and English sections. The two sections were checked and proved to be the same. Only in Syria and Egypt were the reports obtained produced in the Arabic language only. The time period in which companies were contacted was between May and December 2001. All the reports received or printed from the Internet were mostly related to year 2000 annual reports. A few reports related to 1999. The majority of companies (85% of the sample) are public companies listed on the stock exchange. Only four companies are characterised by a joint ownership between the government of the country and the private sector and five companies are commercial state-owned companies.22 The sample includes companies from different sectors (see Table 1), with majority of these companies being from the financial sector.
This is due to the fact that a significant number of Arab companies registered on the stock exchange belong to the financial sector.23
SOCIAL REPORTING PRACTICES IN 68 ANNUAL
reporting categories are presented, followed by a critical analysis of disclosures under these categories and theoretical reflections on disclosures.
Table 2shows a summary of the level of disclosure recorded under each of the four disclosure dimensions. The findings of the content analysis demonstrated how most companies in the sample have made some form of social reporting, with only one company not providing any form of what is regarded as social disclosure in this study.24 The coverage of social information provided by companies ranged from one paragraph to the providing of a stand-alone social report. Out of the four main disclosure dimensions considered in this study, disclosure in respect of the ‘general social’ dimension was the most commonly experienced, with 62 companies (91% in the sample) satisfying at least one category and/or sub-category under this dimension. The majority of reporting under the ‘general social’
dimension was in relation to the ‘employee issues’ category, with 75% of the companies in the sample providing some form of employee information as understood here. The second highest level of social disclosure was provided under the ‘economic’ dimension, with 47 companies or 69% of the sample reporting under this dimension. The most popular area of disclosure under the ‘economic’ dimension was the ‘customer relations’ category, with 30 companies disclosing some form of customer-related information. The
‘other social characteristics of reports’ dimension level of disclosure came third, with 35 companies or 53% of the sample satisfying one or more of this dimension’s categories or sub-categories. The poorest level of disclosure was recorded under the ‘environmental’ dimension, with only 10 companies in the sample providing some form of environmental information.
In general terms, the majority of social disclosures provided by the 68 companies in their annual reports were of a qualitative nature with quantitative information provided concentrating mainly on employment training, charities and donations, and less often on amounts relating to governmental and Islamic concerns. Financial disclosures concentrated
Table 2. Level of Disclosure for Four Dimensions.
Dimension Companies
Number %
Economic 47 69
Environmental 10 15
General social 62 91
Other social characteristics of reports 35 53
mainly on using conventional types of financial disclosures, especially expenses related to employees’ benefits and amounts of donations provided to charitable bodies in society. Islamic-related financial disclosures were provided by 10 companies in the sample, with the majority of these being in respect to liabilities for Zakat. Disclosures were also mainly positive in orientation, with hardly any reference to any negative or ‘bad’ news information in any of the reports. In all dimensions, disclosure themes relating to social and other cultural particularities in Arab societies were in evidence. For instance, Islamic and nationalistic/governmental considera- tions were emphasised in a number of reports in the sample. All social information provided was done so voluntarily, with the exception of the disclosing of Zakat liabilities by Saudi companies, which is required by law in Saudi Arabia.
The Economic Dimension
Mostly, the focus of social accounting and reporting concentrated on issues of natural environment, employees and local and international commu- nities. A number of studies, however, have insisted on the importance of including the ‘economic dimension’ in social accounting if we want to see more radical social accountings emerge (see Bebbington, n.d.; GRI, 2002;
Boyce, 1998;Gallhofer & Haslam, 2003).Bebbington (n.d., p. 9)argues that if by social accounting we are aiming towards sustainability development, then key concepts such as integration and interconnectedness should be applied to social accounting. Integration means bringing together informa- tion relevant to all company’s stakeholders, be they financial (e.g. investors, lenders), those affected by its environmental impact or those whose well- being is affected by the company (e.g. employees, local communities). The second key concept is interconnectedness: ‘‘showing how a company’s activities relate to the environment, sustainable economic development, and quality of life’’ (Bebbington, n.d., p. 9). In line with this understanding of a radical form of social accounting, the study incorporates some aspects of the
‘economic dimension’ to social disclosure.25
Social accounting and CSR literature have concentrated mainly on supplier and customer relation issues when dealing with the economic dimension of social disclosures.26This current research, inspired by the pilot study and AME context, added two other categories that the researcher thought to be relevant and would enrich the ‘economic dimension’ as well as reflect some aspects of particular social and cultural elements in Arab
societies; these are ‘Islamic considerations in company business decisions and activities’ and ‘linking business activities and decision making to govern- mental and national considerations’.Appendix Bprovides a description of categories under the ‘economic’ dimension. A total of 47 companies (out of the 68 companies in the sample) disclosed some form of ‘economic’
information as defined for the purpose of this analysis (seeTable 2).
