CSR 426 Module 2 Corporate Governance and CSR Strategy-1.docx

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CSR 426 – ENVIRONMENT AND CSR MODULE 2: CORPORATE GOVERNANCE AND CSR STRATEGY What is Corporate Governance? Muralidharan , P (2016) states that Corporate Governance is ensuring that an organization is run in a responsible manner by ensuring accountability, transparency and compliance with due regard to its key stakeholders. It is the whole set of legal, cultural, and institutional arrangements that determine what publicly traded corporations can do, who controls them, how that control is exercised, and how the risks and returns from the activities they undertake are allocated (Margaret Blair, 1995). Corporate Social Responsibility (CSR) is a corporate form of self-regulation integrated into the business model to create a positive impact on the stakeholders and the environment. A traditional view suggested a contradiction between CSR and Corporate Governance. Corporate Governance was related to profit maximization and provided protection to shareholders who have provided capital to firm, while CSR apparently was against profit maximization because it suggested a set of actions beneficial for external stakeholders that may not be good for a shareholder. However CSR is gradually getting fused into the company’s corporate governance practices. Their relationship can be interpreted by abandoning the standard view of the firm as a shareholder value maximizer and embracing the view of a firm as a stakeholder value maximizer. This convergence paves the way for Corporate Governance to be driven by ethical norms and the 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 the responsiveness of an organization to its stakeholders and the environment in which it operates. The Social Contract In business, social contract theory includes the obligations that businesses of all sizes owe to the communities in which they operate and to the world as a whole. This involves corporate philanthropy, corporate social responsibility and corporate governance. To answer the call for more involvement in the local community, businesses can draw on social contract theory to interact with society. While it is no secret that businesses must follow laws and regulations, they also must meet implicit non-legal expectations. These expectations are encompassed in the idea of corporate philanthropy, or do- gooding. Businesses can show that they are concerned with their communities and appreciative of the revenue streams the community provides by allocating resources for community projects, by volunteering in local charities or schools, by donating products and by running environmentally friendly ad campaigns. These things illustrate that a business is serious about its social contract and that it recognizes the value of giving back.

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