The effect of incentive types and organizational value statements on corporate social responsibility decisions

Rokhayati, Hijroh; Sholihin, Mahfud; Djajadikerta, Hadrian Geri Article The effect of incentive types and organizational value statements on corporate social responsibility decisions Cogent Business & Management Provided in Cooperation with: Taylor & Francis Group Suggested Citation: Rokhayati, Hijroh; Sholihin, Mahfud; Djajadikerta, Hadrian Geri (2024) : The effect of incentive types and organizational value statements on corporate social responsibility decisions, Cogent Business & Management, ISSN 2331-1975, Taylor & Francis, Abingdon, Vol. 11, Iss. 1, pp. 1-18, https://doi.org/10.1080/23311975.2023.2301137 This Version is available at: https://hdl.handle.net/10419/325987 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ Cogent Business & Management ISSN: 2331-1975 (Online) Journal homepage: www.tandfonline.com/journals/oabm20 The effect of incentive types and organizational value statements on corporate social responsibility decisions Hijroh Rokhayati, Mahfud Sholihin & Hadrian Geri Djajadikerta To cite this article: Hijroh Rokhayati, Mahfud Sholihin & Hadrian Geri Djajadikerta (2024) The effect of incentive types and organizational value statements on corporate social responsibility decisions, Cogent Business & Management, 11:1, 2301137, DOI: 10.1080/23311975.2023.2301137 To link to this article: https://doi.org/10.1080/23311975.2023.2301137 © 2024 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group. Published online: 13 Feb 2024. Submit your article to this journal Article views: 2091 View related articles View Crossmark data Citing articles: 3 View citing articles Full Terms & Conditions of access and use can be found at https://www.tandfonline.com/action/journalInformation?journalCode=oabm20 ACCOUNTING, CORPORATE GOVERNANCE & BUSINESS ETHICS | RESEARCH ARTICLE Cogent Business & ManageMent 2024, VoL. 11, no. 1, 2301137 The effect of incentive types and organizational value statements on corporate social responsibility decisions Hijroh Rokhayatia , Mahfud Sholihinb and Hadrian Geri Djajadikertac aDepartment of accounting, Jenderal soedirman university, Purwokerto, indonesia; bDepartment of accounting, gadjah Mada university, Yogyakarta, indonesia; cschool of accounting, economics and Finance, Curtin university, Perth, australia ABSTRACT This study examines the effect of incentive types and organizational value statements on corporate social responsibility (CSR) decisions. It used a 2 × 2 between-subject experimental design and analyzed the data using Analysis of Variance (ANOVA). The participants were undergraduate students in the accounting department of a major university in Central Java, Indonesia. The results show that incentives in the form of recognition encourage CSR decisions more than financial incentives. This study also provides evidence that environmental-based value statements encourage managers to make CSR decisions rather than financial-based value statements. This study, however, finds there is no interaction between the type of incentives and organizational value statements on CSR decisions. The implication of the results of this study is the importance of using the types of recognition incentives and value statements that focus on sustainability to promote CSR decisions. 1. Introduction The implementation of corporate social responsibility (CSR) in operational activities has become of great importance in organizations today. Within the sustainability context, the social concerns of corporations also cover environmental considerations (Francoeur et al., 2017). Recently, the climate-related situation has increased as greenhouse gas emissions continue to rise (The Sustainable Development Goals Report, 2023). Gas emissions lead to global warming and climate change. Increased awareness of the negative consequences of global warming on life has encouraged researchers and practitioners to investigate the impact of carbon emissions on operational decision-making (Jauhari et al., 2023). In practice, for example, some businesses assert their commitment to environmental protection by implementing corporate greening activities (Alzaidi & Iyanna, 2022). Environmental sustainability involves reducing pollution, regenerating resources, avoiding the use of hazardous substances, and eliminating all processes that negatively impact the environment (Rehman et al., 2022). Many managers believe that good CSR can improve company-community relations, which is crucial to earning trust. The variety of CSR practices is extensive, and there is little consensus on what a socially responsible business entails (Tian etal., 2020). Therefore, organizations see a need to integrate social and environmental aspects into their strategic © 2024 the author(s). Published by informa uK Limited, trading as taylor & Francis group. CONTACT Hijroh Rokhayati [email protected] Department of accounting, Jenderal soedirman university, Jl HR Boenjamin 708 Purwokerto, Central Java, 53122, indonesia. https://doi.org/10.1080/23311975.2023.2301137 this is an open access article distributed under the terms of the Creative Commons attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. the terms on which this article has been published