CSR 426 – ENVIRONMENT AND CSRMODULE 2: CORPORATE GOVERNANCE AND CSR STRATEGYWhat is Corporate Governance?Muralidharan, P (2016) states that Corporate Governance is ensuring that anorganization is run in a responsible manner by ensuring accountability, transparencyand compliance with due regard to its key stakeholders. It is the whole set of legal,cultural, and institutional arrangements that determine what publicly tradedcorporations can do, who controls them, how that control is exercised, and how the risksand returns from the activities they undertake are allocated (Margaret Blair, 1995).Corporate Social Responsibility (CSR) is a corporate form of self-regulation integratedinto the business model to create a positive impact on the stakeholders and theenvironment. A traditional view suggested a contradiction between CSR and CorporateGovernance. Corporate Governance was related to profit maximization and providedprotection to shareholders who have provided capital to firm, while CSR apparently wasagainst profit maximization because it suggested a set of actions beneficial for externalstakeholders that may not be good for a shareholder. However CSR is gradually gettingfused into the company’s corporate governance practices. Their relationship can beinterpreted by abandoning the standard view of the firm as a shareholder valuemaximizer and embracing the view of a firm as a stakeholder value maximizer. Thisconvergence paves the way for Corporate Governance to be driven by ethical norms andthe need for accountability, and it enables CSR to adapt prevailing business practices.Today both Corporate Governance and CSR focus on ethical practices in business and theresponsiveness of an organization to its stakeholders and the environment in which itoperates.The Social ContractIn business, social contract theory includes the obligations that businesses ofall sizes owe to the communities in which they operate and to the world as awhole. This involves corporate philanthropy, corporate social responsibilityand corporate governance. To answer the call for more involvement in thelocal community, businesses can draw on social contract theory to interactwith society. While it is no secret that businesses must follow laws andregulations, they also must meet implicit non-legal expectations. Theseexpectations are encompassed in the idea of corporate philanthropy, or do-gooding. Businesses can show that they are concerned with their communities andappreciative of the revenue streams the community provides by allocatingresources for community projects, by volunteering in local charities orschools, by donating products and by running environmentally friendly adcampaigns. These things illustrate that a business is serious about its socialcontract and that it recognizes the value of giving back.