-familial shareholders can free-ride on the monitoring of family owners and have less tendencies toward monitoring the management. Therefore, the demand for public information is lower (Bushman, Chen, Engel & Smith, 2004). In addition to this, Dutch family firms do not have to comply or explain a corporate code as do listed firms. In other words, family firms do not have mandatory regulations about CSR. Nevertheless, research has indicated that non-accounting information is disclosed to a lower degree by private firms than by public firms (Hope et al., 2012). Based on the low degree of information asymmetry and non-regulation, it will be expected that family firms are not transparent about CSR and belong to companies receiving a score of zero.
2.5.3 Cooperatives
A cooperative is a firm that is financed and governed by members that utilize the firm9. Members can be entrepreneurs, consumers, employees or governmental organizations. At the same time a cooperative is a legal form for a firm. The civil code states that a cooperative’s goal to provide the material needs of its members10. One of the first priorities of a cooperative is to create better conditions for the members. This consists of creating continuity of the firm in the members’ interests and return on their investments (NCR, 2015). Despite this priority, agency problems have increased the last decade for cooperatives (Hakelius & Hansson, 2016). The directors (agent) should govern in the interests of the members (principal). However, monitoring of the directors becomes harder for members, because the gap between the decisions of the directors and the ideas of the members seems to be increasing (Hakelius & Hansson, 2016). Dutch cooperatives are not only monitored by their members, but also by a board of directors (NCR, 2015). Additionally, Dutch cooperatives have to follow the NCR Governance Code (2015). This governance code provides behavior rules to enhance transparency and board quality. In the rules of the code, it is written that a cooperative should have a CSR and sustainability policy. The board has to report on these policies for the most recent financial year in the annual report. Moreover, the code says that the board has to publish yearly a social report on the website of the firm when CSR is not an essential part of the annual report (NCR, 2015). Therefore, it will not be expected that cooperatives belong to group of companies with a score of zero. Sustainability reporting by cooperatives is growing and the Netherlands is one of the most active countries in cooperative CSR disclosure (Seguí-Mas et al., 2015. Self-responsibility, caring for others and solidarity are a few of the cooperative values which are also an integral part of sustainability, and therefore the relationship between cooperatives and CSR is closer than for other company types (Seguí-Mas et al., 2015). The largest Dutch cooperatives that are included in this study operate mainly in the agriculture, financial services and insurance sectors. Of these sectors, agriculture in particular takes their role seriously regarding communicating about their social responsibility (Ursin, Myskja & Carson, 2016). Despite the agency problems, it will be expected that the governance code, the internal values of cooperatives and the high recent scores on CSR disclosures will lead to an above average degree in transparency regarding CSR.
9http://www.cooperatie.nl/over-cooperaties, retrieved on February 28, 2017
12
2.5.4 Public limited companies and private limited companies
Firms with a certain turnover and/or number of employees are obligated to participate in the TB (Ministerie van Economische Zaken, 2016). This category consists of family firms, cooperatives and a third group of firms. This remaining group can be distinguished legally as public limited companies and private limited companies.
Public limited companies have a large amount of shareholders and shares are publicly available, which means that their shares can be traded freely11. Therefore, it will be simpler to attract capital by issuing shares than it is for private limited companies. Shares can be easily transferred17, which has as consequence that shareholders are, to a small degree, committed to the firm (Peek et al., 2010). Peek et al. (2010) show that shareholders have a lack of influence on management in public firms. Because of this, a low degree of pressure from these stakeholders is likely to be exerted in relation to CSR information. Additionally, companies in this category are not listed, which means that they do not have any obligation by law to report on CSR. However, shareholders’ demand for information from public firms is greater than from private firms because there is a larger distance between shareholders and management (Peek et al., 2010). Therefore, a bottom tier degree of transparency about CSR will be expected.
In contrast, private limited companies have a small number of shareholders and do not offer shares to the general public12. Shares are registered and mostly owned by the founders, family members or employees. The small amount of shareholders ensures involvement in the firm, whereby shareholders are able to monitor the managers and know what is going on in the firm (Peek et al., 2010). Therefore, it can be suggested that the degree of transparency of private limited companies is comparable to family firms, and therefore the need for transparency is low. It will be supposed that private limited companies belong to the group of firms with a score of zero.