allow the posting of the accepted Manuscript in a repository by the author(s) or with their consent. ARTICLE HISTORY Received 16 October 2023 Revised 22 December 2023 Accepted 26 December 2023 KEYWORDS Incentives; recognition; value statements; corporate social responsibility; experiment REVIEWING EDITOR Collins Ntim, University of Southampton, United Kingdom of Great Britain and Northern Ireland SUBJECTS Social Responsibility; Accounting, Business Economics, Environment and Development; Compensation and Compensation Methods and Their Effects; Sustainable Development; Executive Compensation 2 H. ROKHAYATI ETAL. decision-making process (Journeault, 2016; Wijethilake, 2017). Previous study, however, mostly explains the implications of implementing environmental responsibility that it can improve operational efficiency (Journeault, 2016), environmental performance (Anser etal., 2020), get attention from investors (Rokhayati et al., 2019), financial performance (Indriastuti & Chariri, 2021), and even affect stock volatility (Zhang et al., 2018). Moreover, environmental management of production processes has become a key success factor for market competition (Bravi et al., 2020). Companies today are more inclined to explore how to integrate societal goals (Carballo, 2023; Obel & Kallehave, 2022). However, research on CSR integration in internal company strategy is rare. Management accounting researchers are increasingly recognizing the need to witness management controls as a package system, including specific controls affecting how other controls affect decision-making and behavior (Malmi & Brown, 2008). Within this context, management control systems are essential in helping organizations develop practices involving environmental aspects in their organizational strategy (Hopwood & Unerman, 2010; Journeault, 2016; Madein & Sholihin, 2015; Malmi & Brown, 2008) and their CSR activities (Laguir et al., 2019; Rokhayati et al., 2021). Management control can be exercised in the form of formal and informal controls. While much management accounting research has focused on accounting-based controls, which are often formal systems, there is still a lack of knowledge of the impact of different types of controls (Malmi & Brown, 2008). Formal control systems rely on incentives to motivate employees to achieve organizational goals (Christ et al., 2016; Libby & Lipe, 1992; Merchant & Stede, 2008). Clearly defined performance measurements are necessary conditions for the effectiveness of incentives (Merchant & Stede, 2017). Based on the behavioral aspects within the agency framework, incentives also determine the choice of business model and strategy, business development, and attainment of non-financial success (Velte, 2020), and reduce agency conflicts between management and stakeholders (Hill & Jones, 1992). According to the activation theory, however, mental enthusiasm is required to motivate individuals to achieve their performance (Gardner, 1986). He stated that employees seek activation through an array of stimuli. One of the substantial stimuli that can be used to engage employees’ awareness and commitment to their assigned tasks is compensation schemes (Fessler, 2003). Incentives can be made in the form of financial or non-financial incentives (i.e. recognition). In achieving financial performance, money and recognition incentive schemes have been substitutable. Besides monetary incentives, incentives in the form of recognition have been found to improve business and performance (Lourenço, 2016). Furthermore, it is known that tournament incentives in the form of money are substitutes for recognition incentives, as non-financial incentives, in the context of creative performance (Ilyana & Sholihin, 2021). The nature of monetary incentives has also not always proven beneficial in a normative context (Mehta et al., 2017). Additionally, CEOs may be motivated by financial incentives; they may be willing to take lower compensation in exchange for personal thoughts of the fulfillment of handling social issues (Francoeur etal., 2017). Similarly, in companies where employees perceive their commitment to society’s objectives as genuine, financial incentives may not be essential, compared to companies that appear to place less emphasis on societal goals may require financial incentives to inspire their employees (Spallek et al., 2023). In a prosocial setting, recognition incentives are considered more valuable than monetary incentives for enhancing performance (Handgraaf etal., 2013), although the effectiveness of recognition incentives is highly situational (Kosfeld etal., 2017). In relation to CSR, management control systems have been suggested to be effective in embedding CSR initiatives into companies’ plans and strategies (Crutzen et al., 2017). Informal control systems maintain the continuity of formal control (Akinyele et al., 2020; Norris & O’Dwyer, 2004). Crutzen et al. (2017) also argue that focusing on just a single form of management control, whether formal or informal, exposes an organization towards a risk of internal conflicts. Informal controls direct organizational members’ conduct through unwritten policies, and shared values that derived from the organizational culture (Langfield-Smith, 2006; Ouchi, 1979). Informal systems