The effect of the CEO’s national culture on the CSR performance of the organization

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The effect of the CEO’s national culture on the CSR

performance of the organization

Name: Charlot van den Brink Student number: S3029794 Course: Master’s Thesis IB&M Course code: EBM719A20.2016-2017.2

Supervisor: Esha Mendiratta Co-assessor: Paulo J. Marques Morgado

Date: 21 June 2017

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Abstract

During the last decades, corporate social responsibility (CSR) has increased in its importance, yet the CSR performance of organizations differs widely. There is a deficiency of studies focused on the relevant managerial variables influencing CSR performance. Multiple studies have focused on the extent to which national culture affects an organization’s behavior and attitudes. In accordance to the upper echelon theory, the aim of this study is to seek an answer to the question how the CEO’s national culture affects the CSR performance of the organization. Two of Hofstede’s cultural dimensions are considered: ‘individualism-collectivism’ and ‘uncertainty avoidance’. They have the clearest implications for a CEO’s choice behavior, thus affect the choice of CSR activities, which is an antecedent for an organization’s CSR performance. This study makes use of a sample of 403 organizations from the Fortune Global 500 list. Additionally, a reduced sample of 66 organizations with solely foreign CEOs is considered. This sample is used to investigate the expected negative moderating effect from the foreign CEO’s level of cultural difference (between its home and host country). Using regression analyses with firm size, financial performance, industry type and level of country development as control variables, it can be concluded that there is a significant positive relationship between the CEO’s country of origin individualism and the CSR performance of the organization. The relationship between the CEO’s country of origin uncertainty avoidance and the CSR performance of the organization indicates to be significantly positive, although a negative relationship was proposed. No significant results are found for the moderating hypotheses of this study.

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1. Introduction

During the last decades, corporate social responsibility (CSR) has increased in its importance. The CSR of organizations consists of different activities, such as the support of community activities, diversity initiatives, donations to charity, and recycling programs (Sen and Bhattacharya, 2001). As a result of the increase in CSR importance, reporting on an organization’s CSR practices has become a mainstream business activity (Attig, Boubakri, Ghoul and Guedhami, 2016). A study of KPMG (2013) indicates that fifty-one percent of all reporting organizations around the world include information on CSR in their annual reports nowadays. To highlight the considerable increase: in 2008 only eight percent of all reporting companies included CSR in their annual reports. Besides CSR becoming a mainstream activity among organizations, a body of academic literature has developed around it (Margolis and Walsh, 2003; Campbell, 2007).

Literature on CSR has started in the 1940s, when researchers were concerned about the power of business and their negative effects on society (Wood, 1991). Bowen (1953) is seen as one of the founders of CSR; he highlighted the duty of business leaders to make decisions and pursue goals that are desirable in the context of social objectives and values. As an organization makes use of resources from various stakeholders to conduct its business, it respectively also owes responsibility to society and the environment. Freeman (1984) agreed on this and argued that organizations do not solely exist as an economic entity, but also have a responsibility that goes beyond mere profit maximization. This is its responsibility to society and the environment. There are different perspectives on corporate social responsible behavior around the globe, as it means ‘different things in different places to different people and at different times’ (Campbell, 2007:950). Matten and Moon (2004) argue that CSR differs from nation to nation because of cultural traditions, which is agreed upon by other researchers (Burton, Farth & Hegarty, 2000; Chapple & Moon, 2005). In developing nations CSR is closely related to philanthropy as a consequence of cultural traditions (Visser, 2007). But there are also differences among developed nations: Burton et al. (2000) found variation in the relative importance of the types of CSR between US and Hong Kong students, with cultural differences as major variation. The accepted CSR practices and performances may therefore vary among different nations (Lindgreen, Swaen & Campbell, 2009).