2.5.5 State holdings
The Dutch government can be shareholder of a company when a firm has an important public function or when a private firm is not able to survive on his own, creating social problems as consequence13. The minister of finance obligates these state holdings to participate the TB. The minister argues that society may expect accountability for a state holdings policy, which included results and performance regarding to CSR14. The state does not govern these firms; however, it has a say in the business (Ministerie van Financiën, 2016). Research confirms that state holdings have to be accountable (Greiling & Grüb, 2014). Taxpayers’ money is used for public enterprises, and in return the society can expect accountability and extensive reporting. Public enterprises have to show that they operate in an efficient and effective way, including social and environmental compatibility, when using public resources. Moreover, Yu and Choi (2016) indicate that pressure from these stakeholders has a positive effect on the adoption of CSR practices. Increased governmental pressure on sustainability reporting
11
http://www.wetrecht.nl/naamloze-vennootschap-nv/, retrieved on March 8, 2017
12
http://www.wetrecht.nl/besloten-vennootschap-bv/, retrieved on March 8, 2017
13https://www.rijksoverheid.nl/onderwerpen/staatsdeelnemingen, retrieved on January 10, 2017
14https://www.transparantiebenchmark.nl/sites/transparantiebenchmark.nl/files/afbeeldingen/deelnameprotocol_tb_2016.p df, retrieved on February 13, 2017
13
might even lead to more reporting (Adams & McNicholas, 2007). Although state holdings are not listed companies, the government desires compliance with the Corporate Governance Code. In the annual reports of the state holding companies that are included in this study, it is noted that when a state holding does not comply or explain the Code, the government will prompt them to report about the Code (Ministerie van Financiën, 2015). Owing to this, it is expected that state holdings are excluded from the group of companies with a score of zero. The state holdings that are included in this research have between ten percent and a hundred percent state ownership15. A higher extent of financial dependency leads to a higher degree of influence of the provider (Verbruggen, Christians & Milis, 2011). This suggests that stakeholders can exert pressure in varying degrees regarding the transparency about CSR. Because of the differences in degree of ownership by the state (ten to hundred percent), this study divides state holdings in three categories (Table 6 of Appendix B). Because of this, it will be expected that state holdings that are between 70 percent and 100 percent owned by the government will score above average on the TB. Based on the differences in governmental pressure, state holdings that are between 40 percent and 69 percent government owned are expected to have an average degree of transparency about CSR and lastly, firms that have between 1 percent and 39 percent government ownership are expected to have a below-average degree of transparency about CSR.
2.5.6 Universities and University Medical Centers
A University Medical Center (UMC) is a cooperative venture between a university and a teaching hospital16. Therefore, a similar degree of transparency will be expected for both universities as UMCs. Universities and UMCs differ from the other firm types, because these firms are in a unique category that consists of non-profit organizations. The annual reports of universities and UMCs show that these firms have a high degree of financial dependence on the government. As mentioned in the previous paragraph, a higher extent of financial dependency leads to a higher degree of influence by the provider (Verbruggen et al., 2011); in addition the Dutch government motivates firms to report transparently about their CSR17. Moreover, Patrizia & Masimo (2014) exemplify that non-profit organizations have an ethical obligation to report transparently about their activities to their stakeholders. Stakeholders, the public and donors need to know how their money is used, as well as information about mission, vision, activities and decision-making processes. The sustainability report is an important instrument for communicating openly and regularly to the stakeholders. Therefore, it will be expected that universities and UMCs are excluded from group of companies with a score of zero. On the other hand, universities and UMCs do not have a high environmental impact. Research has indicated that this is a main driver to report extensively (Asif et al., 2013). Patrizia and Maimo (2014) show in that non-profit organizations can take steps to increase their transparency to reach the goal of open and regulatory communication to their stakeholders. Nevertheless, universities vary in the degree of extensiveness and fidelity in their sustainability report (Chatelain-Ponroy & Morin-Delerm, 2016) and the financial dependency of the government differs as well for the various universities and UMCs. For all of these reasons, it will be expected that the single universities and
15https://www.transparantiebenchmark.nl/sites/transparantiebenchmark.nl/files/afbeeldingen/deelnameprotocol_tb_2016.p df, retrieved on January 10, 2017
16http://www.nfu.nl/img/pdf/14.6719_Rathenau_Feiten_en_Cijfers_umcs_2014.pdf, retrieved on February 14, 2017 17 http://www.rvo.nl/onderwerpen/internationaal-ondernemen/mvo/mvo-themas/verslaglegging-en-transparantie, retrieved
14
UMCs will differ highly in their extent of transparency about CSR. Therefore the overall rating is expected to be in the average degree of transparency about CSR for this firm type.