predominate when resolving ethical issues (Falkenberg & Herremans, 1995). Managers could also adopt informal controls to encourage stakeholder commitment to a CSR-aligned organizational culture (Laguir et al., 2019). Hence, formal and informal control mechanisms should interact to accomplish companies’ social and environmental objectives (Bedford et al., 2016). Companies should accordingly establish ‘company COGENT BUSINESS & MANAGEMENT 3 values’ that regulate employee behavior (Vantrappen & Jong, 2018). Organizational values have been proven to guide behavior (Allison, 2019; Ye, 2012). As part of informal control systems, organizational values statements can enhance performance (Akinyele et al., 2020) by strengthening responsibility and setting standards (Urbany, 2005). Based on norm activation model, personal norms need to be activated to achieve social and environmental goals (Schwartz, 1977; Thøgersen, 2009). Moreover, value statements can foster social norms (Lynn Hannan, 2016) that transcend selfish behavior to prioritize the interests of the larger organization (Bicchieri, 2005). Despite the strong support for management control systems in CSR decision-making, empirical research in this area is still limited (Ditillo & Lisi, 2016; Herremans & Nazari, 2016; Rokhayati etal., 2021). The existing literature linking aspects of management control systems and CSR has so far been constrained to conceptual performance measurements (Hopwood & Unerman, 2010; Perego & Hartmann, 2009; Searcy, 2012), measurement base in the CSR investment (Church etal., 2019; Rokhayati etal., 2021), and implementation of CEO compensation (Cordeiro & Sarkis, 2008; Deckop et al., 2006), while some suggested that CSR strategies and implementation in companies are influenced by the existence of incentives (Berrone & Gomez-Mejia, 2009; Cordeiro & Sarkis, 2008). Overall, there is still a lack of research on the effectiveness of formal and non-formal control mechanisms on CSR decisions. To address this issue, this study examines the effect of formal control (money incentives vs recognition) and informal control (social vs financial value statements) on CSR decisions. It aims to contribute to the literature in this area and the methodology by developing experimental research instruments in the context of CSR decisions. The aims of this research are threefolds. First, this research aims to examine the influence of the type of financial incentives and recognition on CSR decisions. Second, this research examines the influence of value statements on CSR decisions. Third, this research examines the effect of the interaction between incentive type and value statement on CSR decisions. This study uses a between-subjects experimental design that involves 2 incentive types (financial and recognition) and 2 value statements (focus on profit and focus on environment). The results show that individuals make greater CSR decisions when they receive recognition incentives. Furthermore, the results show that individuals make greater CSR decisions when the company’s value statement focuses on environmental issues. This research does not find an interaction effect between incentive type and value statement. However, this research shows that the largest CSR decisions are made when individuals are aware of recognition incentives and statements of environmental values. This research contributes to the extant literature by examining the relationship between formal control, informal control, and CSR decisions. First, this research provides evidence on CSR research using formal and informal controls on CSR decisions. Previous research shows that sustainability management control needs to include all systems and tools where managers develop and use formal and informal systems that support the achievement of CSR objectives (Crutzen et al., 2017). This study investigates types of incentives, namely financial and recognition as formal control. The results of this study support previous studies that incentive types affect performance (Cianci et al., 2013) and that recognition incentives are regarded as more important than monetary incentives for improving performance in prosocial settings (Handgraaf et al., 2013). The second contribution of this study is that it provides additional empirical evidence of the importance of using informal control in the form of value statements (Aguiar, 2021; Akinyele et al., 2020; Kachelmeier et al., 2016). The research expands the results of the effectiveness of value statements for increasing CSR decisions. Conformity to sustainability values statement will encourage individuals to prioritize CSR decisions because a company’s values statement that highlights sustainability issues will encourage individual social norms. Moreover, the compatibility between recognition incentives and sustainability value statements results in the highest CSR decisions. These results indicate that the match between formal and informal controls that focus on social norms will produce the greatest influence on individuals in CRS activities. The remainder of this article is presented as follows. The next section discusses the background. The sections that follow are related to the theoretical framework, literature review and hypothesis development, research design, empirical results and discussion, summary and conclusion. 