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activism (Agle, Mitchell, and Sonnenfeld, 1999; Clark and Hebb, 2004; David, Bloom, and Hillman, 2007; Marquis, Glynn, and Davis, 2007). Relatively few studies have focused on the effects of internal values at the organization or individual levels (Petrenko, Aime, Ridge and Hill, 2016). As a result, there is a deficiency of studies that have investigated the relevant managerial variables that affect the CSR performance of an organization (Waldman, Siegel and Javidan, 2006; Angus-Leppan, Metcalf and Benn, 2010; Manner, 2010). Such a variable influencing organization behavior is national culture. Previous research provides strong evidence that national culture affects organization behavior in comparison to more context-specific regulations and laws (Whitley, 1999; Hofstede & Hofstede, 2005; Scholtens and Dam, 2007). Hofstede (1984) states that culture is the collective programming of the mind, which distinguishes individuals of one society from another. Peoples’ views differ widely in different parts of the world and research has shown that no “one way” solution applies to issues managed within distinct contexts (Newman and Nollen, 1996). Literature has progressively illustrated the significance of cultural influence on strategic decision-making. Multiple studies have focused on the extent to which national culture affects an organization’s behavior and attitudes. Most of these studies were focused on two of Hofstede’s cultural dimensions, namely ‘individualism-collectivism’ and ‘uncertainty avoidance’ (Vachon, 2009). Vachon (2009) found a linkage between these two cultural dimensions and corporate sustainable development practices. Thus differences in CSR performance, which are the consequence of inter alia the implementation of CSR activities, can be ascribed to variation in national culture (Campbell, 2007; Jackson & Apostolakou, 2010).

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Baumhart, 2016). In order to make a value-added contribution to the existing literature on this topic, this study shifts the attention to the relation between the CEO’s national culture and the CSR performance of the organization. The following main research question will be empirically examined:

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2. Literature Review

This section is concerned with reviewing the available literature about CSR (performance), the national culture of a CEO and the link between these two variables.

2.1 Defining CSR (performance)

The term corporate social responsibility (CSR) is considered to have a broad meaning, although many researchers have tried to provide a precise definition of an organization’s CSR (e.g. Carroll, 1979; Jackson and Apostolakou, 2010). As a result, the theoretical development of CSR and its measurement are challenging (McWilliams, Siegel & Wright, 2006; De Waard, 2008). According to many researchers, CSR is defined as a voluntary concept, starting where the legal obligations end (Bowen, 1953; McQuire, 1963; Davis, 1973). Most researchers agree on the fact that CSR is a multi-faceted concept focused on consumer and labor welfare, environmental protection, corporate philanthropy, and a host of related areas (McGuinness, Vieito and Wang, 2017). Defining CSR is, however, often not an unequivocal endeavor, as it is found to depend upon perspective and point of view (Campbell, 2007; Matten and Moon, 2008). The common understanding put forward in the different definitions of CSR is that organizations are encouraged to conduct their business in a manner that demonstrates considerations for the broader social environment, in order to serve constructively the needs of society (van de Ven & Graafland, 2006).

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existence of an organization (Turker, 2009) and this is not considered as a responsibility to society (Mahoney and Thorne, 2005). The economic responsibility component as stated by Carroll is therefore excluded from the CSR definition.

With regard to determining an organization’s CSR performance, “the real question is whether valid and reliable measures can be developed” (Carroll, 2000:473). Carroll argues that measuring CSR performance should be made possible due to its importance to business and society (2000). But the fact that there are different perspectives on corporate social responsible behavior around the globe makes this challenging (Campbell, 2007). Wolfe and Aupperle (1991) argue that there is no single best way to measure CSR performance, which is the reason why researchers established many different methods. Although CSR performance is considered inherently subjective, extant prior research approved the CSR scores provided by multiple CSR rating agencies as reliable proxies for CSR performance (e.g. Chand, 2006; Cho, Lee & Pfeiffer, 2013). The definition of CSR performance adopted in this study is in consistence with one of these CSR rating agencies, namely with the agency ‘CSRHub’. It states that CSR performance consists of how an organization is performing with regards to its community, employees, environment and governance (CSRHub, 2017). This is in line with an organization’s legal, ethical and philanthropic responsibilities as identified in Carroll’s definition of CSR.