2.5.7 Public-interest entities
As noticed in Table 1 (p. 7), the public-interest entities that are included in this firm type category are not listed, and have more than 500 employees. Additionally, it is noticeable that some firms can be classified as a public-interest entity, but also as another firm type such as a cooperative. In this case the other firm types of Table 1 (p. 7) are prioritized above public-interest entities, except for the firm type of public limited companies and private limited companies. The reason for this is that we expect that, for example, a cooperative with public interest will behave more like a cooperative than a public-interest entity because this is the primary structure of the firm. A firm will not be classified as more than one firm type, and as a consequence, the firm type of public-interest entities do not consist of all public-interest entities established in the Netherlands. This leads to a limitation of this study. CSR reporting for public-interest entities is voluntary; only listed companies have to comply with the Corporate Governance Code, according the law. Only ten percent of the 2,500 largest European companies provided transparent information about their social and environmental impact. Therefore, the European Union developed legislation that obligates public-interest entities to disclose non-financial information about social and environmental matters starting in the reporting year 201718,19. Regulation can be a form of stakeholder pressure to adopt CSR (Yu and Choi, 2016). Furthermore, public-interest entities will be stimulated to report following the criteria of the TB20. It would be reasonable if firms begin to prepare and start anticipating to the new legislation of the EU (Ministerie van Economische Zaken, 2016). Research into the transparency of public-interest entities in a general sense has not yet been conducted. Public-interest entities in the Netherlands operate mainly in the insurance and bank sectors. Reporting about CSR has become more standardized for bank and insurance companies since the financial crisis (Lock & Seele, 2015). Not only is the core business important for the stakeholders, but so are communication and CSR conduct. Based on the reporting consequences of the financial crisis, it will be expected that banks and insurance companies will score above average on the TB. For the remaining firms with public interest, it will be expected that they have little motivation to report about their CSR. The reason for this is that firms in this category are not listed or financially dependent on the government, which could lower stakeholder pressure. Reporting is voluntary, although anticipating on the coming legislation could be a reason to report. The remaining firms with public interest are expected to be in the bottom-tier degree of transparency about CSR.
2.6 Development over the past three years
As mentioned in the introduction, Dutch firms are progressive in sustainability reporting compared to other countries (Asif et al., 2013; Wolniak & Habek, 2013). The average score on the TB is higher as well (Ministerie van Economische Zaken, 2016). However, the results of the TB show that the percentage of firms that are included in the group of companies with a score of zero has increased over the last three years. This is partly due to the fact that new firms that have entered the benchmark are more likely to be included in the group of companies with a score of zero than are firms that have
18
http://europa.eu/rapid/press-release_MEMO-14-301_en.htm, retrieved on February 14, 2017
19
http://mvonederland.nl/transparantie/eu-transparantierichtlijn, retrieved on February 14, 2017
15
participated for more than one year. In addition to this, the number of firms with a score of zero on the TB which indicates that publishing a sustainability report is not a priority decreased from 19 till 13 percent (Ministerie van Economische Zaken, 2016). This suggests a positive development in firms regarding their perception about CSR transparency. The expectations for the degree of transparency about CSR of the eight firm types that are included in this study are given in the previous paragraphs. The development of the degree of transparency over the past few years will be tested by comparing the results of TB 2014, TB 2015 and TB 2016. Because of this short period of time, the average score of a firm type might increase, but the same degree of transparency (according to Table 2, p. 9) for each firm type is expected over the three years. However, when the results indicate that only a certain firm type increases their degree of transparency, while other firm types stay at the same level, the effect or value of the TB as a policy tool can be contested.
2.7 Summarized transparency expectation
The table below summarizes the expectation of the degree of transparency about CSR for each firm type included in this study. The next chapter will continue with the methodology.