4 H. ROKHAYATI ETAL. 2. Background The environment is a critical component in sustainable development. Environmental factors are also important aspects of health that are directly connected with individual and population health. Air pollution is unavoidable and has become problematic in many developing countries, including major cities in Indonesia. By the end of 2024, there is a target percentage reduction in greenhouse gas emissions of 27.3 percent; also improving the Air Quality Index from 86.8 (2019) to 84.5 (2024). The Low Carbon Development approach emphasizes cross-sector policies that balance economic growth targets with efforts to reduce emissions and encourage the growth of green investment for more sustainable development (CISDI, 2021). It means the governments agree with the plan to prevent climate change by reducing emissions through mitigation. The mandate of corporate social responsibility in Indonesia is contained in Law No. 40 of 2007 concerning Limited Liability Companies, Law No. 25 of 2007 concerning Capital Investment, and Government Regulation No. 47 of 2012 concerning the Social and Environmental Responsibility of Limited Companies. Furthermore, the achievement of SDGs is supported by the Indonesian Government with Presidential Regulation No. 111 of 2022 concerning the Implementation of the Achievement of Sustainable Development Goals. Indonesia is one of the United Nations member countries that actively participates in the development of Sustainable Development Goals (SDGs). One of the objectives is to protect the environment. Additionally, there is Government Regulation No. 22 of 2021 on Environmental Protection and Management Implementation. This regulation is a systematic and comprehensive effort to conserve environmental functions and avoid pollution and/or damage to the environment. Furthermore, in Indonesia, the Financial Service Authorities No. 51 of 2017 enacted an obligatory regulation for financial industries to conduct sustainable finance and investment. Other countries in Southeast Asia, such as the Philippines and Vietnam, already have CSR regulations for companies. However, Malaysia, Thailand, and Singapore have not mandated CSR through official laws and regulations, but those laws and regulations encompass some key components of CSR such as human rights, environmental protection, labor law, and protecting consumers law (Tran et al., 2021). An emerging concern in CSR is assisting businesses in implementing CSR in a way that is compatible with their specific business circumstances (Virakul et al., 2009). Previous research showed that corporations with better governance are also more likely to pursue a more socially responsible agenda (Asogwa et al., 2020; Nguyen etal., 2021). Moreover, a management control system is critical in providing the integration of environmental and social activities into an organization’s strategic plans and goals (Gond et al., 2012). Management control systems implementation in CSR integration into a business strategy can encourage Indonesian and other developing-country manufacturers to implement CSR more effectively (Rinawiyanti et al., 2020). Management control systems encompass all instruments and procedures established and employed by managers to ensure that employee behaviors and decisions are consistent with the organization’s CSR-related objectives and strategies, both formally and informally (Crutzen et al., 2017; Malmi & Brown, 2008). 3.Theoretical literature review The activation theory states that mental enthusiasm is important to motivate individuals effectively in achieving their performance (Gardner, 1986). Activation theory has been used to explain the impact of task design variances on the responses of task performers (Scott, 1966). Activation theory predicts a variety of behavioral outcomes in tasks that involve continuous repetition of a restricted set of responses to configurative simple and temporally consistent stimulus. A decrease in activation level is expected when the individual gets familiar with his or her surroundings and learns the responses required in the repeated task. If the activation level passes below the typical norm, the person will have a negative effect and will try to increase impact. If he is restricted from performing impact-increasing behavior, his performance will continue to decrease. Social norms promote socially related behavior (Schwartz, 1973). Social norms can be used to explain differences in behavior from decisions that prioritize personal interests (Biel & Thøgersen, 2007; Thøgersen, 2008). According to Schwartz (1977), social norms are actively experienced as feelings of moral obligation rather than as intentions. The norm activation model analyzes the factors that COGENT BUSINESS & MANAGEMENT 5 influence human intention to engage in altruistic and environmental behaviors (Onwezen et al., 2013). Behaviors are a result of personal norms which are regulated by awareness of consequences and ascription of responsibility (Schwartz, 1977). Norm activation begins with an individual’s awareness of potential adverse consequences, which prompts feeling to take responsibility for the negative effects of not acting pro-socially. 