Differences in corporate social responsibility disclosure between Japan and the USA

irst, FWMA ranking exercises are conducted on the firms selected based on the similar worldwide applied criteria of Fortune. The exercises are based on the surveys with a large number of executives, directors and security analysts who rated the companies in their own industry for the selection of the companies they admired the most, in which CSR was considered as one of the key areas of leadership of a company in the relevant industry. Thus, given accelerated global competition, FWMA companies seem to be the leaders in adopting CSR principles and practices from the Anglo-Saxon nations (Flammer, 2015). Second, previous studies have positively reported that FWMA firms of these countries provide more CSR information (Chan et al., 2014). It is also empirically evident that preserving the already established reputation requires a firm to deliver consistent performance over time (Petkova et al., 2014). Third, out of all firms that appeared on the FWMA ranking result from 2006 to 2011, the number of US firms is always the largest followed by the number of Japanese firms. This is relatively proportionate to the size of these two global leading economies in the early 2000s. Fourth, with a global reputation and total assets between over USD12 billion and 1,900 billion for Japanese firms in 2011, between USD800 million and 2,300 billion for the US firms in the same year, each of FWMA firms has had a profound impact on their global value chain and the world economy. 72 JABES 25,1 3.2 Data collection process The data collection process comprised three stages. First, the data from all of the FWMAUS firms and Japanese firms that were released in at least one of the years between 2007 and 2012 from the Fortune website were captured. The FWMA surveys were conducted in the previous year of the releasing year, i.e. from 2006 to 2011. There were initially 586 US firms and 60 Japanese firms; each firm was provided an ISIN code or a Bloomberg ticker. Second, annual data on environmental disclosure score (E ), social disclosure score (S ) and the combined environmental-social-governance (ESG) disclosure score, the percentage of independent directors, return on equity, debt-to-equity ratio, sales growth, turnover, total assets, number of employees and industry sectors from 2006 to 2011 were collected automatically from Bloomberg with the Bloomberg template spread sheet. Third, the list of the above-mentioned companies was narrowed down to the firms that meet the criterion of being an active public company as of July 2012. 3.3 Final data set After the initial omission of the missing data, this left us with 2,046 firm-year observations for 451 US companies listed on New York Stock Exchange in 168 industries classified by Bloomberg in 2012, and 246 firm-year observations for 47 Japanese companies listed on the Tokyo Stock Exchange in 22 industries classified by Bloomberg in 2012. Due to the further missing data in a small number of the observations of either ESG or E or S, the number of observations used in the modelling was marginally reduced, as reported in Table III. 3.4 Model Following Jo and Harjoto’s (2012) finding of a causal effect of governance on CSR and Chan et al. (2014) suggestion of a link between CG quality and CSR disclosure on company annual report, I tested the hypothesis on the impact of independent directors on CSR disclosure. A multivariate linear regression model was estimated using the OLS method. To observe this hypothesised impact over time, following Ntim and Soobaroyen (2013), fixed effect estimation was applied to control for unobserved heterogeneity and time-invariant firm-specific effects (Wooldridge, 2002). Drawn on Bear et al.’s (2010) work using lagged data of the explanatory variables, I used one-year lagged data for the independent variables and control variables under the assumption that independent directors must be in their roles for some time to exert their influence on CSR information disclosed by the executives. In addition, I control the lagged dependent variable, since the disclosure level demonstrates its heritage manner. The proposed empirical model is characterised by: CSR disclosure i; t ¼ b0þb1 indirectorð Þi; t1þb2 CSR disclosureð Þi; t1 þb3 roeð Þi; t1þb4 leverageð Þi; t1þb5 salesgrowthð Þi; t1 þb6 salesð Þi; t1þb7 assetsð Þi; t1þb8 employeeð Þi; t1 þb9 yearð Þi; t1þb10 y industryð Þi; t1þei; t where, the dependent variable that reflects CSR disclosure is measured by three alternative proxies, ESG, E and S, used in separate regressions. ESG was calculated on the amount of ESG information that a company disclosed while the two individual components of ESG, i.e. E and S, were calculated on the basis of amount of the information on E and S, respectively. These scores were measured by Proprietary Bloomberg ESG group based on the extent of company disclosure of environmental, social and governance data. The scores were also tailored to different industries; in this way, each company was evaluated in terms of the data relevant to its industry sector. Companies that are not covered by the 73 Differences in CSR disclosure Proprietary Bloomberg ESG group and companies that do not disclose anything will have no score. The scores range from 0.1 for companies that disclosed a minimum amount of data to 100 for those that disclosed every data point. Each data point is weighted in terms of importance, with environmental data carrying a greater weight than other disclosures in ESG, greenhouse gas emission carrying greater weight than other environmental disclosures in E, and workforce data carrying greater weight than other social disclosures in S. The key explanatory variable, indirector, is defined by the percentage of independent directors on board membership following Rashid’s (2015) study that employed the percentage of outside directors as the proxy for board independence. For the control variables, following Ntim and Soobaroyen (2013), return on equity (roe), debt-to-equity ratio (leverage), sales growth (salesgrowth) were fixed. Additionally, the extent of a firm’s CSR disclosure might be subject to the firm’s size, since several aspects of firm size may influence governance in a way that tempers the board’s ability to effect change (Dalton et al., 1999). Previous studies employed turnover (Prior et al., 2008; Ammann et al., 2011), total assets (Frye et al., 2006; Lo and Sheu, 2007) or number of employees (Glavas and Piderit, 2009) to quantify firm size. In this study, the control variables for firm size are turnover (sales), total assets (assets) and number of employees (employee). Further, industry effect and year effect were controlled, since voluntary disclosure principles and practices likely vary from industry to industry (Campbell et al., 2006) and from year to year. industry is the dummy variable for each of the industries; and year is the dummy variable for each of the six years from 2006 to 2011. 4. Empirical results 4.1 Descriptive statistics Table I demonstrates the two similarities in the attributes of the data of both countries. First, the standard deviations and the gaps between the minimum and maximum values of ESG, E and S are substantially large, which reveals that the amount of social and environmental information embedded in nonfinancial disclosure varies noticeably across the firms. Second, the mean values of E are considerably higher than those of S, suggesting that the amount of environmental disclosure is higher than the amount of social disclosure in both countries. There are clearly two main differences in the trends of the ESG, E and S data for each country in Table I. First, the US data on ESG, E and S are particularly extreme. In other words, there are larger standard deviations and wider gaps between the minimum and maximum values of EGS, E and S of the American firms compared to those of the Japanese firms. A considerable number of American companies reported only a minimum amount of E and S data, while a small number of the other US companies reported substantially on E and S (the data are available upon request). Second, the means and medians of ESG, E and S in the Japan panel are all higher than those in the US panel. Moreover, there is an increase in E and S in the Japanese data while those in the American counterparts fell during 2007-2009 when the global financial crisis was at its peak (see Figures 1 and 2). Regarding the proportion of independent