There was little evidence of ‘supplier relation’ disclosures, with only four companies providing some form of information under this category (see Table 3). The highest level of disclosure in respect of the ‘economic dimension’ came under the ‘customer relations’ category, with 30 companies in the sample providing information related to customer relations and customer satisfaction. The vast majority of disclosures undertaken by companies in the sample concentrated on improving customer care and broadening the range of products and services provided to customers.
In its 2000 Annual Report, for example, Taib Bank states:
We’ll use our expertise and insight to create new products and services, including new investment opportunities that will allow our clients to tap into high growth sectors in unique markets. Plans also include expanding our online brokerage services to provide clients with direct access to a wider range of markets. (Taib Bank Annual Report, 2000, p. 5)
A Bahraini Telecommunications company went further to demonstrate its commitment to enhanced customer services by implementing a ‘Customer Service Charter’:
As part of its commitment to enhanced customer service, Batelco implemented a Customer Service Charter. Applicable to residential customers, the charter constitutes a contract between the company and its customers, defining standards for acceptable levels of service and the time limits within which services should be provided. (Batelco Annual Report, 2001, p. 8)
Table 3. Disclosure under ‘Economic’ Dimension.
Categories Companies
Number %
Supplier relations 4 5.5
Customer relations 30 44
Islamic considerations in company business decisions and company activities
18 26
Linking corporate business activities and decision making to governmental and national considerations
25 37
The company’s annual report and social report (Batelco is the only company in the sample to have a stand-alone social report) provided brief description of what the charter contains. That included opening up of new channels of communication and service with the establishment of additional customer sales and service centres across the Kingdom of Bahrain, where a full range of services for residential and small business customers is available. The Chief Executive Report (p. 20) explained that such charter aims at ‘‘offering accountability and transparency to the customer’’. The statement included in Batelco’s Annual Report contains radical and emancipatory potentials. These potentials stem from the ability of an external user to hold the company responsible for the shortcomings in its performance by reference to this charter (seeGray & Bebbington, 2001for discussions on importance of environmental and social charters). The charter, in other words, could be used as a benchmark for good practice to hold the company responsible and for evaluation of the company’s future performance.
Other types of disclosures under this category concentrated on the organisation’s relationship with its customers by providing statements that demonstrated the good reputation of the organisation among customers.
The annual report of Jordanian bank highlighted its successful relationship with customers as follows:
Our outstanding relation with the customer, as well as our endeavour to stand by them and help them in achieving their goals represents an important strength element in Arab Bank’s clearly articulated strategy. (Arab Bank Group Annual Report, 2000, p. 8)
While companies were keen to include positive statements about company–
customer relationships and customer satisfaction, very few companies provided disclosure regarding the means of communicating with customers or information related to customer’s needs and satisfaction surveys. The handful of companies that disclosed such information did so in very general terms. An annual report of a Saudi Bank explained its policy regarding communicating with customers:
At ANB, we are driven to exceed customer expectations through a process of listening, evaluating, delivering and communicating with our customers. (Arab National Bank Annual Report, 2000, Directors’ report)
A telecommunication company also states in their annual report that:
The feedback from our customers has indicated that they are in fact satisfied with our service and personal attention. (National Mobile Telecommunications Company Annual Report, 1999, Chairman’s Message, p. 4)
The above two companies, however, fail to give further details on the means of communications with their customers or on feedback mechanisms.
