Relationship of corporate governance and social responsibility

relationship of corporate governance and social responsibility

The paper aims at understanding the relation between corporate governance ( CG) and corporate social responsibility (CSR). In theory, CG refers mainly to the. The terms corporate governance and corporate social responsibility sound similar, but there is a very important difference between them. Descriptive Statistics for Corporate Social Responsibility Disclosure by each .. will focus on the relationship between CSR disclosure, Corporate Governance.

  • Corporate Governance and Social Responsibility of Business
  • Corporate Governance and Corporate Social Responsibility

The voluminous literature on the relationship between financial and social performance finds a modestly positive relationship between the two.

Indeed they are related as many of the CSR innovations in these countries tend to be more likely to reflect market actors and imperatives than CSR in say continental and Scandinavian Europe.

What is Corporate Social Responsibility (CSR)?

Denmark, Germany which yield both greater attention to the labour stakeholders and the collective interest in environmental sustainability. It also contrasts with the CSR in state-led market economies e. France, Korea which tend to reflect a CG focus on national development.

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It contrasts with CSR in emerging and developing economies which tends to reflect a community orientation reflecting the features of high inter-personal trust and low institutional trust underlying the CG arrangements in many such countries.

But notwithstanding the ways in which CSR has emerged as a feature of business as usual complementary with their respective CG systems, it seems to me that there are often deficits in company level governance of CSR.

relationship of corporate governance and social responsibility

However, CSR commitments increase the imperatives for more conspicuous governance of sourcing, contracts, production, employment, wastes, consumption and so forth. The challenges here are considerable, including the integration of CG measures for CSR across MNCs whose business units operate under very different CG systems; and particularly for SMEs in emerging and developing countries which have underdeveloped CG systems to start with. Thus the fact that an increasing number of companies now fall under new reporting requirements such as come with stock exchange listing e.

relationship of corporate governance and social responsibility

However, the reality is quite different. Shareholders are spread over a wide area, and they generally do not attend the general body meetings of the corporate company. As a result, they have no effective control over the working of board of directors and management of corporate enterprise.

Corporate Governance and Corporate Social Responsibility - The BUSINESS of SOCIETY

This often causes clash of interests. Thus, while in theory the objective of board of directors and management is to maximise profits or shareholders value and wealth, but in practice this does not happen. The board of directors and top management in the context of separation of ownership may pursue their own interests by pursuing, for example, very risky or imprudent projects and misappropriate funds raised from investors and use them in promoting their own interests.

relationship of corporate governance and social responsibility

Corporate financier whether they are individuals or pension funds, mutual funds, banks and other financial institutions, or even government need assurances that their investment will be protected from misappropriation and used as intended for the agreed corporate objective.

The objective in a corporate, as stated above, is the maximisation of shareholders value subject to the protection of interests of other stakeholders.

Corporate Governance and Social Responsibility of Business

The corporate governance is affected by the relationship among various participants in the governance system. The shareholders, especially those who can hold bulk of shares and are in controlling position can influence corporate behaviour, institutional investors such as banks, mutual funds are increasingly having a larger say in corporate governance of some companies.

Creditors also demand an important role in the corporate governance and employees can also play an important role in contributing to the good performance of the corporation and realisation of its long-term objective.

relationship of corporate governance and social responsibility

The board of directors and top management is central to the concept of corporate governance and it is their accountability and transparency in the dealings with shareholders and other stakeholders that underlie good corporate governance.

The practices of good corporate governance are expressed as ethical code of conduct and are mainly self-regulated and not imposed by laws or legislation.