directors on board, there is an opposing tendency between Japan firms and the US firms. Quite a few Japanese firm-year observations report 0 per cent independent directors; in contrast, there are a considerable number of American firms reporting upto 100 per cent of independent board members (see Table I). For all firm-year observations, the overall standard deviation in Japan data is larger than that in the US data (17.33 vice versa 11.21). On the contrary, the overall mean of Japanese firms is remarkably smaller than that of US firms, 17.25 per cent of the former compared to 81.82 per cent of the latter, and so as the overall medians (13.81 per cent 74 JABES 25,1 compared to 84.62 per cent, respectively). Likewise, in each of the observed years, the annual means and medians for the Japanese firms are all substantially smaller than those of the US counterparts, as shown in Figure 3. 4.2 Correlation matrix Table II displays the coefficients of bivariate correlation between each pair of the variables for each data panel to test for multicollinearity. The correlation coefficient between each pair of the independent variable and the dependent variable ESG (E ) (S ) is less than 0.31, which is considered small. All 2006 2007 2008 2009 2010 2011 Japan USA Japan USA Japan USA Japan USA Japan USA Japan USA Japan USA Dependent variable: ESG Mean 41.77 25.25 37.36 26.73 40.58 23.36 41.84 23.97 42.27 25.26 43.23 27.16 42.46 25.91 Median 42.98 20.247 40.08 24.53 43.18 18.51 42.56 17.77 42.97 19.00 44.21 22.77 42.98 19.14 SD 8.63 13.28 9.78 11.41 9.04 11.79 8.04 12.70 8.32 13.98 8.64 13.85 8.45 14.31 Min. 9.47 6.61 9.47 10.79 10.70 6.61 21.81 10.74 24.69 9.50 21.40 10.74 21.81 10.74 Max. 59.50 73.68 47.52 57.44 52.48 62.40 54.55 62.81 59.50 68.88 57.85 73.55 58.68 73.68 Dependent variable: E Mean 42.77 22.96 40.48 20.71 41.92 20.46 42.41 22.39 42.56 25.23 43.93 24.10 43.75 23.10 Median 45.248 19.64 41.47 17.05 46.51 17.05 43.80 19.51 44.57 25 45.74 21.70 46.51 17.83 SD 12.03 15.76 8.35 12.70 11.66 14.17 11.37 15.17 12.01 16.47 12.70 16.28 13.70 17.71 Min. 13.01 0.78 23.26 0.78 13.95 0.78 14.63 1.55 17.89 0.78 13.01 1.55 13.39 1.79 Max. 65.89 81.40 53.49 53.49 57.36 58.92 57.36 64.23 62.02 70.54 62.79 81.40 65.89 71.32 Dependent variable: S Mean 33.87 19.41 26.86 20.82 32.21 17.12 34.14 17.42 34.61 19.32 35.09 21.99 35.80 20.79 Median 33.33 12.28 28.07 14.03 33.33 8.77 33.33 8.77 33.33 8.77 33.33 17.54 33.33 14.03 SD 10.15 16.98 13.70 16.74 10.47 15.85 10.55 16.33 9.95 17.41 8.95 17.34 8.35 17.58 Min. 3.13 3.13 3.13 3.13 3.13 3.13 12.28 3.13 17.54 3.13 15.63 3.13 15.63 3.13 Max. 57.90 83.33 56.14 73.44 56.14 68.75 57.90 73.44 57.90 80.70 54.39 82.81 52.63 83.33 Independent variable: indirector Mean 17.25 81.82 16.81 83.10 15.65 81.44 16.14 81.00 17.72 81.36 18.27 82.50 18.55 82.55 Median 13.81 84.62 12 83.33 13.16 83.98 12.66 84.62 14.56 84.62 16.67 87.50 16.67 87.08 SD 17.33 11.21 18.80 8.73 16.77 11.09 16.85 11.75 17.32 11.47 18.03 11.19 17.82 11.25 Min. 0.00 27.27 0.00 53.33 0.00 33.00 0.00 28.57 0.00 27.27 0.00 27.27 0.00 27.27 Max. 86.67 100 71.43 94.12 78.57 94.44 80.00 100.00 80.00 94.12 85.71 100.00 86.67 100.00 Table I. Descriptive statistics of the dependent and independent variables 0 5 10 15 20 25 30 35 40 45 50 20 06 20 07 20 08 20 09 20 10 20 11 Japan USA Figure 1. Annual environmental disclosure score 75 Differences in CSR disclosure 4.3 Regression results The result of Breusch and Pagan’s (1980) Lagrangian multiplier test indicates that there is a panel effect in both the Japan and the US data. The F-test results (po0.05) suggest that fixed effects estimation could be used to estimate the parameters of the variables when Japanese data and US data were employed alternatively. Particularly, Hausman’s (1978) specification test results suggest that fixed effects estimation is preferred for Japanese data ( po0.05) rather than the random effects estimation. As seen in Table III, the models 1a, 2a and 3a demonstrate the fixed effects estimation results for the Japanese panel, while the models 1b, 2b and 3b for the US panel. 