2.2 CEO’s national culture

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group members (Kroeber & Kluckhohn, 1963; Wallerstein, 1990). Ultimately, the social norms and expectations embedded in a culture shape the behavior of individuals and organizations (Hofstede, 2010). It can respectively help guide group members make decisions and/or judge the decision of others. Accordingly, national culture affects people’s perception of issues and is therefore one of the drivers of strategic choices of organizations (Hooghiemstra, Hermes and Emanuels, 2015).

2.3 Linking CEO national culture and CSR

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al., 2006). In order to be consistent with previous literature, Hofstede’s cultural dimensions are considered in this study. It has to be considered that Hofstede’s cultural framework is on country level instead of individual level. This implies that Hofstede’s cultural dimensions assume national cultural homogeneity (Beugelsdijk et al., 2017). But culture has been found to also exist among many different social groups, including regions, generations, and social economic groups (Kirkman, Lowe & Gibson 2016). Due to the availability of data, a deficiency of literature exists concerning intra-country cultural diversity. Until today, literature has not established an overall theoretical framework reconciling intra-country cultural diversity with the conception of national cultures (Peterson, 2016).

2.3.1 Hofstede’s cultural dimensions

Hofstede is considered as one of the first researchers in the field of international management who developed an empirically typology, which represents the relation between human behavior and business organizations. He was the first to create a parsimonious national culture framework, initially consisting of four cultural dimensions, namely: individualism-collectivism, uncertainty avoidance, power distance and masculinity-femininity (Hofstede, 1994). Later, a fifth dimension was incorporated concerned with the positioning of a country’s population along a long-term orientation versus short-term orientation spectrum (Hofstede and Hofstede, 2005). In 2010, the sixth dimension was added, which is called the indulgence versus restraint. In order to be consistent with prior research, this study considers solely the first two cultural dimensions: individualism-collectivism and uncertainty avoidance. This is explained by the fact that these two dimensions have the clearest implications for corporate leaders’ choice behaviors, thus affect the choice of CSR activities, which is an antecedent for an organization’s CSR performance. These two dimensions also encompass the most often researched cultural dimensions in corporate governance research (e.g. Hope, 2003; Han, Kang, Salter & Yoo, 2010; Hooghiemstra, Hermes and Emanuals, 2015).

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regulations. But a study of Akaah (1990) indicates that compared to employees from an individualistic cultural background, employees from collectivistic countries displayed higher attention to ethically oriented behaviors. It is argued that members from individualistic countries act out of self-interest and are less concerned with the impact of their business on society. However, people with an individualistic cultural background have found to also deliberate an exceptional importance to voluntary and free cooperation as well as to individual initiative (Husted, 2005). Scholtens and van Dam (2007) argue that there is therefore a positive relation between the level of individualism and ethical practices of an organization. Moreover, Vachon (2010) found evidence for individualism being positively associated with sustainability practices of an organization. This can be explained by individualism positioning an agent’s own responsibility on the foreground, which leads to members from individualistic countries being more likely to push a social and environmental agenda within an organization. As a result, organizations will pay more attention to their ethical practices. Additionally, in individualistic countries group cohesiveness is less of interest, therefore members from these countries are more likely to condemn any social and environmental malpractices (Vachon, 2010). In accordance to previous literature, this would probably imply that when the CEO originates from a country with a higher level of individualism, the CSR performance of the organization will be higher.

H1: The CEO’s country of origin individualism is positively related to the CSR performance of the organization.

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or public). In addition, members from high uncertainty avoidance countries do not challenge the traditional order of their operating context. This would potentially imply that when the CEO originates from a country with a lower level of uncertainty avoidance, the CSR performance of the organization will be higher.

H2: The CEO’s country of origin uncertainty avoidance is negatively related to the CSR performance of the organization.

