An Analysis of the Function of Boards of Directors: The moderating effect of BOD on the relationship between slack and CSR in Korean Firms

Abstract

With controversial arguments on the prime function of a board of directors, this study aim to determine the major role of the board in Korean companies, and to address the possible change caused by cultural factors in the role of the board. This research explores the issues in perspective of agency theory, resource dependence theory, and stakeholders theory

moderating effects of independent directors and Anglo-Saxon directors on the relationship between organizational slack and CSR investment are also empirically examined. Using data of 1,662 publicly traded Korean manufacturing firms gathered within the period of 2008 to 2013, the study shows that independent directors strengthen the relationship between organizational slack and CSR investment in Korean firms, whereby Anglo-Saxon directors, who are mostly from countries with shareholder-centered view of corporate law, weaken the relationship, provided, that they exceeded non-Anglo-Saxon directors in number. One possible explanation for the former finding is that key functions of a board of directors in Korean firms may be to advise managers and to provide resources to firms, lending supports to resource dependent theory and stakeholders theory perspectives. The latter result, on the other hand, indicates that a prime role of the board could appeal in a different way, drawing on cultural factors such as the countrys corporate law tradition.