Moreover, the increasing power of organizations has resulted in a societal expectation that corporations act proactively and carry out a leadership role in responding to the problems transpiring in the world (CSR Survey, 2003). This means that given that organizations frequently have more resources than governments, they should somehow give back to society and allot part of their resources to carrying out good works and helping the less fortunate sectors of society. Overall, this CSR goal is justified as follows. Initially, a societal need is identified.
For instance, areas such as education, healthcare, low-income housing or the arts may require certain amounts of funding that cannot be generated privately or that government is unable to provide to enable these institutions to continue making goods or services available or even to exist. Second, corporations are identified as capable of filling the gap by providing either funds or infrastructure to address the need. In other words, an appeal to organizations is made because they frequently have the capacity, in accordance with their size and reach, to act as agents of “social progress (Kahn, 1997).
The CSR concept is not simple to grasp or to carry out. It is hard to define, and when done so, the resultant definition is frequently contentious. In addition, perspectives on CSR are undoubtedly tinged with the normative beliefs that one has about the apt role and purpose of an organization. For instance, classical economists will most probably have differing understandings of what CSR should entail, compared to social activists. The classical economists, for example, do not expect that organizations should be anything other than productive and efficient organizations.
Certain social activists, on the other hand, expect corporations to be leaders in responding to social issues, or at a minimum, to prevent, minimize or compensate for harm that corporations may inflict to society. In addition to the disagreement over CSR’s normative foundations and its corresponding definition, is the idea that organizations also often use the CSR concept for strategic, profit making reasons only. Thus, issues ensue also because of the ‘proper’ motivation behind undertaking CSR.
Some proponents of CSR believe that an organization’s actions can only be aptly tagged as CSR if the motivations behind it reflect an authentic desire to engage in CSR for its sake, and not for profit-enhancing reasons. Others opine that the motivations behind CSR do not matter for as long as the resultant behavior by organizations is evaluated as socially responsible. There is no globally accepted definition of CSR, and the currently existing definitions are frequently ambivalent.
For instance, the definition of CSR in The New Balance Sheet states that “while there is no fixed definition, in our view, the term ‘corporate social responsibility’ is most effectively used to describe instances in which companies respond to interests in addition to those of their shareholders (The Canadian Democracy and Accountability Commission, 1999). Critics and proponents alike often cite the lack of agreement on the meaning of CSR as a major problem in advocating the CSR agenda. Votaw (1973, p. 11) has stated: The term is brilliant one; it means something, but not always the same thing, to everybody.
To some it conveys the idea of legal responsibility or liability; to others it means socially responsible in an ethical sense; to still others, the meaning transmitted is that of “responsible for” in a causal mode; many simply equate it with a charitable contribution; some take it to mean socially conscious; many of those who embrace it most fervently see it as a mere synonym for “legitimacy”, in the context of belonging” or being proper or valid; a few see it as a sort of fiduciary duty imposing higher standards of behavior on businessmen than on citizens at large.
Corporate Governance Currently, there has been a burgeoning interest in corporate governance, acknowledging it as a crucial component of the CSR concept. Corporate controversies and the need to protect minority shareholders’ interests, for instance, are reasons behind the development of corporate governance codes in several countries and corporations. Majority of corporate governance codes provide recommendations to promote good corporate governance and increase transparency and disclosure (Mallin, 2002).
Apart from this, the concepts of sustainable development”, “corporate responsibility and “corporate citizenship” have taken root in the corporate world. Although comprehensive research treats the fields of corporate governance and sustainable development individually, less attention has been paid to the interaction between these fields. Ricart, Rodriguez and Sanchez (2005) tried to close the gap by studying how corporate governance systems are transforming in order to integrate sustainable development thinking into them.
The researchers did so by analyzing the governance systems of the 18 corporations that are market sector leaders considered by the Dow Jones Sustainability World Index (DJSI World). In general, the objectives of the paper are twofold: to analyze in depth how and to what extent DJSI World leaders are incorporating sustainability into their corporate governance systems; and to develop a model for sustainable corporate governance based upon corporate governance and sustainable development theories, and built upon empirical research of the DJSI leading companies’ corporate governance systems (Ricart et al, 2005.)