Corporate Governance and CSR Theories and Practices

Corporate Governance and Corporate Social Responsibility Theories and Practices  LEARNING OBJECTIVES Discuss the corporate governance issues; Know the role of directors (BoDs); Understand the role of CSR in the organization; Identify the models of CSR and its issues; and Determin...

Corporate Governance and Corporate Social Responsibility Theories and Practices  LEARNING OBJECTIVES Discuss the corporate governance issues; Know the role of directors (BoDs); Understand the role of CSR in the organization; Identify the models of CSR and its issues; and Determine who are the stakeholders of the firms.  Corporate Governance Issues The corporation is a mechanism established to allow different parties to contribute capital, expertise and labor for their mutual benefit. – Investors/Shareholders – capital providers – Management – expertise & labor providers for running of company Board of directors (BODs) elected by shareholders to protect their interest. Corporate governance – relationship among BODs, management, and shareholders  The Role of Board of Directors – Setting corporate strategy, overall direction , mission and/or vision – Succession: Hiring, compensating and firing the CEO and top management – Control: monitoring, evaluating, and/or supervising top management – Reviewing and approving the use of organizational resources – Caring for stockholders’ interest  The Role of Board of Directors Low Degree of involvement High Monitor Evaluate & Initiate & (40%) Influence (30%) Determine (30%) Permit officers to Involved in review of make all decisions. selected key decisions, Take leading role in Formally reviews indicators or programs establishing & modifying selected issues of management mission, objectives, Votes as officers Approve, question & strategy & policies. recommend on makes final decisions Has very active actions. on mission, objectives strategic committees strategy & policies. Perform fiscal & mngt audits.  The Concept of CSR – Proposes that a private firm has responsibilities to society that extend beyond making a profit – Obligation of firm decision makers to make decisions & act in ways that recognize the interrelatedness of business & society. – It recognizes the existence of various stakeholders and firms deal with them Corporate Social Responsibility (CSR) refers to corporate self-regulation integrated into a business model, which usually involves active compliance with the law, ethical standards, and international norms. Corporate Social Responsibility (CSR) This concept aims to achieve positive impacts on the environment, consumers, employees, and the communities. Under the force of globalization, this theory has been challenged by the diminishing different roles of the government and firms, especially when the power of multinational companies is rising.  Models of CSR Self-interest Social Contract Stakeholder Management Stakeholder Stewardship  Position Responsible to Therefore… Stockholders/ Maximizing profit Minimalist owners Self interested Stockholders/ owners/ cost Do good when furthers quest “controllers” for growth and profit Social contract Those with social and legal Goes beyond law to spirit of contract commitment Stakeholder Those who influence Develop responsive Management direction and fortunes strategies Stakeholder Society as whole / future Solutions for social problems stewardship Who are the Stakeholders of Firms? Stakeholders are individuals, groups or institutions who have a stake in or are significantly influenced by an organization’s decisions and actions – Shareholders – Governments – Political & social action groups – Employees – Customers – Communities – Suppliers – Trade Associations  Issues of Trust and Change (Minimalist) Participants Change Issues Trust Trust grows when performance meets Hyper competition expectation; Investors Stockholders Globalization Distrust if fails to meet expectation Owners/Managers  Issues of Trust and Change (Self-Interest Model) Participants Change Issues Trust Trust grows when performance meets Competition expectation; Program Advocates Owners/Managers Reputation Enhancement Distrust if fails to meet expectation  Issues of Trust and Change (Stakeholder Management) Participants Change Issues Trust Primary and secondary Information access to firm Trust grows when increases stakeholders feel included in Owners/Managers Systems open to scrutiny Distrust if feel excluded  Issues of Trust and Change (Stakeholder Stewardship) Participants Change Issues Trust Trust grows when firm willing Spokespersons for tertiary Pressure to include tertiary to negotiate with spokespersons for tertiary Owners/Managers Worry about environment Distrust if feel excluded  Modeling the context Premodern – Minimalist – Self Interested Modern – The social contract Postmodern – Stakeholder (management and stewardship) Corporate Social Responsibility Pyramid  Economic Responsibility The foundation upon which all others rest. Be profitable  Legal Responsibility Law is society's codification of right and wrong. Play by the rules of the game. Obey the law  Ethical Responsibility Obligation to do what is right, just, and fair. Avoid harm. Be ethical.  Philanthropic Responsibility Contribute resources to the community. Improve the quality of life. Be a good corporate citizen  Insight… Different types or kinds of obligations in the pyramid are in constant and dynamic tension with one another. The most critical tensions are those involving the relationship of economics: between economic and legal, economic and ethical, and economic and philanthropic. The pyramid should not merely be seen sequentially or in its component parts, but holistically to aid the company in is decisions, actions, and policies. -- Jeff Haden End of Discussion  CLASSWORK 1 Name at least 5 companies (foreign or local) and discuss each layer of their CSR Pyramid. What do you think is the important layer? Why? Justify your answer.