Social responsibility in corporation governance
Carroll’s Four-part model
(Economic responsibilities)
(1) Company has the responsibility to shareholders who demand a reasonable return.
(2) Company has the responsibility to employees who want fair employment conditions.
(3) Company has the responsibility to customers who seek good-quality goods at fair prices.
(Legal responsibilities)
(1) Company has the responsibility to obey laws since law is the base line for companies operating with society.
(2) The law is an acceptable rule book for company operation.
(Ethical responsibilities)
Company has the responsibility to act in a fair and just way even if the law doesn’t compel them to do so.
(Philanthropic responsibilities)
It is desired for company to make charitable donations or contributions to local community.
Shareholder responsibility
(1) The nature of wide dispersion of shareholders of large corporation means the shareholders with small percentage holdings have small influence on managers and limited responsibility to company.
(2) The ease of share dispose on the stock market loosens shareholders’ feeling of obligation in relation to their property.
(3) Institutional shareholders have significant influence on the ownership responsibility. They have the level of shares enough to be used as a lever to pressure managers. They also have fiduciary responsibilities to their investor.
Organization as a corporate citizen
Definition
Corporate citizenship is the business strategy that shapes the values underpinning a company’s mission and the choices made each day by its executives, managers and employees as they engage with society.
Three Views
(1) Limited View. This is base on voluntary philanthropy and limited to such as charitable donations to local community.
(2) Equivalent View. This is base on corporate social responsibility, and is partly voluntary and partly imposed. Self-interest is not the primary motivation, instead of focusing on legal requirements and ethical fulfillment.
(3) Extended View. Corporate citizenship should have responsibility as well as rights, which including social rights, civil rights and political rights.
Relationship with shareholders, Reporting/Disclosure of corporate governance
(1) Shareholders are the legal owners of the company and therefore entitled to sufficient information of the company.
(2) Disclosure is the means by which corporate governance is communicated and possibly ensured because of the scrutiny of stakeholders and shareholders.
(3) Disclosure becomes the mechanism through which corporate governance is given transparency.
(4) The annual general meeting is the most important form for the shareholders to communicate with the directors of the company.
(5) The annual report is the only legally-required disclosure from which shareholders can get information of the company.
(6) In an addition to compulsory disclosure, voluntary disclosure reduces information asymmetry and increases the corporate accountability.
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