4.4 Result interpretations The regression results can be interpreted as two main points. First, only the regression run on Japanese data shows that the percentage of independent directors in Japanese firms significantly and positively affects the level of ESG, E and S (Model 1a: β¼ 0.12, po0.001; Model 2a: β¼ 0.14, po0.001; Model 3a: β¼ 0.17, po0.01, respectively). This is interpreted 0 5 10 15 20 25 30 35 40 20 06 20 07 20 08 20 09 20 10 20 11 Japan USA Figure 2. Annual social disclosure score 0 10 20 30 40 50 60 70 80 90 20 06 20 07 20 08 20 09 20 10 20 11 Japan USA Figure 3. Annual proportion of independent directors on the board 76 JABES 25,1 that voluntary disclosure level of environmental and social information, whether being treated in parts or as a whole, is significantly, positively and directly affected by the proportion of independent directors in the Japanese firms. However, no significant evidence of the investigated impact was found on the US data. Variable ESG E S indirector roe lever salesgrowth sales assets employees Japanese data ESG 1.00 E 0.93*** 1.00 S 0.73*** 0.44*** 1.00 indirector 0.04 −0.03 0.07 1.00 roe −0.28*** −0.21** −0.26*** −0.07 1.00 lever −0.16* −0.23*** 0.09 0.14* −0.07 1.00 salesgrowth −0.31*** −0.17** −0.24*** 0.05 0.42*** −0.04 1.00 assets −0.07 −0.17** 0.09 0.19** −0.03 0.82*** −0.05 0.12 1.00 employees 0.25*** 0.21*** 0.12 0.16* −0.19** −0.16* −0.10 0.79*** 0.03 1.00 US data E 0.96*** 1.00 S 0.89*** 0.67*** 1.00 indirector 0.26*** 0.15*** 0.23*** 1.00 roe 0.06** 0.07** 0.06* 0.07** 1.00 leverage −0.01 0.01 −0.01 −0.01 −0.31*** 1.00 salesgrowth −0.03 0.02 −0.03 −0.03 0.00 0.01 1.00 turnover 0.26*** 0.18*** 0.22*** 0.09*** 0.03 −0.01 0.06** 1.00 assets 0.16*** 0.15*** 0.07** 0.07** −0.03 0.10*** 0.05* 0.40*** 1.00 employees 0.14*** 0.05 0.10*** 0.02 0.03 −0.00 0.02 0.67*** 0.23*** 1.00 Notes: The industry dummy and year dummy variables are not included in this table. *po0.05; **po0.01; ***po0.001 Table II. Correlation matrix for all firm-year observations Model 1a Model 1b Model 2a Model 2b Model 3a Model 3b Japan USA Japan USA Japan USA CSR disclosure ESG ESG E E S S L.in_director 0.12*** (3.72) 0.03 (0.93) 0.14*** (3.71) 0.04 (0.54) 0.17** (2.93) −0.01 (−0.18) L.CSR disclosure 0.33** (3.23) 0.13** (2.64) 0.32** (3.37) 0.16** (2.88) 0.14* (2.29) 0.15** (3.28) L.roe −0.01 (−0.40) −0.00 (−0.30) −0.01 (−0.24) −0.01 (−0.67) 0.03 (0.64) −0.00 (−0.39) L.lever 0.01 (1.62) −0.00 (−0.23) 0.01 (0.70) −0.00* (−2.39) 0.01 (1.03) −0.00 (−0.73) L.sales_growth 0.02 (1.05) −0.01 (−1.71) 0.00 (0.07) −0.01 (−1.05) −0.02 (−0.86) −0.01 (−1.77) L.sales 0.00 (0.44) −0.00 (−0.08) −0.00 (−0.01) 0.00 (0.69) 0.00 (0.60) 0.00 (0.79) L.total_asset 0.00 (1.32) 0.00** (2.78) 0.00** (3.18) 0.00*** (4.17) −0.00 (−1.71) 0.00 (1.05) L.employee_nu 0.00 (0.13) −0.00 (−1.77) −0.00 (−0.24) −0.00 (−1.97) 0.00 (0.07) −0.00 (−1.37) 2006bL.year 0.00 (.) 0.00 (.) 0.00 (.) 0.00 (.) 0.00 (.) 0.00 (.) 2007L.year 0.38 (0.63) 2.15*** (4.05) 1.07 (1.18) 2.46** (3.29) 1.63 (1.86) 2.55** (3.09) 2008L.year −0.01 (−0.02) 3.66*** (5.60) 0.37 (0.35) 4.63*** (4.24) 1.36 (1.14) 4.44*** (4.84) 2009L.year 0.63 (0.63) 4.36*** (6.50) 1.63 (1.26) 4.52*** (4.09) 1.37 (0.93) 5.97***(6.01) 2010L.year −0.21 (−0.19) 3.68*** (4.58) 1.08 (0.86) 3.85** (2.90) 2.15 (1.29) 5.63*** (4.94) industry dummy Y Y Y Y Y Y _cons 23.24*** (4.73) 18.50*** (6.81) 24.56*** (4.35) 15.71* (2.54) 22.88*** (5.08) 15.73*** (4.32) n 199 1,570 197 933 199 1,566 R2 0.324 0.125 0.301 0.163 0.182 0.133 Notes: t-values are in parentheses. The preference of the panel estimation method rather than a simple OLS method is confirmed by performing Breusch and Pagan’s Lagrangian multiplier test. The test results ( po0.05 in each of the model using ESG, E and S alternatively as the dependent variable) allow the rejection of the null hypothesis of variances across firms equal to zero (i.e. no panel effect hypothesis); while the R2 between the studied firms and the overall R2 are somewhat disappointing, this weakness has been minimised by the use of fixed-effect estimation where the unobserved year-invariant factors are fixed, leaving the year-variant factors to become more explanatory in the models. Thus, the reported magnitudes of R2 within the studied firms are at the acceptable level in social science research. *po0.05; **po0.01; ***po0.001 Table III. Results of fixed effects regressions on the level of CSR disclosure 77 Differences