TABLE 3: Expected degree of transparency about CSR for each firm type
Firm type Degree of transparency about CSR
Listed companies AEX Top tier
AMX Top tier
AScX Above average
Family firms Score of zero
Cooperatives Above average
Remaining group of firms Public limited company Bottom tier Private limited company Score of zero
State holdings 70% - 100% owned by the
state
Above average
40% - 69% owned by the state Average 1% - 39% owned by the state Below average
Universities & UMCs Average
16
3. METHODOLOGY
This study examines the relationships between firm types and the degree of transparency about CSR in a report. The expectations for these relations are developed by an explorative study in the previous chapter and are presented in Table 3. These expectations are tested by descriptive analysis.
3.1 Sample design and data collection
The sample consists of all participating firms of TB 2014, 2015 and 2016. This includes that both firms that published information about CSR in a report, as well as firms that did not publish any information about their CSR. The data includes the reason for participation in the benchmark and the score obtained on their sustainability report for each firm. The sample of TB 2014 consists of 429 firms; 20 of these firms have an international sustainability report (Ministerie van Economische Zaken, 2014). These companies are part of a multinational company and provide no information about their business operations in the Netherlands. When the international group report complies with the criteria for non-financial reporting established by the EU, the firm will be not included in the research group of the TB. The 20 firms were tested by the TB and rated as sufficient. Therefore, the research sample of TB 2014 consists of 409 firms established in the Netherlands. The sample of TB 2015 consists of 485 firms, 24 of which have an international sustainability report that are not part of the sample (Ministerie van Economische Zaken, 2015). In addition, four foundations (stichtingen) participated in the benchmark. Two foundations can be classified as a public-interest entity and one foundation is included in the state holdings. These firms are included in the sample. The fourth foundation cannot be classified as a firm type following Table 1 (p. 7); because of the small number the foundation will be excluded from the sample. Thus, 460 firms are included in the sample of TB 2015. Lastly, TB 2016 consists of 512 firms, 26 of which have an international sustainability report which were all rated as sufficient (Ministerie van Economische Zaken, 2016). In addition to these firms, there are six public-interest entities that have a chair in the Netherlands, but operate solely abroad. Three of these firms passed the criteria for the international group report, this means that the other three entities will be part of the sample because their rate was insufficient. The 26 firms with an international sustainability report and the three public-interest entities with activities abroad are not part of the sample. In addition, two foundations participated in the benchmark. One foundation can be classified as a public-interest entity and is included in the sample. The other foundation cannot be classified as a firm type following Table 1 (p. 7); because of the small number, the foundation will be out of the scope of this study. This means that the sample consists of 482 firms for TB 2016.
3.2 Variables 3.2.1 Firm type
Firm type can be defined by the answer on the first sub-question: Which firm types does the transparency benchmark report on? All firms are classified into distinguishing categories by the TB as presented in Table 1 (p. 7); these distinguishing categories are the firm types used in this study. In
Entities from other sectors with public interest
17
addition, the category of firms that are obliged to participate because of a certain amount of turnover and/or number of employees are further distinguished into family firms, cooperatives, public limited companies and private limited companies. The distribution of the participating firms for each firm type for the years 2014, 2015 and 2016 are given in Table 1 of Appendix A. The number of firms differs for each firm type. Because the total population of the TB is included in our sample and each individual firm type’s transparency will be analyzed, a difference in the amount of firms has no influence on the results. In addition, a larger number of firms for a certain firm type can give a more generalized result. For these reasons, the number of firms for each firm type will not be equated.
3.2.2 Degree of transparency about CSR in a report
The degree of transparency about CSR is the extent of information about CSR that is reported in a financial report, an integrated report or in a separate sustainability report, as expressed in a score achieved on the TB (Ministerie van Economische Zaken, 2016). The report has to be publicly available, which means that reports must be easily obtained from the website of the firm or that the printed report is publicly available for free. Reports of firms that are only available at the Kamer van Koophandel were not assessed (Ministerie van Economische Zaken, 2016). TB 2016 investigated the content and quality of the reports of 2015. The same is done for the years 2014 and 2013, where the TB 2015 assessed the reports of 2014 and TB 2014 the reports of 2013.