2.4 Cultural difference of a foreign CEO

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the CEO has experience working in a particular host country before being appointed as a CEO there. Hofstede & Hofstede (2005) argue that much of the cultural patterns of thinking, feeling, and acting are acquired during early child years, as a person is most sensitive to learning and assimilation at that time. These patterns are deeply rooted and once well established within people’s minds, they are unlikely to change extensively by subsequent experiences. Accordingly, Hambrick et al. (1998) state that while compiled international experience and exposure can, to a certain degree, conquer nationality-based differences, nationality imprinting is difficult to abolish. Thus, although a foreign CEO has presumably already been living in the host country for a while, there will still be cultural differences noticeable concerning the patterns of thinking, feeling and acting between the home and host country of the CEO. Those differences could withhold a foreign CEO from optimal performing. Consequently, it is expected that a CEO working in a foreign country will be confronted with cultural difficulties that (negatively) effect the relation between a CEO’s characteristics and the (CSR) performance of the organization. This implies that the level of cultural difference faced by a foreign CEO is a moderating variable in this study. In specific, the relation between the national culture of a CEO and the CSR performance of the organization is expected to be weakened by the level of cultural difference between the home and host county of a foreign CEO.

H3a: There is a negative moderating effect from the foreign CEO’s level of cultural difference (between its home and host country) on the positive relationship between the CEO’s country of origin individualism and the CSR performance of the organization.

H3b: There is a negative moderating effect from the foreign CEO’s level of cultural difference (between its home and host country) on the negative relationship between the CEO’s country of origin uncertainty avoidance and the CSR performance of the organization.

2.5 Conceptual model

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to the CSR performance of the organization, while the CEO’s country of origin uncertainty avoidance is expected to be negatively related to the CRS performance of the organization. Additionally, a negative moderating effect from the foreign CEO’s level of cultural difference (between its home and host country) is expected. Therefore, the following conceptual model is subject to this study:

FIGURE 1. Conceptual model

+ H1 - H2 CEO national culture CSR performance Individualism Uncertainty avoidance Cultural difference (of foreign CEO)

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3. Data and Methodology

This section is concerned with describing an empirical strategy in order to test the hypotheses and formulate an answer to the main research question. The research method of this study is from quantitative nature and secondary available data, which refers to an existing dataset that has previously been collected by another researcher, has been collected and analyzed.

3.1 Sample

First of all, the sample for this study had to be selected, which exists of a selection of organizations. To increase the reliability and the generalizability of this research, which is said to be realized when one could infer the findings from the research sample to the population at large; an extensive sample is favored to give adequate representativeness and scope for the analysis (Van Veen & Pennink, 2015). In order to ensure accuracy, the sample consists of organizations from the Fortune Global 500 list. The Fortune Global 500 is an annual ranking of the top 500 organizations around the world measured by revenue. For this study, the most recent list is used, which is of the year 2016. The information is based on the organization’s fiscal year ended on or before March 31, 2016. In total, these 500 largest organizations generated $27,6 trillion revenues and employ 67 million people worldwide (Fortune, 2016). Due to missing data, some organizations were excluded. As a result, the sample size of this study consists of N = 403 organizations out of the 500 listed. The sample includes organizations located in 29 different countries around the world, which together have CEOs originating from 35 different countries. The complete list of the locations of the organizations included in this sample can be found in appendix I, and the complete list of the nationalities of the CEOs in appendix II.

3.2 Data collection and measurement

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3.2.1 Dependent variable: CSR performance

In order to gather data about the CSR performance of the organizations the database ‘CSRHub’ is used, which is world’s largest sustainability business intelligence database. This database offers to a certain extent publicly available CSR performance ratings of more than 15,000 organizations from more than 130 countries supplied by more than 500 data sources, mainly deriving from socially responsible investing research organizations, non-governmental organizations, government agencies and well-known indices (CSRHub, 2017). CSRHub is the first database combining data from six dominant SRI houses, including MSCI KLD, Thomas Reuters and GovernanceMetrics (Gidwani, 2010; CSRHub, 2017). Hence, this alleviates the potential bias problem by having integrated numerous major data sources. In addition, recent numbers are available in this database from almost all larger firms worldwide, which allows collecting the preferred recent data for this study. The CSR performance is rated according to an extensive measurement including four categories with different subcategories, which are (CSRHub, 2016):

§ Community: human rights, supply chain, product quality and safety, product sustainability, community development, philanthropy.