in CSR disclosure The descriptive statistics, correlation coefficients and regression outputs reveal the opposing trends between two countries. The effect of independent directors on ESG (E ) (S ) of the Japanese firms is significant, as illustrated by the fixed effects regression outputs despite the insignificant bivariate correlations in the Japanese data. In contrast, although at first the bivariate correlations between independent directors and ESG (E ) (S ) in the US firms is significant, the underlying effect shown in the regression results turns out insignificant on the US data. This evidence is of greater importance, since the means and medians of the proportion of independent directors on the board of Japanese firms are less than 20 per cent, while those of the US firms are higher than 80 per cent. This contrast points to the need for further investigation of the universal validity of stakeholder theory in shaping CG configurations and CSR. Second, each of 2007, 2008, 2009 and 2010 generates an interesting insight although the year dummy is not the key explanatory factor in the proposed model. Each of the years from 2007 to 2010 turns out to be more significantly, strongly and positively related to CSR disclosure on the US data than it does on the Japanese data. This could be inferred that American independent directors might have become interested in stakeholder engagement in the wake of the global financial crisis; interestingly, the year factor is more explanatory for the studied impact in the US ( po0.01) than it is in Japan. Overall, the hypothesis was confirmed on the Japanese data but no statistical evidence found on the American part. While supporting the stakeholder theory in the Japanese firms, the hypothesis testing results challenge this theory by questioning whether independent directors in the US firms adopted the stakeholder approach in exercising their functions in relation to CSR. The empirical evidence shapes to the two ways of interpretation. On the one hand, the unsupported hypothesis tested on the US data highlights the need for the stakeholder approach in the board rooms of the US firms with regard to their social and environmental footprints. This point of discussion is aligned with Rose’s (2007) findings that the US Fortune firm directors sometimes made decisions that emphasise the legal defensibility of profit maximisation at the expense of long-term social responsibility and personal ethics. If being accountable to external stakeholders can partially build firm reputation, the results of this study challenge Musteen et al.’s (2010) findings that US Fortune firms with a greater proportion of outside directors attract a better reputation than those with a higher proportion of internal directors. On the other hand, the empirical findings possibly indicate that the board of directors and the top management in Japanese global firms might have adopted the stakeholder approach into their business in the way that they disclosed the ESG (E ) (S ) information to their external stakeholders. The significant fixed effects regression results on the Japanese data confirm Bansal and Roth’s (2000) findings that Japanese firms focussed their attention on their priorities articulated by the social norms, and they often operated with similar standards in a socially cohesive environment. This confirmation is further supported by the year factor in the regression outputs using Japanese data, suggesting that the global financial crisis spanning 2006-2011 might not be the main factor that triggered the Japanese FWMA companies to engage with the stakeholders. 