The development of the score on the TB starts with a self-assessment by the firms. The firms can assign themselves points on the different parts of the benchmark. After this, the self-assessment is judged by EY, a big-4 accounting firm, and the final score then determined (Ministerie van Economische Zaken, 2016). The degree of transparency can be further defined by the classification of the specific ratings presented in Table 2 (p. 9). The classification is based on the average score of 104 on TB 2016 and further divided on an equal scale. The “transparantieladder” of the TB is not used as framework for the classification of the degree of transparency. The reason for this is that the different groups (“kopgroep”: 186-199 points, “achtervolgers”: 158-185 points, “peleton”: 30-155 points, “achterblijvers”: 0-29 points and “bezemwagen”: 0 points) are unequally divided on the range between 0 and 200 points. The number of firms for each group will vary to a high extent. Especially the “peleton” group consists of a broad range of ratings. We believe that it is more useful to categorize transparency in more equally divided degrees to bring both the degree of transparency for each firm type and the comparison in transparency between firm types clearly into vision.
3.3 Testing
The goal of this study is to find an answer on the mentioned research question:
To what extent does the firm type influence the degree of transparency about CSR in a report?
As mentioned, this question is divided in four sub-questions. Firm types reported by the TB were already discussed in the previous section. The second sub-question concerns the score of zero: To what extent can a firm type be associated with the score of zero? A first indication will be given by a descriptive analysis, which shows an overview of the firm types that are included in the score of zero of TB 2016. The results of TB 2016 will be used for this sub-question, because it consists of the most recent data. The firms that participated TB 2016 are given in Appendix B. The total sample of the
18
score of zero on TB 2016 consist of 230 firms. Further investigation will be conducted by a descriptive analysis for each unique firm type. These analyses will present the percentages per firm type that achieved a score of zero. Based on the results of all these analyses, it can be determined if a certain firm type(s) can be related to the score of zero.
The third sub-question, to what extent can a firm type be associated with a specific rating on the transparency benchmark, will be answered by the descriptive analyses as well. The descriptive analyses give an overview of the rated transparency for each firm type. In this way the expected relationships between the firm types and the degrees of transparency of Table 3 (p. 15) can be tested. Thus, the same descriptive analyses will be used to investigate if a firm type can be related to the score of zero or to a certain degree of transparency. In addition, a comparison between the different firm types will be given.
The development of the degree of transparency for each firm type over three years will answer the last sub-question: Which firm types are increasing their degree of transparency? This analysis will be used for the practical contribution of this study; the value or effect of the TB as policy tool of the Ministry of Economic Affairs. An overview of the development over the past three years can indicate if all firm types are increasing their CSR disclosure or if the initiatives of the government only influence a specific firm type. In addition, an overview of the firm types that were included in the score of zero over the past three years will be given. The final analysis will present the development in reporting versus non-reporting for each firm type. The total sample of the score of zero on TB 2014 consists of 167 firms and 215 firms for TB 2015 (Ministerie van Economische Zaken, 2014; Ministerie van Economische Zaken, 2015).
19
4. RESULTS AND ANALYSIS
This chapter will present the results and corresponding analysis of this study. First, the group of companies with a score of zero will be analyzed. Second, the degree of transparency about CSR for each firm type following the classification of Table 2 (p. 9) will be presented. The scores are based on the results of TB 2016, because this will present the most recent information about the degree of CSR transparency. After this, the degree of transparency of the different firm types will be compared. The final paragraph outlines the development over the past three years by comparing the scores of TB 2014, TB 2015 and TB 2016.
4.1 Score of zero
The second sub-question of this study investigates if a certain firm type can be related to the group of companies with a score of zero. Figure 1 shows that the score of zero in TB 2016 consist for 69 percent of private limited companies. After this, family firms and public limited companies have the highest occurrence of the score of zero. It is noticeable that these three firm types are included in the category of “companies with Dutch operating activities with substantial amount of turnover and/or number of employees”. It is mandatory for these companies to participate the benchmark and, as mentioned in the theoretical framework, the incentives to report about CSR will be low for these firm types because of the non-regulation and a low degree of information asymmetry. The high percentage of private limited companies that are included in the score of zero is a first indication to relate this firm type to the score of zero. It can be noticed that several private limited companies are part of an international group. If the head of the group published a sustainability report, but the private limited company in The Netherlands did not apply for the arrangement of international group reporting, the company will be included in the benchmark and achieves a score of zero. This can bias the results of private limited companies. After all the single analyses, a definitive answer can be developed, which will be outlined in the conclusion.