Other less evident disclosures under this category varied from providing a list of customers dealing with the company to some unique disclosures, such as this one by a Syrian joint venture Services and Tourism Company:
Despite the fact that the customer failed to comply with the contract conditions and regulations, the company continues dealing with (the customer) until the customer finds another supplier, as the company wishes to co-operate with (the customer) to avoid a situation where employees (of the customer) stay without food or services. (TheSyrian Services and Tourism Company Annual Report, 2000, p. 27) (translated from Arabic to English)
The Syrian company’s quotation suggests that considerations, other than maximising shareholder value, may, in this case at least, be of some significance. The reason could be that the Syrian Services and Tourism Company is a joint venture where the government owns 25% of the shares, making it the largest shareholder in the company. The Syrian Services and Tourism Company’ customer is also a joint venture company where the government owns 51% of the shares. This suggest that in a country like Syria, where the government plays a significant role and has a significant share of economic activities, decision making, in some cases, is not always based on a profitability criterion, but also on broader conceptions of public and national interest.
All in all, disclosures under ‘supplier’ and ‘customer’ relations categories tended to be general, qualitative and concentrating mainly on good or neutral news, lacking, in most cases, any critical or negative news. Radical forms of disclosures under these two categories made a very modest appearance. Very few companies, for instance, disclosed any form of engagement and communications with or feedback from their customers or suppliers – such as that of Batelco’s ‘Customer Services Charter’ that constitutes a contract between the company and its customers. Exclusion of the voices of customers and suppliers from the process of governing and shaping company’s future policies, indicated by the lack of disclosure on such involvement, deprives the entity of the opportunity to construct an accountable and transparent account of its relationship with its customers and suppliers. On another note, it is not clear why there is a significant difference in disclosure levels between
‘customer’ and ‘supplier’ relations disclosures, where customer relations disclosures manifested in the 68 annual reports are considerably higher than disclosures relating to ‘supplier’ issues. From the analysis, this is most likely because the majority of companies in the sample are public holding
companies, driven in many cases by expanding their customer base and, therefore, maximising their shareholders’ value. Disclosures on customers tend to reflect such a consideration.
Disclosures indicating Islamic influence on business decisions and activities amounted to 26% of the sample (18 companies). Disclosure in this category primarily included details regarding the provision and introduction of Islamic products and services. The annual report of a Kuwaiti Islamic financial institution stated:
Kuwait Finance House has achieved a remarkable success toward providing overall banking services based on the principles of the ShariayIn the field of financing Islamic companies and car agencies, KFH provided KD 51 million in finance through its
‘murabaha’27product, and provided KD 10 million for financing the building of the University City at Sharjah, through the ‘istisnaa’28product. (Kuwait Finance House Annual Report, 2000, p. 16)
Providing Islamic products and services is not exclusive to Islamic banks and institutions. Other banks are also providing Islamic types of products and services. The majority of those transactions fall within traditional banking transactions, such as dealing with interest. A Jordanian bank describes services offered under Islamic Sharia and the expansion of the Islamic division in the bank as follows:
The Islamic Banking Division offers Islamic-based financing to the health, education and manufacturing sectors y The bank provides banking services which are in compliance with the ShariayThe total number of employees in the Islamic banking Division at the end of 2000 reached 209 compared with 161 by the end of 1999. (Arab Bank Group Annual Report, 2000, p. 34)
Some disclosures under this category provided statements confirming the strict adherence to the principles of Islamic Sharia in the organisation’s activities. Islamic institutions were, again, prominent in this area. The annual report of a Bahraini Islamic bank described how the bank’s functions were all in line with the ‘Sharia Islamieha’ that is taken from the Holy Quran and the sayings and practices of the Prophet Muhammad:
The Holy Quran outlines for Muslims a complete code of life for dealing individually or collectively. This is further amplified by the sayings and practice of the Holy Prophet (May Peace be Upon Him). In this context all functions of the Bank are performed in strict adherence to the principles of Islamic Sharia. In order to ensure such conformity to Sharia the Group’s operations are checked and monitored by its Religious Supervisory Board (RSB) to which the management reports periodically. In case of new operations and activities prior approval of the RSB is invariably obtained by the Bank’s managementy The RSB of the bank itself comprises eminent scholars of Islamic Sharia from Bahrain, Egypt, Saudi Arabia, Turkey and Pakistan possessing in depth knowledge of the