4.5 Robustness analysis The author conducted a number of analyses on the robustness of the regression outputs. First, given the inconstant variants of the variables, Table III only reports the regression results after the robust check was done. A visual inspection of the correlation coefficients would indicate concerns for multicollinearity; therefore, I used the test for variance inflation factor (VIF) to measure how much the variance of the coefficients is inflated by multicollinearity. For Japanese data, the mean VIF of the data used in the regression on ESG is 6.98, that on E is 6.27 and that on S is 6.49. For the US data, the mean VIF of the data used 78 JABES 25,1 in the regression on ESG is 1.62, that on E is 1.82 and that on S is 1.62. All of the mean VIFs are generally well below the rule-of-thumb value of 10, which demonstrates that the models do not seriously violate the assumption of no perfect multicollinearity. Second, the independent and dependent variables of the Japanese data set show that the absolute values of skewness range from 0.01 to 1.29, and the absolute values of kurtosis from 2.73 to 5.44. The US data for the independent and dependent variables show that the absolute values of skewness range from 0.61 to 1.50, and the absolute values of kurtosis from 2.48 to 5.46. This implies that the assumption of normal distribution of the variables is not seriously violated. Third, there are intrinsically unobserved elements in the dependent variable that cannot be estimated in the error term in statistical models. The independent variable is endogenous when there is a correlation with the error term (Wooldridge, 2013). Generally, a loop of causality between the independent and dependent variables of a model leads to endogeneity ( Jia and Skaperdas, 2012). To examine this problem, ESG (E ) (S ) was alternatively regressed against indirector and the control variables to ensure that the direction of causality is from indirector to ESG (E ) (S ), and not the reverse (Chen, 2014). The next two steps are to investigate if indirector is endogenous with the error term, that is, to investigate the likely association between indirector and the residual of the models. In the first step, the residuals R1, R2 and R3 were obtained from the pooled OLS models using ESG, E and S as separate dependent variables. The correlation between indirector and each of the residuals was examined. The test results show that there is no significant correlation between indirector and each of the residuals using the data set ( po0.05). The second step further investigated the association between indirector and each of the residuals via regressions alternatively using fixed effects and random effects estimations. The regression results display that there are no significant associations between indirector and each of the residuals ( po0.05). Finally, I investigated the reversal consequence of higher ESG, E and S on having more independent directors in the board membership to ascertain whether the reversal impact caused by endogeneity is insignificant. I also controlled ROE, leverage, sales growth, sales, total assets, employee number, industry effects and year effects. The regression coefficient of ESG (E ) (S ), either using Japanese data or US data, is not statistically significant, suggesting that endogeneity is not a serious problem in this study. 5. Discussions and conclusion Delving into the black box of the validity of stakeholder theory observed in the influence of independent directors on CSR disclosure in Japan and the USA, I would suggest the following two points that possibly explain my findings. First, there might be risks of inflation of CSR information disclosed by the management who aim to please both stakeholders and shareholders when firms are facing difficulties in recession. The boundary between a true and greenwashing CSR disclosure is unclear due to information asymmetry (Akerlof, 1970). Therefore, more independent supervision on CSR disclosure by external directors are needed to maintain corporate legitimacy (Suchman, 1995), corporate reputation and risk reduction (Delgado-García et al., 2013). Second, although the CSR concept has received much attention in theory and practice for over a half of a century in Anglo-Saxon society (Tricker, 2015), this study confirms Young and Thyil’s (2014) findings that contextual factors are important to the incorporation of CSR within governance. Given the benefit of my proposed model in unpacking the effectiveness of the Japanese and American independent board members in their influence on disclosure of CSR activities, this study implies that it is impossible to apply a single CSR-driven governance model in different national governance bundles. 