FIGURE 1: Score of zero
[PERCENTAGE] [PERCENTAGE] [PERCENTAGE]
[PERCENTAGE]
[PERCENTAGE] [PERCENTAGE]
[PERCENTAGE] Listed Companies
Family firms Cooperatives
Public limited companies Private limited companies State holdings
20 17% 9% 13% 26% 35% 0%
ASCX
Top tier Above average Average Below average Bottom tier Score of zero 4.2 Results 4.2.1 Listed companiesChen et al. (2014) indicated that firms with a larger size will be more aware of pressure to publish CSR information. This can be confirmed by the results in Figure 2. The average score of the largest firms at Amsterdam Euronext is 153, medium-sized companies score on average 106 and the smallest listed companies have an average score of 85 (scores of zero excluded). Listed companies were not expected to be included in the group of companies with a score of zero, which has been confirmed, as only 4 percent of the total number of listed companies scored zero points on TB 2016. Listed companies on the stock exchange at the AEX were expected to be included in the top tier degree of transparency. The results in Figure 2 show that 48 percent of the firms are included in the top tier. Next to this, 28 percent of the firms are included in the above-average category. The expectation cannot be confirmed to the fullest extent; however, with an average score of 153 and 76 percent of firms placing in the top tier and above average tier, it can be concluded that listed firms on the stock exchange at the AEX have the highest degrees of transparency about CSR. Additionally, companies on the stock exchange at the AMX were also expected to be included in the top tier. The results in Figure 2 show that only 20 percent of these companies are included in this category of transparency. The average score is 106; half of the number of companies scored average or higher. Furthermore, listed companies on the stock exchange at the AScX were expected to be included in the above average category. The results cannot confirm this expectation either, the average score of the companies is 85 and 61 percent of the firms are included in the below average and bottom tier, which are the lowest degrees of transparency. The results deviate from the expectations; this can be explained by the influence of the size of the company. This influence is larger than expected and can be the reason for the differences in transparency about CSR. It can be concluded that listed companies established in the Netherlands disclose information about their CSR and the degree of transparency is influenced by their size.
FIGURE 2: Listed companies
4.2.2 Family firms
Family firms were expected to not be transparent about CSR. The results in Figure 3 show that 56 percent of the family firms are included in the group of companies with a score of zero and 22 percent
20% 24% 8% 32% 12% 4%
AMX
48% 28% 8% 8% 0% 8%AEX
21
have a bottom-tier degree of transparency. The average score is 35, including those with a score of zero. The family firms that report on their CSR and achieve an average score or higher mainly consist of the largest family firms that are included in this study. It can be concluded that family firms established in the Netherlands are not transparent about CSR or disclose information at the lowest degree. The conclusion is based on the results showing that 78 percent of the total number of family firms received a score of zero and were placed in the bottom-tier degree of transparency category.
FIGURE 3: Family firms
4.2.3 Cooperatives
Cooperatives were not expected to belong to the group with a score of zero. This cannot be confirmed to the fullest extent; however, 83 percent of the cooperatives disclosed information about CSR, which makes it reasonable to conclude that cooperatives generally report on CSR. Cooperatives were expected to have an above-average degree of transparency. Figure 4 shows that only 4 percent of the cooperatives are included in this level of transparency. The companies are, to a high extent, dispersed
over the different degrees of transparency. This can
be explained by the NCR governance code of
cooperatives. The code says that the board of the
cooperative has to report on their sustainability
policy (NCR, 2015); however, there are no
further requirements as to what exactly is expected
in the report. This means that companies give
different degrees of attention to the rule of
the governance code. This leads to the
conclusion that cooperatives are not
related to a certain degree of transparency,
although cooperatives established in the
Netherlands do tend to disclose CSR information.
FIGURE 4: Cooperatives 5% 10% 5% 2% 22% 56% Top tier Above average Average Below average Bottom tier Score of zero 18% 4% 22% 26% 13% 17% Top tier Above average Average Below average Bottom tier Score of zero
22
4.2.4 Public limited companies and private limited companies
The results of the remaining group of firms are given in Figure 5. It is mandatory for these firms to participate in the TB because of their substantial amount of turnover and/or number of employees, but they cannot be classified as a family firm or cooperative. Therefore these firms are divided into public limited companies and private limited companies. The results confirm the expectation that public limited companies disclose more CSR information than do private limited companies. The demand for information from public firms is greater than for private firms because there is a larger distance between stakeholders and management (Peek et al., 2010).
