Integration of Corporate Social Responsibility

Integration of Corporate Social Responsibility and Corporate Governance

In early times, the definition of business was limited to providing the customer with a good, product or service, and receiving compensation for it in form of cash or in kind. The idea was simple: Make Profit. However over the years, the existence of business has changed extensively. Businesses now are not concerned just with profit, but are expected to contribute towards the good of the society that they sustain in. The good of the society can be achieved through various steps like donating to a charity, supporting a good cause or working towards the good of the environment. When a firm takes these steps, it is said to be a Socially Responsible firm. V. Kasturi Rangan, a Harvard business School Professor, (in an interview with Martha Lagace) defines social responsibility as “Activities undertaken by businesses that enhance their value in the community and society and thus benefit their reputation and brand.”

It is important to note that the definition of Social Responsibility has also evolved over the years. Initially it was the good of the community, but now it is good of the stakeholders, i.e., anyone who is connected to the company in any way, whether it is the customers, suppliers, employees or the society. This good was overlooked in the past and resulted in corporate disasters like Enron and WorldCom. Since then, a new concept called Corporate Governance has become the focal point. A study done by Richardson and Associates presented to the OECD detailed that, “Good corporate governance should contribute to better company performance by helping a board discharge its duties in the best interests of shareholders; if it is ignored, the consequence may well be vulnerability or poor performance. Good governance should facilitate efficient, effective and entrepreneurial management that can deliver shareholder value over the longer term.”

With the evolvement of each, the businesses are now...