4. Empirical literature review and hypotheses development 4.1. Incentive types and CSR decisions The activation theory states that mental enthusiasm is important to motivate individuals effectively in achieving their performance (Gardner, 1986). Additionally, employees seek activation through a variety of stimuli. Compensation schemes are effective stimulants that can be implemented to improve employees’ awareness and effort in their assigned tasks (Fessler, 2003). The organization’s incentives can motivate and activate individual efforts and commitment to accomplishing their responsibilities. Companies need to integrate CSR activities into the organization’s operations by developing a control system that involves CSR aspects. From a management control standpoint, companies can pursue their CSR goals by guiding managers on how to conduct themselves inside a centralized control system (Church et al., 2019). A management control system is a set of formal and informal controls (Malmi & Brown, 2008). Formal control is a set of structures, routines, and processes that employees must follow (Bisbe & Otley, 2004), which consists of planning procedures, contractual obligations, performance evaluation, and reward systems (Malmi & Brown, 2008). Incentive schemes as a formal control mechanism are used to motivate employees to improve their performance (Christ et al., 2012; Libby & Lipe, 1992). Sustainability provides new opportunities where firms need to create incentives and all the other aspects of the organizational design of the firm (Obel & Kallehave, 2022). Moreover, the implementation of incentive contracts establishes a connection between the manager’s compensation and their CSR investment or performance (Church et al., 2019). Previous research has shown that performance is influenced by monetary incentives, feedback, and recognition (Lourenço, 2016). Social context research reveals that financial incentives and rewards crowd out because they have different motivational preferences (Bénabou & Tirole, 2010; Lourenço, 2016), in which monetary incentives discourage social behavior. For non-financial organizations, intrinsic motivation from agents potentially decreases the impact of extrinsic rewards (Bénabou & Tirole, 2006; Besley & Ghatak, 2005). This study focuses on financial incentives and recognition because, according to previous studies, the implementation of feedback through CSR activities has a restricted understanding of financial accounting measures, and it will take time to convey an understanding of feedback, such as financial accounting (Derchi etal., 2021). Moreover, monetary incentives and recognition have outcomes utility that is considered acceptable after the individual performance is accomplished, as contrasted to feedback, which has outcome appeal in the form of information processing that governs individual actions through self-evaluation (Stajkovic & Luthans, 2001). According to the results of their research, feedback has the least impact on an individual’s performance. Previous research showed that individual performance increases with non-financial, i.e. recognition, rather than financial incentives for prosocial settings (Ashraf et al., 2014; Handgraaf et al., 2013). Recognition can be extremely effective and motivate individuals without costing the company significantly (Luthans, 2000). Other research states that money leads to lower outcomes for individuals to help others (Vohs et al., 2006); donate to charity (Liu & Aaker, 2008) and CSR engagement (Spallek et al., 2023). Employees have also been shown to value company recognition highly (Luthans, 2000). Furthermore, recognition strengthens the organization’s sense of support for its employees, and consequently, employees provide feedback by performing better (Wayne et al., 2002). These findings are consistent with the findings of Montani et al. (2020), who showed that employees’ perceptions of manager recognition are positively related to the significance of their work. Based on this reasoning, it is predicted that individuals with recognition incentives will prefer CSR decisions to individuals with financial incentives. Accordingly, the following hypothesis is proposed: Ha1: Recognition incentive schemes encourage CSR decisions more than financial incentives. 6 H. ROKHAYATI ETAL. 4.2. Value statements and CSR decisions Social norms have a role in socially related behavior (Schwartz, 1973). Social norms can be utilized to explain behaviors that differ from decisions that prioritize personal interests (Biel & Thøgersen, 2007; Thøgersen, 2008). The main rationale is that social norms have a tendency to regulate behavior through several mechanisms, and the extent to which they influence behavior is conditional on their prominence or salience within a particular environment (Kallgren et al., 2000). The norm activation model proposed by Schwartz (1977) posits that the formation of personal norms is influenced by situational activators, such as awareness of need, situational responsibility, efficacy, and ability. It is based on Bicchieri’s (2005) social activation model for understanding how social norms can overcome self-serving behavior and place greater organizational goals. This social norm activation model assumes that individuals have a conditional preference for conforming to social norms and that these