Public limited companies are expected to be in the category of bottom-tier degree of transparency. The results show that 45 percent of the companies did not publish any information about their CSR activities. The reason for this might be that shareholders have low commitment to a public firm and there have a lack of influence on the management (Peek et al., 2010). The other 55 percent that published CSR information are dispersed over the different categories of degrees of transparency. This can be explained by differences in extent of influence that shareholders have in public firms. When shareholders have a stake in a long-term investment, they will put more pressure on the management to perform CSR than they will have for a short-term investment (Cox, Brammer & Millington, 2004). This could be an explanation for the dispersed degree of transparency for the public firms which disclosed CSR information.
Private limited companies were expected to receive a score of zero. The results do not confirm this to the fullest extent; however, 82 percent of the private limited companies are included in the group of companies with a score of zero. As mentioned, several companies included in this firm type are part of an international group. However, because of the large number of private limited companies in this study, it can be concluded that private limited companies established in the Netherlands that cannot be classified as a certain firm type are likely to receive a score of zero. In addition to this, half of the public limited companies established in the Netherlands will also receive a score of zero. The public firms that report on their CSR activities are widely dispersed in their degree of transparency.
23 18% 4% 13% 5% 15% 45%
PUBLIC LIMITED COMPANIES
2% 4% 4% 1%
7%
82%
PRIVATE LIMITED COMPANIES
Top tier Above average Average Below average Bottom tier Score of zero
FIGURE 5: Remaining group of firms
4.2.5 State holdings
State holdings were expected to not be included in the group of companies with a score of zero. The results given in Figure 6 confirm this expectation; only 7 percent of the total number of state holdings did not disclose CSR information. The differences in expectations between state holdings were based on financial dependency on the government. State holdings that are between 70 percent and 100 percent government-owned were expected to have an above-average degree of transparency, state holdings that are between 40 percent and 69 percent government-owned were expected to have an average degree of transparency and state holdings of between 1 percent and 39 percent government-owned were expected to have a below-average degree of transparency. The results in Figure 6 do not confirm these expectations. The results of the three categories give similar degrees of transparency, especially for the top tier degree. The average scores are (from left to right) 152, 159 and 166 (scores of zero excluded). A limitation might be the small number of firms that are included in the second (5 firms) and third (4 firms) figures; this makes the results less reliable (Smith, 2014). Therefore, all state holdings that are included in this study are taken together in Figure 7.
FIGURE 6: State holdings 75% 25% 0% 0% 0% 0%
1-39% STATE
OWNED
Top tier Above average Average Below average Bottom tier Score of zero 60% 20% 20% 0% 0% 0%40-69% STATE
OWNED
61% 11% 6% 0% 11% 11%70-100% STATE
OWNED
24 63% 15% 8% 0% 7% 7% Top tier Above average Average Below average Bottom tier Score of zero
The average score of state holdings is 155 (scores of zero excluded). This score belongs to the above-average degree, in accordance with the expectation for state holdings which are between 70 percent and 100 percent owned by the state. Based on the analysis in Figure 6, we conclude that the degree of transparency for state holdings cannot be determined by the degree of financial influence by the government. A reason for this could be that the state exerts a high degree of pressure on companies to report on their CSR, independently how much the state owns of a firm. As noticed, the annual report of state holdings says that the state has a say in business (Ministerie van Financiën, 2016). It can be concluded that state holdings established in the Netherlands have the highest degrees of transparency. This is based on the results showing that 78 percent of the state holdings belong to the above-average and top tier degrees of transparency about CSR (Figure 7).
FIGURE 7: State holdings
4.2.6 Universities and University Medical Centers
The expectation that Universities and UMCs would not belong to the group that received a score of zero is confirmed by the results in Figure 8. None of the organizations achieved a score of zero. Single universities and UMCs were expected to differ significantly in their extent of transparency and therefore the overall rating is expected to be in the average degree of transparency. Universities are more dispersed than UMCs. This can be explained by the difference in sample size; the sample of universities (16 firms) consists of twice as many firms as UMCs (8 firms). A larger sample size will reflect the differences in the population to a higher extent (Smith, 2014). Universities achieved an average score of 90 and UMCs scored, on average, 91. Thus, the expectation that both firm types would achieve a similar degree of transparency can be confirmed. It can be concluded that universities especially differ in their extent of transparency; UMCs are related to the below-average degree of transparency. Additionally, on average universities and UMCs established in the Netherlands achieve nearly an average degree of transparency about CSR.