conditions in which the Group operates. The RSB is also composed of many international renowned Islamic Scholars, provides advice from time to time on issues that pertain to Group level implementation. (Faysal Islamic Bank Annual Report, 1999, p. 6)
While Islamic banks and institutions state their full adherence to Sharia principles, other institutions in different sectors have also disclosed information regarding the influence of Islamic considerations on their business activities. A Bahraini telecommunications company explained its business policy of making the usage of facilities easier for pilgrims on Haj:
This year Batelco will be doing even more to ensure that pilgrims on Haj have every opportunity to stay in contact with family and friends in Bahrain throughout their journey. A special package has been designed for Haj Agents which will include mobile handsets and SIM cards for use on Haj, allowing pilgrims to communicate easily and cost effectively while they are away. (Batelco Social Magazine, p. 7)
Quantitative disclosures were more evident under this category than the previous ‘supplier’ and ‘customer’ categories. Ten companies (15% of the sample) provided some forms of financial disclosure in respect of their Islamic activities. The majority of disclosures concentrated on Zakat payment and Zakat obligations. Other financial disclosure in respect of Islamic considera- tions included information regarding the dealing with earnings prohibited by Islamic Sharia. The following is an example:
Earnings prohibited by Sharia amounting to US$337,019 for the year ended 31 December 1999 (1998: US$15,000) are not included in the income statement and are set aside for charitable purposes’. (Faysal Islamic Bank Annual Report, 1999, p. 27)
Financial disclosure regarding Islamic investments was also evident as in this example from an Islamic company:
A Murabaha investment amounting to KD 2,748,000 has been pledged against a letter of guarantee. (The International Investor Annual Report, 2000, p. 26)
Islam has a major impact on life and culture in the modern Middle East.
Muslims consider Sharia to be the source of all law. To be a true Muslim, all aspects of life should be conducted in line with the rules of Islam (McKee et al., 1999). It is not surprising then to find some companies in the AME, including those that do not necessary name themselves as Islamic, voluntarily providing information regarding their adherence with Islamic rules and teachings, and/or disclosing information that illustrates the impact of Islamic considerations on their business activities. It could be that these types of information are a company’s way of portraying themselves as ‘good citizens’
in the Arab community, where religion and the teachings of Islam have a big influence on people’s everyday lives.
Most of the companies disclosing under this category are financial institutions describing themselves as Islamic. They are part of an increased trend in the AME of moving towards Islamic financing and investments.
Their voluntary disclosures regarding their adherence to Islamic concepts and Sharia in different aspects of their business/economic activities represent a potential for a radical and emancipatory form of accounting where social justice (the main objective of Islamic Sharia) is enmeshed within economic objectives. For instance, disclosures under this category have demonstrated a consideration for making economic decisions on a basis other than the financial ones, of maximising shareholders’ value: ‘all functions of the bank are performed in strict adherence with the principles of Islamic Sharia’.
Another emancipatory and radical potential stems from the necessity under Islamic consideration to provide details of activities undertaken by the institution to ensure adherence to Islamic Sharia: ‘‘[The bank] offers Islamic- based financing to the health, education and manufacturing sectors’’.
Institutions have also provided details in respect of their charitable contributions of income resulting from activities prohibited by Islam, such as dealing with interest. Further emancipatory potential is evident in disclosures on financial activities in line with Sharia such as Zakat,29 Mudaraba30 and Musharka,31 which have social justice aspects to them.
Disclosures under this category have also demonstrated a verification mechanism to Islamic objectives, where a ‘Religious Supervisory Board’
verifies and reports on the adherence of organisation’s activities to Sharia.
While the Board is an internal one within the organisation, its role can have emancipatory potentials in that it verifies the adherence to Sharia concepts and not to profitability ones. Disclosure under the Islamic considerations category demonstrates a radical form of disclosure in that it interconnects social and economic objectives and activities of business organisations – an important aspect of sustainability development.
More than one-third (37%) of the companies in the sample have engaged in disclosures linking their activities to governmental and/or national considerations (see Table 3). The vast majority of disclosures under this category are concerned with demonstrating the contribution of organisations in the development and growth of the domestic or regional economy and the implementation of governmental objectives and policies. Typical disclosures under this category are outlined below.
The annual report of the Oman Arab Bank states the following:
The bank has made significant contributions to the development of the Sultanate’s economy by financing a number of infrastructure construction and development projects