10
2.2 Corporate Social Responsibility
Corporate Social Responsibility is not a newbie in the business world. Corporate Social Responsibility means that a corporation should be held
accountable for any of its actions that affect people, their communities, and their environment, Lawrence et al., 2005. Based on The World Business Council of
Sustainability Development, Corporate Social Responsibility is the continuing commitment by business to contribute to economic development while improving
the quality of life of the workforce and their families as well as of the community and society at large.
Corporate Social Responsibility CSR is defined as the voluntary activities undertaken by a company to operate in an economic, social and
environmentally sustainable manner. When companies operate in an economically, socially and environmentally responsible manner, and they do so transparently, it
helps them succeed, in particular through encouraging shared value and social license. Management and mitigation of social and environmental risk factors are
increasingly important for business success abroad, as the costs to companies of losing that social license, both in terms of share price and the bottom line may be
significant. Corporate social responsibility CSR refers to a business practice that involves participating in initiatives that benefit society.
2.3 Disclosure 2.3.1 Definition of Disclosure
Conceptually, the disclosure is an integral part of financial reporting Suwardjono, 2008. Disclosure means presenting useful information to those who
accountable for any of its a a
ct ct
i ions that affect peo
eopl p
e, their communities, and their environment, Law
w re
rence et al., 2005. Based on The W W
or orld Business Council of
Sustainabili li
ty ty Development, Co
Co rp
p or
r at
t e
e So
So ci
c al
al R
R esponsibility
is is
the continuing comm
m i
itment by y
busine ne
ss ss
t to
o contribute to economic ic
d d
ev ev
elopme m
nt while le improving
th h
e quality
y of of l
l if
if e of t
t he
he workforce and their famil
ies as
as wel
ll l as
as o
o f
f th th
e comm mmunity
and so soci
ciet et
y at l
l a
ar ge.
C Co
rporate Social R
esponsib il
ity CSR is defined a
s s
th h
e e vo
vo lu
lu ntary
y ac
ac ti
t vitie
es und
er taken by a
com pany to op
er ate in an ec
on om
ic c, so
c cial
al and
d enviro
n nm
entally sust ai
na bl
e mann er
. Wh
en c
om pa
ni es
operate in an ec
conomica a
ll y,
y, so
sociall ly
and environmentally res ponsible man
ne r, and they do so tr
an n
s sparen
ently, i
it t
helps them s
uc uc
ce ce
ed ed
, in
in p
p ar
ar ti
ti cu
c la
a r
r throug
g h
h en n
co co
ur ur
ag ag
in in
g g
sh sh
ar ar
ed e
v al
ue and soc oc
ia ia
l l
li lice
c nse. Management and mitigation
o o
f f
social and environmental risk fact t
or or
s s
ar are
in in
cr crea
ea si
si ng
ly ly
i i
mp mp
or or
ta ta
nt nt
f f
or or
b b
us us
in in
es e
s succes s
s s
ab ab
ro ro
ad ad
, ,
as as
t t
he he
c c
os os
ts ts
t to co
co mp
mpan an
ie ie
s s of
lo o
si si
ng ng
t t
ha h
t soci ci
al al
l l
ic ic
ense se,
bo bo
th th
in term rm
s s
of sha a
re re p
ri ri
ce ce
a nd
nd t t
he he
bottom m
li line
ne m
may be significant. Corporate social respon
onsibility y
CSR refers to a business practice that involves participating in initiative
es that bene efit society.