preferences for norms are activated by situational cues such as value statements in work settings (Blay et al., 2018). Informal controls, which are based on social norms, tend to motivate managers to align their behaviors with the organization’s goals in situations where formal controls are lacking (Lee and Hageman, 2018). Organizational value statements can activate individual social norms. Organizational values statements can improve performance when they are part of informal control approaches (Akinyele et al., 2020). A value statement is part of the management control system mechanism, including values, beliefs, and social norms that influence employee behavior (Malmi & Brown, 2008). A value statement can lead to positive organizational outcomes, such as increased trust and perceptions of fairness, clarifying appropriate employee actions, and higher commitment to organizational goals based on internalization and identification. Organizations adopt value statements because they can guide employees by determining appropriate behavior (Urbany, 2005). The organization’s communication of value statements as a cue can reinforce behavioral norms (Kachelmeier et al., 2016). It suggests that situational cues help determine the importance of social norms in certain situations (Abdel-Rahim & Stevens, 2018; Bicchieri, 2005). Schram & Charness (2015) argues that social norms require a shared understanding of what one should do in each situation as well as observing one’s actions. Environmental information is important to environmentally-related activities (Nzama et al. 2022). Previous research has shown that value statements have a positive impact on organizations (Akinyele et al., 2020; Kachelmeier et al., 2016). Kachelmeier et al. (2016) show that the existence of value statements that prioritize quality improvement leads employees to shift from more efficient actions to less optimal actions, even though they are more aligned with the prioritized goals. Akinyele etal. (2020) expand on these results by showing that the behavioral effect of value statements occurs not only when the value being communicated has a narrow focus on improving quality, but also when it has a broad focus on organizational ownership. Furthermore, Aguiar (2021) shows that value statements that focus on environmental issues encourage individual intentions to follow environmentally friendly behavior. This study suggests that a value statement that focuses on the environment will encourage managers to make CSR decisions. Based on the reasoning above, the following hypothesis is proposed: Ha2: Environmental-based value statements encourage CSR decisions more than financial-based value statements. 4.3. Incentives, value statements, and CSR decisions Social norms dictate that individuals are expected to exhibit specific behaviors that are deemed acceptable while refraining from engaging in behaviors that are considered unacceptable. Moreover, social norms frequently serve as influential factors in shaping behavior within certain circumstances, often requiring deliberate activation. The process of activation, in many instances, occurs without conscious awareness. Once a norm has been activated, individuals tend to persist in adhering to the primed norm (Biel & Thøgersen, 2007). COGENT BUSINESS & MANAGEMENT 7 Incentive schemes are a tool to motivate individuals to carry out their duties in achieving performance. Incentives are formal controls arranged by the organization. However, organizations also need informal controls. Informal control is the implicit structure that management adopts to encourage employees to act in alignment with organizational goals (Berry et al., 2009; Bisbe & Otley, 2004). Informal control is transmitted to employees through signals such as organizational value statements (Norris & O’Dwyer, 2004). When informal controls are adopted to stimulate self-regulatory behavior among employees, management does not need to penalize or reward employees for their behavior towards these controls (Berry et al., 2009). As a result, informal controls interact with formal controls to influence behavior and decisions. It is difficult to separate the effects of formal and informal controls because informal controls may induce social norms that are inconsistent with formal controls (Norris & O’Dwyer, 2004). Further research found an interaction between formal and informal controls (Berry et al., 2009; Malmi & Brown, 2008). In management control research using experimental methods, it is proven that communication of value statements can put social pressure on employees to comply with value statements, even though it reduces employee compensation. Individuals who perceive a strong organizational commitment to the environment show greater attachment to environmental initiatives (Ramus & Steger, 2000). In the absence of stated organizational values, individuals were found to rely on their perceptions of social norms when choosing whether to support organizational sustainability initiatives (Merriman & Sen, 2012). The results show that the incentive effect alone cannot explain project choice for groups that emphasize intangible benefits for the environment or corporate financial benefits as a guide to social norms. At the same time, incentives can predictably affect