The Effect of Leadership on Corporate Governance through the Integration of
Corporate Social Responsibility
Perspectives from the Boards of Directors and Chief Executive Officers of the Libyan Commercial Banks
Being a Thesis Submitted in Partial Fulfilment of the Requirements for the Degree of Doctor of Philosophy in the University of Hull
by
Khalid Altaher Alshaikh
BSc, University of Misrata, Libya - 1998
MSc, Academy of Graduate Studies, Libya - 2005
September 2019
In the name of Allah, most Gracious, most merciful
ii
Dedication
I dedicate this achievement to the people, who have never ceased from the encouragement of me pursuing my studies,
My parents.
I also dedicate this dissertation to my beloved country,
Libya.
iii
Acknowledgements
First, I am thankful to Almighty Allah for all the help and blessings he has bestowed upon me, including the abilities to finish this work. Certainly, many individuals deserve a special gratitude because without their supports, assistances, and encouragements, I would surely have not arrived to this point and accomplished this thesis. However, due to constraints of space, it is impossible to mention all thenames.
I would specifically thank my parents for their encouragement and support since my first enrolment in school and for their prayers throughout my life. My appreciation also goes to my supervisor Christopher Bovis for his support and advice during my PhD journey.
Many thanks to the internal and the external examiners for taking out time to examine this thesis. My thanks to all my friends and colleagues at the University of Hull. Also, I would like to express my appreciation to my brothers and sisters and to all my relatives and friends in Libya for their continuous moral support during my study. Finally, special thanks to my country Libya for its valuable contributions throughout my studies,
without forgetting the interviewees’ cooperation.
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Abstract
Corporate Governance (CG), Corporate Social Responsibility (CSR) and leadership have become such related concepts that each concept is a supplement and/or a complement to the other. CG, for example, has come to govern the principle-agent relationship and ensure the satisfaction of various
stakeholders’ interests. CSR demands organisations to provide economic,
social and environmental justice where they operate. Leadership is the ability of those with power to influence and guide followers to achieve common goals and simultaneously comprehend and respond bravely and constructively to the most critical economic, social and ecological challenges. Thus, once employed altogether effectively, these concepts establish healthy relationships with various stakeholders, gain competitiveness and generate corporate profits.
However, these concepts have been recently under investigation in Libyan society. Scholars and private and public institutions have commenced examining the possible resolutions CG, CSR and leadership can arrange to alleviate the economic, social and environmental concerns the war has produced. Thus far, levels and efforts to apply CG codes have varied in Libyan companies. CSR is a new organisational culture that still designs its route within the Libyan commercial banks (LCBs). Leadership in the LCBs requires transformational and transactional styles to detach itself from any notion of dictatorship and autocratic traits. Therefore, this study tried to link the three concepts CG, CSR and leadership by exploring the impact of the board and executive leadership on CG framework to integrate CSR strategies in the LCBs.
To achieve its goal, the study relied on three main questions to examine: First, to what extent does the board and executive leadership involve in the formation and application of CG structure? Second, to what extent does the board and executive leadership, through TSL and TFL styles, facilitate the application of CSR activities in the LCBs in light of the current Libyan crisis? Third, how does the board and executive leadership influence CG regulations to include CSR agendas in the LCBs to manage the issues caused by the current Libyan crisis? To answer these main questions, it was necessary to create a group of sub questions that investigated: First, the meanings, the current situations and challenges of CG, CSR and leadership? Second, the nature of relationship between CG and CSR in the LCBs? Third, the position of the TSL and TFL styles in the LCBs?
In regard with the methodology, the study adopted the qualitative approach and conducted semi-structured interviews to collect the required data from 21 BMs and CEOs in 12 public and private LCBs. Then, the data was analysed by using grounded theory approach and thematic analysis method.
The study provided some findings that answer the sub and main research questions starting with the sub question the findings showed that CG has narrow and wide definitions in the LCBs. Besides, the findings indicate that CSR is mainly encouraged and directed by religion and is centred on the notion of charity, and hardly touch upon achieving sustainable development. CG and CSR have a mutual relationship. Moreover, the findings demonstrate that Leadership features in the LCBs are under the influence of three factors, including the legacy of the previous regime, the Islamic culture and the
Western perspective of leadership. Nonetheless, the leadership’s attempts to
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make economic and social changes seem difficult due to some challenges such as the weak of knowledge in regard with CG and CSR in the LCBs, the weak CG Enforcement system in addition to the Confusion between CSR and the notion of philanthropy, the transformation from traditional to Islamic banks and the impact of social and tribal culture. Concerning the main researcher questions, the findings revealed that the BoDs and CEOs involved in the establishment of the Libyan Corporate governance code (LCGC) by compromising the CG international guidelines with national laws and regulations, in addition to their crucial role in the application and development of CG policies within their banks. The findings also indicated that BoDs and CEOs applied TFL and TSL styles. Both styles work together as continuum to enable the implementation of CSR activities within and outside the banks. Finally, the finding confirmed that the BoDs and CEOs influence the CG regulations to include the CSR practices in the LCBs to meet the interests of both shareholders and other stakeholders.