§ Employees: diversity, labor rights, treatment of unions, compensation, benefits, training, health, worker safety.

§ Environment: environmental policy, environmental reporting, waste management, resource management, energy use, climate change policies and performance.

§ Governance: leadership ethics, board composition, executive compensation, transparency and reporting, stakeholder treatment

The ratings on CSR performance range from 1 – the lowest score, meaning a very poor CSR performance, to 100 – the highest score, meaning an excellent CSR performance.

3.2.2 Independent variable: CEO national culture

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‘’statements about just one culture on the level of ‘’values’’ do not describe ‘’reality’’; such statements are generalizations and they ought to be relative’’. For this reason, the country scores of each CEO have to be compared to each other in order to be meaningful. In addition, Hofstede (2010) argues that the forces that drive cultural values and bring about their shift tend to be global or continent-wide and influence many countries at the same time. Meaning that as cultures fluctuate together, their relative positions remain the same. For that reason, it is proven that the cultural scores are being stable over time (Hofstede, 2001; 2010). In this study, Hofstede’s cultural dimensions ‘individualism-collectivism’ and ‘uncertainty avoidance’ are considered for each country specifically in order to measure the ‘national culture’ of a CEO. The scores on each of the cultural values vary from 1 – meaning that the cultural dimension is not present in the country, to 100 – meaning that the country possesses the cultural dimension strongly. In case a CEO has two nationalities, both nationalities are taken into consideration by including the average score of the value scores of the two countries for both cultural dimensions ‘individualism-collectivism’ and ‘uncertainty avoidance’.

3.2.3 Moderator: Cultural difference of a foreign CEO

The moderator is concerned with solely the foreign CEOs, which are the CEOs having a different nationality than the location of the headquarters of the organization. In this study, 66 out of the 403 organizations have a foreign CEO. This moderating variable will therefore be subject to a sample size of N = 66 organizations. To investigate the degree of cultural difference between the home and host market of a foreign CEO, Hofstede’s cultural dimensions ‘individualism-collectivism’ and ‘uncertainty avoidance’ are used in accordance to the independent variables of this study. The data of this moderating variable is considered by taking the deviation scores of the home and host country of a foreign CEO of these two cultural dimensions. The average of the deviation scores of these two cultural dimensions are calculated and used in this study to represent the cultural difference faced by a foreign CEO.

3.2.4 Control variables

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Firm size

Huang (2013) found that firm size has an affect on CSR performance as larger organizations have a better transparency and face generally higher environmental pressure (Choi & Hwang, 2015). In addition, Holmes (1977) argues that firm size can have possible influences on the organization’s policy of investing in CSR; therefore it has to be taken into consideration as one of the control variables. In order to measure the firm size, the number of employees of an organization is considered in this study. The data is derived from the Fortune Global 500 database.

Financial performance

In order to measure the financial performance of an organization, the profit numbers are included in this study. Palmer (2013) found that corporate social performance is positively related to CSR, which can be explained by firms with higher profits possessing more assets to invest in CSR practices. Additionally, Edmans (2015) argues that only organizations that are performing well are able to afford spending money on its other stakeholders. The profit data of the organizations derives from the Fortune Global 500 database.

Firm industry

The industry a firm is operating in is also included into this study, as it has been found that certain industries include considerably more CSR than other industries. Also, some industries have a greater impact on the society and environment in comparison to others; therefore industry plays a major role in a study concerning CSR. Moreover, certain industries are pressured by NGOs and local communities to invest in CSR practices. The data about the industries is derived from the Fortune Global 500 database. In total, 21 different industries are indicated for the sample of this study.

