EVALUATING CORPORATE SOCIAL RESPONSIBILITY AND CORPORATE GOVERNANCE PRACTICES OF THE GCC ISLAMIC BANKS THROUGH DISCLOSURE ANALYSIS

Abstract

ABSTRACT

The concept of corporate social responsibility (CSR) has been one of the most contested issues during the last few decades, due to the consequences it has for business and society. The concept of CSR represents corporate activities, beyond profit making, which include protecting the environment, caring for employees, being ethical in trading, and getting involved in the local community. Despite the fact that the primary goal of enterprises is to generate profit, they can be voluntarily involved in solving social and environmental problems. Furthermore, endorsing human rights, community contribution, human resource management, socially responsible investing, and social reporting, in particular, are some of the main issues of CSR.
While CSR is expected to be practiced for being socially acceptable, another important and related aspect of corporations including banks are corporate governance (CG). In particular, with the recent financial crises, the importance of CG has emerged as an important factor.
Considering that Islamic finance aims to develop an alternative paradigm, it has consequences for CSR and CG. As argued in this research, Islamic moral economy base suggests an integrated CSR and CG.
This research hence aims to explore and examine the CSR and CG performance of the GCC Islamic banks through information communicated by their annual reports in relation to a disclosure index created by the help of Islamic moral economy and various standardization documents. For this, fifteen Islamic banks was sampled from five GCC Islamic banks; and through content analysis the disclosed information in line with the created index analyzed for the period of 2008-2012.
The findings of this research indicate that the CSR and CG performance of the sampled Islamic banks are very low; and is not compatible with the expectations developed through Islamic moral economy. The study also found that there is a positive but statistically insignificant relationship between CSR and CG practices in the case of sampled banks for the period in question.