The study has some limitations, including the lack of literature regarding to the concepts of CG, CSR and leadership in Libya. Additionally, the study did not include leaders from the middle and lower management and also did not
cover other stakeholders’ entities. Moreover, this study did not distinguish the
differences between the public banks from the private banks. Female participants are absent in this research due to engendered Libyan environment. Finally, the Libyan crisis experienced during the conduct of this research influenced, somehow, the findings of this research.
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Table of Contents
The name of Allah ………………………………………………………………………….. ii
Dedication .. ......................... ……………………………………………………………iii Acknowledgements .................................................................................... iv
Abstract ……………………………………………………………………………….............v
Table of Contents...................................................................................... vii List of Figures, Tables, Appendices and Legislations.................................. xi
List of Abbreviations …….……………………………………………………….……... xii
Research Introduction
Introduction ................................................................................................1 Research Background.................................................................................. 2
Research Signifacance ……..……………………………………………………………….4
Research Objectives.................................................................................... 5 Research Questions..................................................................................... 6 Research Methodology Overview ................................................................ 6 The Findings of the Research...................................................................... 7 Contribution of the Study ………………………………………………………………..10 Thesis Structure ........................................................................................11 Conclusion.................................................................................................14
Chapter 1: Research Methodology
Introduction ..............................................................................................15 1.1 Research Objectives..............................................................................15 1.2 Research Questions ..............................................................................16 1.3 Research Strategies and methods ........................................................ 23 1.4 Validity and Reliability of Research Methods....................................... 35 1.5 Ethical Considerations......................................................................... 37
Conclusion …………………………………………………………………………………… 38
Literature Review
(Chapters 2 & 3)
Chapter 2: Historical Background of Corporate Governance,
Corporate Social Responsibility and Leadership
Introduction .............................................................................................40 2.1. Theoretical Framework for Corporate Governance Introduction ..............................................................................................41
vii
2.1.1 The Meanings of Corporate Governance …………………………..………...41 2.1.2 Emergence and Development of Corporate Governance .................... 43 2.1.3 Internal and External Mechanisms of Corporate Governance............ 50 2.1.4 Key Principles of Corporate Governance........................................... 53 Conclusion................................................................................................ 54
2.2 Theoretical Framework for Corporate Social Responsibility Introduction ............................................................................................. 56 2.2.1 The Meanings of Corporate Social Responsibility.............................. 56 2.2.2 The Historical Development of Corporate Social Responsibility........ 58 2.2.3 Key Principles of Corporate Social Responsibility............................. 67 Conclusion................................................................................................68
2.3 Theoretical Framework for Leadership Introduction ............................................................................................. 69 2.3.1 The Definition of Leadership …………………………………………………… 69 2.3.2 Theories of Leadership......................................................................71 2.3.3 Leadership in Times of Crisis ………………………………………………….. 81 Conclusion................................................................................................ 85
Chapter 3: The Relationship between Corporate Governance,
Corporate Social Responsibility and Leadership
Introduction..............................................................................................86 3.1 The Interdependent Relationship between Leadership and Corporate
Governance
Introduction.............................................................................................. 87 3.1.1 Symbiotic Relationship between Leadership and Corporate
Governance....................................................................................... 87
3.1.2 Ownership Structure and Corporate Governance ..............................88 3.1.3 Agency Theory and Corporate Governance........................................90 Conclusion................................................................................................ 92
3.2 The Reciprocal Relationship between Corporate Governance and
Corporate Social Responsibility
Introduction..............................................................................................94 3.2.1 The Distinctions between Corporate Governance and Corporate Social
Responsibility .................................................................................94
3.2.2 The Convergence of Corporate Governance and Corporate Social
Responsibility ................................................................................. 95
3.2.3 Stakeholder Approach in Corporate Governance ………………………… 96 Conclusion................................................................................................98
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3.3 The mutual relationship between Leadership and Corporate Social
Responsibility
Introduction ............................................................................................. 99 3.3.1 The Boardroom and Corporate Social Responsibility......................... 99 3.3.2 The Executive Management and Corporate Social Responsibility.... 100 3.3.3 Transactional and Transformational Leadership and Corporate Social