2.3 Disclosure 2.3.1 Definition of Disclosure
11
need it. The information disclosed should be complete, clear, and able to represent the exact economic condition Hutapea, 2014. Based on Evans 2003 in
Suwardjono 2008, disclosure means supplying information in the financial statements themselves, the notes to the statements, and the supplementary
associated with the disclosure statements. It does not extend to public or private statements made by management or information provided outside the
financial statements. More specifically, Wolk et al 2001 in Suwardjono 2008 interpreting
the definition of disclosure as followed: “Broadly interpreted, disclosure is concerned with information in both
the financial statements and supplementary communications including footnotes, post-statements events, management’s discussion and analysis
of operations for the fortcoming year, financial and operating forecasts, and additional financial statements covering segmental disclosure and
extentions beyond historical cost.” Disclosure is often also interpreted as providing more information than what can
be delivered in the form of formal financial statements Suwardjono, 2008. This seems in line with the idea of the FASB in its conceptual framework as follows
SFAC No. 1, paragraph 5: “Although financial reporting and financial statements have essentially
the same objectives, some useful information is better provided by financial statements and some is better provided, or can only be provided,
by means of financial reporting other than financial statements.” statements themselves, the n
n ot
otes to th h
e st
st at
a ements, and the supplementary
associated with the e
d disclosure statements. It does n
n ot
ot extend to public or
private state e
m ments made by m
m an
an ag
ag em
em en
en t
t or
o in
i formation pro
rovi v
ded outside the financia
ia l
l statements. Mo
Mo re
e s
pe cifi
fi ca
ca l
lly, Wolk et a
l 2001 in
Su wa
wardjono 20
2008 08
interp rpreting
the de defi
fini ni
ti tion o
o f
f di
sclosure as followed :
“B “B
ro adly interpret
ed ,
disclo su
re is conc er
ned with inf or
r ma
ma ti
ti on
n i
i n
n both
h the
fina ncial statem
en ts
and supplementary commu ni
cati o
ons in
incl cl
ud u
ing g
footnotes, pos t-st
at em
e nts
ev en
ts , ma
na ge
ment ’s discussion
a and analy
ysi s
of operations for the fortcoming yea
r, f
inancial and operati n
ng for orecasts
s, an
d ad
ad di
di ti
ti on
on al
al f
f in
in an
an ci
c al
l s
s tateme
e n
nts co co
ve ve
ri ri
ng ng
s s
eg eg
me me
nt al d
isclosure an
an d
d extentions beyond historical
c c
os o
t.” Di
Disc sc
lo lo
su sure
re i
i s
s of
of te
te n
n al
al so
so i
i nt
nt er
erpr pret
eted ed
as pr pr
ov ov
id id
in in
g g mo
mo re
re i
i nf
nf or
or ma
ma ti
ti on
on t
t ha
han n
wh wh
at at
can be
d d
el eliv
iv er
er ed
ed i
i n
n th the fo
fo rm
rm of form rmal fin
an cial
l statement nt
s s
S S
uw uwar
ar dj
dj on
on o,
o, 2
200 00
8 8. This
seems in line with the idea of the he FASB
in in
its conceptual framework as follows SFAC No. 1, paragraph 5:
“Although financial repor r
ti t
ng a a
n nd financial statements have essentially
the same objectives, some u
useful information is better provided by
12
2.3.2 Level of Disclosure
Level of disclosure is related to how much information should be disclosed. There are three levels of disclosure proposed by Hendriksen and
Brenda 1992, which are: a. Adequate Disclosure
This implies a minimum amount of disclosure congruous with the negative objective of making the statement not misleading.
b. Fair Disclosure This implies an ethical objective of providing equal treatment for all
potential readers. c. Full Disclosure
This implies the presentation of all relevant information. For some, it means the presentation of superfluous information that sometime becomes
inappropriate.
2.3.3 Type of Disclosure
There are two kinds or two types of disclosure which are mandatory disclosure and voluntary disclosure.
a. Voluntary Disclosure Voluntary disclosure is the disclosure by the company beyond what is
required by the accounting standards or regulations of regulatory bodies Suwardjono, 2008.
b. Mandatory Disclosure Brenda 1992, which are:
a. Adequate e
D Disclosure
Th h
is is implies a
a m
m in
in imum
m a
a mo
mo un
un t
t of of
d d
is s
c clos
os ur
ur e congruous
wi wi
th the negative objectiv
iv e of m
m ak
ak in
g the st st
at at
em em
en en
t t
no no
t t
misleadi di
n ng.
b. Fa Fa
ir ir
D D
is is
clos s
ur ur
e Th
This i i
m mplies an ethical obje
ct ive of provi
di ng equ
al al
tre at
atme me
nt for all
po o
t te
ntial readers. c.
F Fu
ll D is
cl os
ure This implies
t he
p re
se nt
at io
n of all
rel ev
ant information.
F F
or some, e,
i it
means the presentation o
f superfluous in fo
rmation that somet im
me be become
es inap
pr op
op ri
ri at
at e
e.
2. 2.
3. 3.
3 Type of Disclosure
Th Th
er er
e e
ar ar
e e
tw tw
o o
ki ki
nd nd
s s
or or t
t wo
wo t t
yp ypes
es o
o f
f di
di sc
sc lo
lo su
su re
re w
whi hi
ch ch
a a
re re m
m an
anda da
tory disc
c lo
lo su
re re
a a
nd nd vol
l un
un t
tary disclosur ure.
a. Voluntary Disclosure Voluntary disclosure is th
the disclo s
sure by the company beyond what is required by the accounting
s s
tand dards or regulations of regulatory bodies
Suwardjono 2008
13
Mandatory disclosure is mandatory disclosure by the company as a form of government intervention to overcome the potential market failures.