Development of a country

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4. Empirical results

The data obtained from the mentioned databases and Hofstede’s studies is analyzed in the IBM software program ‘SPSS’ in order to determine if, and to what extent, the CSR performance of an organization is influenced by the national culture of its CEO. In order to be consistent with the hypotheses, the data will be analyzed using the cultural dimension scores of the CEOs country of origin on ‘individualism-collectivism’ and ‘uncertainty avoidance’ separately to measure the national culture. In this section, the empirical results of the analyses conducted to investigate the hypotheses of this study will be presented. First of all, the descriptive statistics of the sample are mentioned, followed by the results of the correlation matrix, regression analyses and a post hoc analysis.

4.1 Descriptive statistics

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study is bi-national. The other dummy variable representing whether a CEO has a different nationality than the country the HQ of the organization is located indicates that in this sample this is the fact in 16.4% cases. This implies that there are 66 organizations with a foreign CEO, which will be used to investigate the moderating variable of this study. The descriptive statistics of this reduced sample size of N = 66 organizations can be found in appendix III. Table 1. Descriptive statistics

Variables Observations Mean St. Deviation Min Max

CSR 403 60 7 37 77 Individualism 403 65 26 17 91 Uncertainty Avoidance 403 58 22 8 100 HDI 403 0.88 0.70 0.62 0.95 Profit* 403 3,404.56 6,559.25 -44,904 53,394 # Of employees 403 133,730.57 183,416.48 1.231 2.300.000 Financials 403 0.26 0.44 0 1 Energy 403 0.16 0.37 0 1 Motor vehicles 403 0.07 0.25 0 1 Technology 403 0.08 0.27 0 1 Healthcare 403 0.06 0.25 0 1 Other industries 403 0.38 0.48 0 1

* Profit is measured in $ millions

4.2 Correlation analysis

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moderating variable, which can be found in appendix IV. All values in this matrix are below .7, which means that there is also no multicollinearity detected in this sample.

Table 2. Spearman correlation matrix

Variables Mean S.D. 1 2 3 4 5 6 7 1 CSR 59.91 6.66 - 2 HDI 883.66 69.50 .21** - 3 Individualism 64.73 26.42 .16** .62** - 4 Uncertainty avoidance 58.39 21.58 .14** .26** -.24** - 5 # Employees 133.730.57 183.416.48 -.09 -.14** -.11* -.09 - 6 Profit $3,403.56 $6,559.25 .02 -.02 .03 -.18** .23** - * p <.05, ** p < .01 4.3 Regression analysis

As this study aims to ascertain the causal effect of one variable upon another, this study uses regression analysis as the primary statistical technique. Hence, this technique will be used to measure a linear dependence between the national culture of the CEO (independent variable) and CSR performance of the organization (dependent variable). The effect of a CEO originating from an individualist country and/or from an uncertainty avoidance country on CSR performance will be investigated separately in accordance to the hypotheses of this study. The first three models are subject to a sample size of N = 403, while model 4 has a sample size of N = 66, as solely the foreign CEOs are considered for the moderating variable of this study.

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all control variables are insignificant, implying that firm size, financial performance, type of industry and a country’s level of development do not significantly explain variation in CSR performance among organizations. The coefficients for individualism (p < .05) and uncertainty avoidance (p < .01) are highly significant. The first hypothesis of this study posits that a CEO originating from a country with a higher level of individualism is associated with a higher level of CSR performance. As can be determined from model 3, the independent variable ‘individualism’ is significant (p < .05) and positive (B = .048). These results indicate that the CSR performance of an organization is higher when the CEO originates from a country with a higher level of individualism. Thus, hypothesis 1 is supported. The second hypothesis of this study proposes that a CEO originating from a country with a lower level of uncertainty avoidance is associated with a higher level of CSR performance, thus a negative relation is expected. As shown in model 3, the independent variable ‘uncertainty avoidance’ is significant (p < .01) but positive (B = .053). These results indicate that the CSR performance of an organization is higher when the CEO originates from a country with a higher level of uncertainty avoidance, which is not in line with the proposed hypothesis. Consequently, hypothesis 2 is rejected.

