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Corporate Governance and Corporate Social Responsibility - Coggle Diagram
Corporate Governance and Corporate Social Responsibility
Corporate Governance
It is concerned with holding the balance between economic and social goals and between individual and communal goals.
Elements
Good board practices
Clearly defined roles and authorities
Duties and responsibilities of directors understood
Board is well structured
Appropriate composition and mix of skills
Appropriate control and processes
Independent audit committee established
Risk-management framework present
Internal control procedures
Internal audit function
A stable regime of disclosure and transparency
Financial information disclosed
Non-financial information disclosed
Financials prepared according to standard protocols
A high-quality annual report published
Protection of (minority) shareowner rights
Well defined shareowner rights
Minority shareowner rights formalized
Well-organized general assembly conducted
Strong commitment to corporate governance reforms
The board discusses organizational governance issues and has created a corporate governance
committee
The company has a corporate governance champion
A corporate governance code has developed
Concerns the relationship among the management, board of directors, controlling shareholders, minority shareholders, and other stakeholders.
Potential Problems
ACCOUNTABLITY ISSUES
Accountability is necessary for effective corporate governance.
the actions of each level of the corporation areresponsible to the shareholders and the public.
Without accountability, one division of the corporation might endanger the success of the entire company or cause stockholders to lose the desire to continue their investment.
TRANSPARENCY
To be transparent, a corporation must accurately report their profits and losses and make those figures available to those who invest in their company.
A lack of transparency can also expose the company to fines from regulatory agencies
OVERSIGHT ISSUES
Effective corporate governance requires the board of directors to have substantial oversight of the
company's procedures and practices.
Oversight is a broad term that encompasses the executive staff reporting to the board and the board's awareness of the daily operations of the company and how its objectives are achieved.
ETHICS VIOLATIONS
Members of the executive board have an ethical duty to make decisions based on the best interests of the stockholders. Further, a corporation has a moral responsibility to protect the social welfare of others, including the greater community in which they operate.
CONFLICTS OF INTEREST
Avoiding conflicts of interest is vital. A conflict of interest within the framework of corporate governance occurs when an officer or other controlling member of a corporation has other financial interests that directly conflict with the objectives of the corporation.
the system by which companies are
directed and controlled. Cadbury (1992)
refers to structures and processes for the direction and control of companies. International Finance Corporation (2018)
CSR
A concept whereby companies integrate social and
environmental concerns into their business operations and voluntarily interact with the stakeholders. EU Commission (2002)
the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the
local community and society at large (Lord Holme and Richard Watts, 2004)
Historical Phases of CSR
Phase 1: PROFIT MAXIMIZING MANAGEMENT (the 1800s to early 1900s)
Phase 2: TRUSTEESHIP MANAGEMENT (The early 1900s)
Phase 3: QUALITY OF LIFE MANAGEMENT (the 1930s)
Perspectives on CSR
A. Classical View
The primary responsibility of business is profit maximization.
Management must satisfy stockholders for their investments.
Supported by Milton Friedman, one of the most influential advocates of economic freedom and free
enterprise
B. Managerial view
Doers do not emphasize the profit maximization and interests of stockholders.
To balance employees, customers, suppliers, and the local plant community is a prominent business
managers’ role.
C. Public View
Includes the needs and interests of the whole society in contrast with the classical and managerial
views
D. Religious View
Excess wealth should be given to the less fortunate. Wealthy individuals have a responsibility to share
their blessings with the poor.
A successful corporation should perform its social responsibility more by returning a fair portion of its
profits to the people in social services.
Based on the teachings of Jesus Christ as taught in the bible
The Four Corporate Social Responsibilities
A. Economic responsibility
Companies’ economic responsibility is about producing goods and services that society needs and making a profit. Companies have shareholders who expect and demand a reasonablereturn on their investments; they have employees who want to do their jobs safely and legally and have customers that want quality products for fair prices.
B. Legal responsibility
The legal responsibility of companies is about complying with the minimum rules that have been set.
Organizations are expected to operate and function within those rules.
The basic rules consist of laws and regulations that represent society’s views of codified ethics.
C. Ethical responsibility
The ethical responsibility of businesses goes beyond society’s normative expectations – laws and regulations.
Taking ethical responsibility means that organizations embrace activities, standards, and practices that haven’t necessarily been written down but are still expected.
D. Philanthropic responsibility
The philanthropic responsibility of businesses includes voluntary or discretionary activities and practices of businesses.
Businesses developing philanthropic or discretionary activities give the public the impression that they want to give something back to the community.
Current Activities Related to CSR
Establishment of certifying bodies to develop standards, programs and to train and certify employees, managers, and businesses with quality programs, certifications, and accreditations
Training of employees for customer care and people skills with the application of Customer Relationship
Management Standards
Improvement of compensation and benefits packages for employees to enjoy from hiring to retirement while several benefits are also rewarded to families of employees
Establishment of programs for the protection and preservation of the environment
Active participation in socio-civic and charitable activities
Development of customer complaint desks or hotlines with the use of state-of-the-art technologies
Recruitment of competent and technical employees to ensure manufacturing will follow the standards
Training quality people that will handle all aspects of business processes
Application of acceptable manufacturing practices and advanced quality assurance standards for the production of safe and quality goods and services
Strengthening of ties with agencies and creating organizing bodies that aim at the promotion, monitoring, and recognition of companies that adhere to their moral obligations