Responsibility…………………………………..……………………….. 102
Conclusion.............................................................................................. 109
Chapter 4: The Libyan Context
Introduction ............................................................................................110 4.1 Libyan Society Background.................................................................110 4.2 An Overview of Corporate Governance, Corporate Social Responsibility and Leadership in Libya...................................................................114
4.3 The Libyan Banking Sector.................................................................118
4.3.1 The History of the Libyan Banking Sector .....................................119 4.3.2 The Central Bank of Libya (CBL)………………..……………………….... 121 4.3.3 The Public and Private Commercial Banks ....................................122
Conclusion...............................................................................................124
Analysis and Discussions of the Findings of the Sub Research Questions
(Chapters 5,6,7 )
Chapter 5: Corporate Governance in the Libyan Commercial Banks
Introduction ............................................................................................126 5.1 The Meanings of Corporate Governance in the LCBs...........................126 5.2 Leadership Structure in the LCBs .......................................................128 5.3 The Shareholders and Employees Rights in the LCBs..........................134 5.4 Key Challenges of Corporate Governance in LCBs...............................145 Conclusion...............................................................................................150
Chapter 6: Corporate Social Responsibility in the Libyan Commercial
Banks: meanings, practices and challenges
Introduction ............................................................................................152 6.1 The Meanings of Corporate Social Responsibility in the LCBs.............152 6.2 Corporate Social Responsibility Activities in the LCBs........................155 6.3 The Roles of the Boards and Executive Officers in Corporate Social
Responsibility ..................................................................................159
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6.4 Corporate Social Responsibility and Corporate Governance Synergies
........................................................................................................162
6.5 The main Challenges of Corporate Social Responsibility in the LCBs..164 Conclusion...............................................................................................169
Chapter 7: Leadership in the Libyan Commercial Banks
Introduction ............................................................................................170 7.1 Reframing the Meanings of Leadership in the LCBs............................170 7.2 Faces of Leadership in the LCBs: Transactional and Transformational leadership.......................................................................................... 171
7.3 Challenges of Leadership in LCBs.......................................................173 Conclusion.............................................................................................. 180
Chapter 8: Analysis and Discussion of the Findings of the Main
Research Questions
Introduction ............................................................................................181 8.1 Analysis and discussion of the findings of question one: To what
extent does the board and executive leadership involve in the establishment and implementation of the CG guidelines
in the LCBs?........................................................................182
8.2 Analysis and discussion of the findings of question two: To what
extent does the board and executive leadership, through TSL and TFL styles, facilitate the application of CSR activities in the LCBs in light of the current Libyan crisis? .....................185
8.3 Analysis and discussion of the findings of question three: How does
board and executive leadership influence CG policies towards the integration of CSR strategies in LCBs to manage the issues caused by the current Libyan crisis?....................187
Conclusion...............................................................................................187
Chapter 9: Research Conclusion
Introduction ............................................................................................192 9.1 Summary of the Findings of the Research Questions ..........................192 9.2 Contribution of the Study...................................................................196 9.3 Limitations of the Study.....................................................................197
9.4 Recommendations …………………………………………………………………. 198
9.5 Suggestions for Further Research ……………………………………………..200
Conclusion…………………………………………………………………………………..200
References ………………………………………………………………….................. 201
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List of Figures
- Number
- Title
- Page
13 65
Figure 1 Figure 2 Figure 3
Flow Chart Describing the Research Process External and Internal Stakeholders of an Organisation
- Agency Theory Model
- 90
Figure 4 Libya Location on the Map Figure 5
Public, Private and Foreign Contribution in the LCBs’ Ownership
111 137
137
Figure 6 The Dominance of Four Public Banks over LCBs’
Ownership
List of Tables
- Number
- Title
- Page
Table 1 Ownership Structure of the Libyan Commercial Banks 2016 136
List of Appendices
- Number
- Title
- Page
233 235 236 237 238
Appendix 1 The Interview Questions Appendix 2 The Interview Invitation Letter Appendix 3 The Consent Form Appendix 4 The Core and Sub Categories Appendix 5 General Information about the Interviewees
List of Legislations
- Legislation
- Title
1234567
Law No 2.1992 Concerning Privatisation Law No 1.2005 Concerning Banks Resolution No 134. 2006 Concerning Libyan Stock Market Law No 12. 2010 Concerning Labour Relations Resolution No 20/ 2010 Concerning Libyan CG Code Law No 23. 2010 Concerning Commercial Activity Law No 1. 2005 Amended by Law No 46, 2012 Concerning Banks
- 8
- Law No 1/ 2013 Concerning the Prevention of Usurious
Transactions
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List of Abbreviations
AGM BoDs BM
Annual General Meeting Board of Directors Board Member
- CBL
- Central Bank of Libya
Chief Executive Officer Libyan Commercial Banks Libyan Corporate Governance Code Libyan Stock Market
CEO LCBs LCGC LSM
- TFL
- Transformational Leadership
- Transactional Leadership
- TSL