79 Differences in CSR disclosure At the firm level, in line with the previous findings that organisational culture influences a firm’s orientation towards responsible treatments to stakeholders (Galbreath, 2010) and that stakeholder’s orientation of CG is positively associated with social and environmental disclosure (Mallin et al., 2013), my findings support the stakeholder theory in Japanese corporate context but challenge the theory in the US corporate context. Although previous studies confirm the positive and significant impact in the banking sector (Bear et al., 2010) and health sector ( Jizi et al., 2014) in the USA, this study takes a further step by challenging the cross-industry generalisation of this impact. My findings support Aguilera and Cazurra’s (2009) statement that the outcomes are not as straightforward as one might think, and hence it is important to move the debate beyond the convergence/divergence dichotomy and to pay more attention to the dynamics of how firms apply certain aspects of the governance codes and not others. At the country level, it is worth analysing why my results show a significant relationship between the proportion of independent board members and CSR disclosure in the Japanese context, but remain inconclusive in the USA one. According to García-Sánchez et al. (2015), the effect of having independent members on the board is conditioned by the shareholder orientation characteristics of the CG system in each country. While there had been no legal requirement for the inclusion of external members on boards in Japan until the governance reform in the early 2000s, it seems that when innovating governance practices, Japanese companies decoupled from the original context and customised their governance practices to their particular circumstances (Aguilera and Cazurra, 2009). Japan’s CG system neither fully converges with, nor completely diverges from the Anglo-Saxon model (Yoshikawa et al., 2007). This study reveals that using independent directors is likely to be an effective mechanism for stakeholder management in the Japanese context. However, this mechanism is questioned in the US context, although CSR movements were initiated from western countries. Country-level studies show that, increasingly, firms tend to adopt a higher percentage of code recommendations despite their voluntary nature (Aguilera and Cazurra, 2009). The USA was the first country to issue the code of good governance in 1978, while Japan issued their first code 22 years later, in 1997. Although the USA has had a well-developed national governance context creating a favourable environment for independent directors to do their tasks (Yoshikawa et al., 2014) for much longer than Japan has, voluntary integration of social and environmental sustainability into business remains a question for American firms as there are no statistical evidence found in this study. Therefore, the national context offers the setting for stakeholder theory to be realized in shaping independent directors’ behaviours relating to stakeholder engagement. CSR disclosure in this study is measured in terms of its level. One might suppose that independent directors could be influential on the annual change of CSR disclosure. There is an assumption that the US independent directors may actually play their roles by making change in the CSR disclosure while its levels are affected by a number of other significant efforts and/or governance models such as board model. Thus, this could be the avenue for future research. This paper has certain limitations, which may open up other significant avenues for further research. The first limitation is resulted from the objective paradigmatic approach of the research (Burrell and Morgan, 1979), since it attempts to quantify human attitudes and behaviours embedded in social constructs of CSR. This rests on the false assumption that managerial behaviour is observable and that observers have the time and ability to watch all human behaviours (Eisenhardt, 1989). 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Corresponding author Hien Tran can be contacted at: hientran@ftu.edu.vn For instructions on how to order reprints of this article, please visit our website: www.emeraldgrouppublishing.com/licensing/reprints.htm Or contact us for further details: permissions@emeraldinsight.com 85 Differences in CSR disclosure