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Table 3. Regression of CEO national culture on CSR performance

* p < .1, ** p < .05, p < .01***

Model 1 Model 2 Model 3 Model 4

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4.4 Post hoc analysis

Next to investigating the proposed hypotheses of this study, it can be interesting to look at the data for patterns that were not specified a priori. As the sample consists of two types of CEOs; namely local and foreign CEOs, the differences between the CSR performances of an organization with a local and a foreign CEO can be compared. A one-way ANOVA is executed to determine this. The results indicate that there is a significant effect of a local-foreign CEO in relation to the CSR performance of an organization, F (1,402) = 6,971, p < .01. The average score of an organization with a foreign CEO (M = 61.88, SD = 6.47) is higher than the CSR score of organizations with a local CEO (M = 59.53, SD = 6.64, p < .01). Table 4. Local-Foreign CEO differences

Type of CEO M (SD)

Local CEO 59.53 (6.64)

Foreign CEO 61.88 (6.47)

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5. Discussion and Conclusion

In this chapter, the empirical results presented in the previous section will be discussed in relation to the research objectives. In addition, the limitations and future research directions be mentioned, followed by the theoretical and managerial implications. As indicated, literature shows that there is a deficiency of studies being focused on the role of corporate leaders on CSR performance, which is remarkable given the prominence of upper echelons work (Waldman, Siegel and Javidan, 2006; Angus-Leppan et al, 2010; Manner, 2010). Yet, this study suggested that the CSR performance of an organization might be the result of its CEO’s characteristics. In specific, this study is focused on one specific CEO characteristic, namely the national culture of the CEO.

The first objective of this study was to find out whether the CEO’s country of origin ‘individualism’ and ‘uncertainty avoidance’ is related to the CSR performance of the organization. The results show that the CEO’s country of origin individualism is positively related with the CSR performance of the organization. This supports the notion of Scholtens and van Dam (2007), who argue that there is positive association between the level of individualism and ethical practices of an organization. In addition, these findings are in line with the study of Vachon (2010), who found evidence for the fact that individualism is positively associated with sustainability practices of an organization. One of the explanations for this is that in individualistic countries group cohesiveness is less of interest, therefore members from these countries are more likely to condemn any social and environmental malpractices (Vachon, 2010).

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harmonic and regulated social coexistence. This is not surprising to support the idea of a society that satisfies human-, as well as labor rights and follows environmental policies (Rallapalli, Vitell, Wiebe & Barnes, 1994).

Lastly, this study tested the moderating effect of the level of cultural difference of a foreign CEO on the relation between the CEO’s national culture and the CSR performance of an organization. Previous research indicates that the greater the cultural difference between home and host country of a CEO, the more difficulties of adjustment in the host environment. Although poor cross-cultural adjustment is found to frequently result in dissatisfaction and suboptimal performance of a CEO (Kraimer, Wayne & Jaworski, 2001; Shaffer & Harrison, 1998), the results of this study indicate that there is no moderating effect of the level of cultural difference on the relation between the CEO’s national culture and the CSR performance of the organization. This could be due to the fact that solely the differences between the CEO’s home and host country’s ‘individualism-collectivism’ and ‘uncertainty avoidance’ were considered in this study to measure a foreign CEO’s cultural differences. This is a consequence of the limited timeframe of this study. There are numerous (other) factors that influence the level of cultural difference between two countries, such as the political, legal and social differences (Kraimer et al., 2001; Shih, Chiang & Hsu 2010; Nunes, Felix & Prates, 2017). Future research could counter this limitation by including more/different factors to measure cultural differences between the home and host country of a foreign CEO.