2.3.4 Corporate Social Responsibility Disclosure
Disclosure about CSR in Indonesia first regulated in ACT No. 40 of 2007 about corporation and in Government Regulation No. 47 of 2012 concerning
Social and Environmental Responsibility of Corporation. But both of those regulations did not explain about the items of social and environmental
responsibility that must be disclosed. In August 2012, Ministry of Finance of the Republic of Indonesia through Capital Market and Financial Institution
Supervisory Body BAPEPAM-LK issued Decision of the Chairman of Capital Market and Financial Institution Supervisory Body BAPEPAM-LK No. KEP-
431BL2012 concerning the submission of annual report by listed company. In Decision of the Chairman of Capital Market and Financial Institution
Supervisory Body BAPEPAM-LK No. KEP-431BL2012, there is a regulation No. X.K.6 which is concerning the submission of annual report by listed company.
In point 2.a.1.g said that an annual report must contain corporate social responsibility. Furthermore in point 2.h.1, BAPEPAM-LK required companies to
disclose its CSR activities that cover policies, types of program, and cost incurred in the following aspects such as environmental; employment practices, health, and
work safety; social and community development; and product responsibility.
2.4 Information Asymmetries
Information asymmetry is a condition describing that managers have access to information on the company’s prospects which are not owned by outside
Disclosure about ut
C CSR in Indonesia first re
re gu
gu lated in ACT No. 40 of 2007
about corporatio o
n n and in Gov
v ernment Regulation No. 4
47 7
of 2012 concerning Social and
nd Environ
n me
me nt
nt al
a Res
es po
o ns
ns ib
b i
ilit it
y of f
C C
or or
poration. Bu t
t both of those
regu u
la lations di
di d
d not explain ab
ab ou
ou t
t th
th e
e it
it ems of
f social
l and envi
viro r
nmental r
responsi i
bi bi
li ity
ty t
that mu mu
st b
e disclosed. I
n August 2 01
2, M
M inistr
ry y of
of F
F inance
of the Repu
ubl bl
ic ic of
In done
si a
through Capital Market and F
F in
in anci
i al
al Instituti
tion Su
Su pe
pe rv
r isor
or y
Body BAPE PA
M-LK is
su ed Decis
io n of the Cha
ir irman
n of
of C
C a
apital al
Ma Ma
rket a
nd F in
an cial Institu
tion Sup
er visory
B ody BAPEPAM-L
K K N
N o.
o. K
K EP
P -
431BL L
2012 concerni ng
the sub mi
ss ion
of a
nn ual
repo rt
by listed c om
mpany. In D
ec isio
n of the
Cha irman of Cap
it al
M ar
ke t an
d Financ ia
a l
In n
s stitutio
io n
n Supervisory Bo
d dy
A BAPE
PA PA
M M-
LK LK
No .
. K
KEP EP
4 -4
31 31
B L
20 20
12 12, there is a regulat
at io
on n
No No
. .
X.K.6 which is concerning the submission of annual report by listed co comp
mpan an
y. In
In p
poi oi
nt nt
2 2
a .a
1 .1
g .g
s s
ai ai
d d
th th
at at
a a
n n an
an nual
r rep
ep or
or t
t mu
mu st
st c
c on
on ta
ta in
in c
c or
or po
pora ra
te te so
ocial resp
spon nsi
sibi bi
li li
ty ty.
. Fu
Fu rthe
e rm
rmore in p p
oi o
nt 2 2
h .h.1, BA
BAPEPA A
M- M-
LK LK
r r
eq equi
ui re
re d
d co comp
mpanies to disclose its CSR activities that cov
over polic ie
ie s, types of program, and cost incurred
in the following aspects such as e environmen
ntal; employment practices, health, and work safety; social and community
y develo
o pm
ent; and product responsibility.
2.4 Information Asymmetries
14
parties Sanjaya and Young, 2012. This condition will result in the magnitude of the opportunity manager, to do things that are beneficial to their interests Palguna
Putra, 2013. There are two major types of information asymmetry Scott, 2009. First
is adverse selection. Adverse selection is a type of information asymmetry whereby one or more parties to a business transaction, or potential transaction,
have an information advantage over other parties. The second is moral hazard. Moral hazard is a type of information asymmetry whereby one or more parties to
a business transaction, or potential transaction, can observe their actions in fulfillment of the transaction but other parties cannot.
2.5 Earnings Quality
Kategori