The Concept of Corporate Governance and Social Responsibility

Subject: Corporate Governance
Pages: 2
Words: 541
Reading time:
2 min

Corporate governance focuses on the rules and processes that govern business operations. These rules and processes also help in the control and regulation of business operations as recommended by stakeholders and managers in an enterprise or a corporation. External forces like consumer groups and government institutions also have a role to play in corporate governance. Astute corporate governance provides a platform where stakeholders’ interests are amicably met and this can only be achieved when ethical standards are strictly adhered to and best practices upheld.

Formal laws must be integrated for this to be realized. Because of problems attributed to the abuse of corporate powers in the past, many corporate bodies are currently considering putting in place credible ethical standards and best practices by integrating corporate governance with a belief that it will help check the criminal activities of corporate officers. This integration arises from the fact that corporate governance has a provision for criminal and civil prosecution of errant individuals who engage in unethical practices and illegal acts that may harm a corporation’s public image and even lead to its collapse. A lack of corporate governance was seen in Enron when the company’s managers ignored accounting malpractices that finally led to its bankruptcy and prosecution of its managers.

Corporate social responsibility, often denoted by the acronym CSR, has been given a different outlook by different organizations. However, the bottom line is that it focuses on how corporate organizations conduct their businesses so that their undertakings have some positive impact on society in general. Business enterprises must always be prepared to evaluate the impact of their activities on the general society as well as ascertain the quality of their management. This is very important because stakeholders tend to take a very keen interest in the activities of an organization in terms of what they have done whether it is positive or negative.

Of much importance is how the activities of the company impact the environment and the local communities. Featuring prominently is how a company treats and nurtures the talents of its workforce. Other definitions of corporate social responsibility that are gaining currency refer to CSR as a continuing commitment by business enterprises to engage in ethical practices in the process of contributing to economic development. In this way, the quality of life of the workforce, their family members, and the local community gets to improve. Society at large also stands to benefit from the process. Some aspects of CSR include the enhancement of sustainable livelihoods and appreciation of cultural diversification.

In the United States, CSR has been looked at from a philanthropic model perspective where companies, after raking in profits and fulfilling the requirement by law to pay taxes, undertake to share their profits in charitable causes. In Europe, it is taken to mean operating a business outfit in a socially responsible way and investing in communities to improve their livelihoods. An example of CSR is seen at Bayer AG, a chemical and pharmaceutical company based in Germany, which partners with National Geographic to provide to provide safe drinking water around the world. The company also works together with UNEP in promoting environmental protection initiatives.