The following limitation is concerned with the fact that there are different perspectives of CSR practices and performances around the globe (Campbell, 2007). CSR performance is inherently subjective, and no single best way exist to measure an organization’s CSR performance. Although the CSR scores provided by ‘CSRHub’ are approved as a reliable proxy for CSR performance (e.g. Chand, 2006; Cho, Lee & Pfeiffer, 2013), the scores could be biased due to the CSR practices they decide to include. Those CSR practices may not be relevant for all nations, and it may exclude CSR practices that are important in some nations. Therefore future research could counter this issue by exploring the different perspectives of CSR practices and performances among nations and creating a more reliable proxy to measure the CSR performance of organizations worldwide.

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sample have a local CEO (337 organizations), instead of a foreign CEO (66 organizations). For that reason, it is more challenging to assure that the nationality of the CEO contributes to the differences in CSR performance instead of the nationality of the organization. However, when building on the upper echelon theory, it can be stated that the CEO is in a position to significantly influence an organization’s practices. To ensure that it is indeed the CEO who contributes to these CSR performance differences, future research could include a sample with more foreign CEOs. This research recommendation is strengthen by the fact that a significant difference has been found between the CSR performance of organizations with a local and foreign CEO. Organizations with a foreign CEO have found to have higher CSR performances than organizations with local CEOs. This also opens up other research possibilities, namely to investigate underlying motives for this phenomenon of foreign CEOs possessing a significantly higher organization CSR performance than local CEOs.

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country of origin values. Although much of the cultural patterns of thinking, feeling, and acting are acquired during early child years and are unlikely to change extensively by subsequent experiences, it may have effect (Hofstede & Hofstede, 2005). To precisely determine the national culture of the CEOs, future research could counter this limitation by conducting individual surveys and/or interviews with the respective CEOs.

The relevance of this study can be explained by its contributions to research. Firstly, it contributes to upper echelons research on CEO national culture by researching how this CEO characteristic influences an organization’s CSR performance. Moreover, this study contributes to research on corporate social responsibility by introducing a novel determinant of CSR, namely the national culture of a CEO. By doing so, the literature on why organizations differ (widely) in CSR performance is enlarged. In addition to its theoretical contributions, this study offers insightful practical implications. Firstly, an increasing number of organizations have been developing CSR initiatives and practices as a meaningful part of their strategic agendas, which requires significant managerial attention. Consequently, CSR becomes a more major topic, thus organizations should pay more attention to the nature of the relationship between CEO characteristics and CSR performance. The findings of this study may also be from importance to organizations aiming for increased CSR performance, as it clarifies on the determinants of CSR performance, which are relevant when aiming for this. For instance, this study highlights that organizations with CEOs originating from countries with a relatively higher level of individualism are associated with a higher CSR performance.

5.1 Conclusion

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Appendices

I. Location of HQ of organizations

Table 5. Location of HQ of organizations

Country Frequency Percent

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II. CEO nationalities

Table 6. Nationalities of CEOs

Country of CEO Frequency Percent

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USA/UK 1 .1

USA/France 1 .1

III. Descriptive statistics

Table 7. Descriptive statistics foreign CEOs

Variables Observations Mean St. Deviation Min Max

CSR 66 61.88 6.47 40 71 Individualism 66 70.86 18.43 18 91 Uncertainty Avoidance 66 60.95 19.80 35 100 HDI 66 0.90 0.06 0.62 0.94 Profit* 66 2,535.12 4,501.39 -7,946 17,783 # Of employees 66 109,857.98 101,693.14 1,500 440,000 Financials 66 0.23 0.42 0 1 Energy 66 0.12 0.33 0 1 Motor vehicles 66 0.05 0.21 0 1 Technology 66 0.08 0.27 0 1 Healthcare 66 0.09 0.29 0 1 Other industries 66 0.44 0.50 0 1 Cultural Difference 66 17.75 12.89 1.50 63

* Profit is measured in $ millions

IV. Correlation matrix

Table 8. Spearman correlation matrix foreign CEOs

The effect of the CEO’s national culture on the CSR performance of the organization