groups that do not emphasize certain social norms in their decision-making. In social decisions, there will be an interaction between incentives and organizational value statements. Informal controls, in the form of organizational values statements, can provide social pressure by communicating organizational values even when there is no explicit action to enforce them (Berry et al., 2009). Kachelmeier et al. (2016) suggest that the choice of words becomes important in the statement of values in organizations. Contemporary value statements are generally organizational and promote ideals that foster social norms (Lynn Hannan, 2016). By activating social norms, conflicting goals can emerge by themselves, which results in getting out of control by another (Blay et al., 2018). Additionally, Aguiar (2021) showed that investigates pro-environmental values statements (informal control) as a potential indicator of pro-environmental behavior in individuals. A value statement that focuses on the economic aspect will weaken CSR decisions, but when a value statement focuses on the environment, it will increasingly encourage individuals to make CSR decisions because the value statement can activate their social norms. The concept of motivation crowding states that informal controls such as value statements can interact with the incentive system, which means that intrinsic motivation interacts with incentives to get rid of individual intrinsic motivation (Frey & Jegen, 2001). Based on the reasoning above, the following hypothesis is proposed: Ha3: There is an interaction between the incentive scheme and the organization’s value statement in making CSR decisions. 5. Research design This study uses an experimental method with a 2 × 2 factorial design between subjects. It follows the previous research that shows the validity of using university students as substitutes for managers in a decision-making context (Avram & Kühne, 2008; Martin & Moser, 2016; Mortensen etal., 2012; Rokhayati et al., 2021). Accordingly, participants in this study were chosen from senior accounting students at the Faculty of Economics and Business of a state university in Indonesia who had taken at least four semesters, including both management accounting and financial accounting courses, to ensure a significant understanding of investment decisions and business processes. According to Montgomery (2013), to obtain the most accurate estimate of precision, it is recommended to have a minimum sample size of 10 or 12 participants per cell. This study employed a 14 H. ROKHAYATI ETAL. Author contributions Hijroh Rokhayati: Conceptualization, Formal analysis, Investigation, Writing - original draft Mahfud Sholihin: Conceptualization, Funding acquisition, Writing - review & editing Hadrian G. Djajadikerta: Conceptualization, Supervision, Writing - review & editing. Disclosure statement No potential conflict of interest was reported by the author(s). About the authors Hijroh Rokhayati is a lecturer at Department of Accounting, Faculty of Economics and Business, Universitas Jenderal Soedirman, Indonesia. Her research interests include management accounting, behavioral accounting, corporate social responsibility, and business ethics. Mahfud Sholihin is a professor at Department of Accounting, Faculty of Economics and Business, Universitas Gadjah Mada, Indonesia. His research interests and subjects include management accounting, islamic accounting, and business and accounting profession ethics. Hadrian Geri Djajadikerta is a professor of Accounting Discipline in the School of Accounting, Economics and Finance at Curtin University. His research area covers essential aspects of sustainability, corporate governance and management accounting, including the application of sustainability and sustainable development principles to organisations and their reporting. He also carries out interdisciplinary research in the field of sustainability and sustainable development with the coverage areas of management, finance, supply chain and logistics, digital technology, and education. Ethics approval We declare that the principles of ethical and professional conduct have been followed and all participants have read and signed the informed consent before participating in this research. Funding This study is funded by Post-Doctoral Research Grant from Gadjah Mada University, contract number 13602/UN1.P.II/ Dit-Lit/PT.01.04/2022. ORCID Hijroh Rokhayati http://orcid.org/0000-0003-1432-4084 Mahfud Sholihin http://orcid.org/0000-0003-0773-4501 Hadrian Geri Djajadikerta http://orcid.org/0000-0003-1672-9579 Data availability statement The participants of this study did not give written consent for their data to be shared publicly, so due to the sensitive nature of the research supporting data is not available. References Abdel-Rahim, H. Y., & Stevens, D. E. (2018). Information system precision and honesty in managerial reporting: A re-examination of information asymmetry effects. Accounting, Organizations and Society, 64, 1–19. https://doi. org/10.1016/j.aos.2017.12.004 Aguiar, A. B. D. (2021). Is value statement an effective informal control for stimulating pro-environmental behaviors? Revista Contabilidade & Finanças, 32(86), 193–206. Akinyele, K. 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