January-June 2016
ISSN 2050-005X (Online); 978-1522795582 (ISBN-13); 1522795588 (ISBN-10)
This article discusses the importance of Corporate Social Responsibility (CSR) in the modern world. The problems that led to the financial crisis will be assessed, as well as why the CSR has been left outside the substantial reforms currently taken by a number of companies and financial institutions. The importance of stakeholders will also be discussed and the stakeholder theory will be analysed, as this is a fundamental part of CSR. Both CSR and stakeholder theory are aspects of an organic theory that acts as a fundamental mechanism in the institution’s development. Moreover, reference will also be made to various corporate scandals, the new Company Law Act 2006, the recent regulations published in 2014 and the ground-breaking India Companies Act. These will serve as strong examples, supporting the author’s suggestion that CSR is not a fad whose time has come, but an important theory, which is slowly emerging as one of the fundamental principles of legislative reform. In the author’s opinion, this is a huge development post-financial crisis. Furthermore, the author will attempt to prove that CSR is an important component, which will help the development of a corporate financial market less vulnerable to a future financial crisis
Keywords: Corporate Social Responsibility, Company Law Act 2006, India Companies Act
Friedman, M., “VII Capitalism and discrimination” at page 112 in Capitalism and Freedom; The classic statement of Milton Friedman’s economic philosophy (University of Chicago Press 1970).
2 Idowu, S.O. & Capaldi, N. & Das Gypta, L.Z.A. (2013). Encyclopedia of Corporate Social Responsibility. Springer Reference, v.
3 Ibid., v.
4 Zhao, (2011). “Promoting more socially responsible corporations through UK company law after the 2008 financial crisis: the turning of the crisis compass”. International Company and Commercial Law Review 22(9): 275–284, 275; Roberts, P. C. “The American Idiocracy: The Crisis is Not Over”, Baltimore Chronicle, February 3, 2010, at http://baltimorechronicle.com/2010/020410Roberts.shtml [accessed on January 23, 2014].
5 Companies Act 2006.
6 India, Companies Act 2013.
7 Zhao (2011), 279.
8 Bruner, C. M. (2010) “Corporate Governance: Reform in a Time of Crisis” 36 Journal of Corporate Law 309, 313.
9 United Nations Global Compact. (2008) “The Global Economic Downturn: Why the UN Global Compact and Corporate Sustainability Are Needed More Than Ever”, United Nations Global Compact Office, New York. Available from http://www.unglobalcompact.org/newsandevents/news_archives/2008_10_17.html [accessed January 23, 2014].
10 Zhao (2011), 279.
11 Arora, A. (2011). “The Corporate Governance Failings in Financial Institutions and Directors’ Legal Liability”. 32 Company Lawyer 3, 7.
12 Zhao J. (2011), 279.
13 Financial Times, “Europe’s Banking Confidence Crisis” Financial Times Editorial Comment, October 1, 2008. Available from http://www.ft.com/cms/s/0/b8db7480-8fe4-11dd9890-0000779fd18c.html#axzz2rDJR7p45 [accessed on January 23, 2014].
14 Cabrelli, D. & Siems, M. (2013). “A Case-Based Approach to Comparative Company Law” at p1 in Comparative Company Law: A Case-Based Approach. Hart Publishing.
15 Macalister, T. A Change in the climate: credit crunch makes the bottom-line the top issue. The Guardian, March 6 2008. Available from http://www.theguardian.com/business/2008/mar/06/greenbusiness.creditcrunch [accessed on the 13th of February 2014].
16 Porter, M. E. & Kramer M. R. (2006), “Strategy & Society: The link between competitive advantage and Corporate Social Responsibility”. Harvard Business Review, 1.
17 Ibid., 2.
18 Pedamon, C. (2010). “Corporate Social Responsibility: A New Approach to Promoting Integrity and Responsibility” (2010). 31 Company Lawyer 172, 172.
19 Zhao (2011), 278.
20 Porter and Kramer (2006), 1.
21 Carroll A. B. (1991). “The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders,” Business Horizons, July 1991, Vol 34(4): 39–48, see pages 39–40.
22 Votaw, D. (1972). “Genius becomes rare: A comment on the doctrine of social responsibility,” California Management Review 15(2): 25–31, 25.
23 Knox, S. (2007). “Corporate Social Responsibility and Business Decision Making,” in Spiritual Motivation: New Thinking for the Business and Management, (eds. J. Ramsden, S. Aida, A. Kakabadse) Palgrave Macmillan, 147.
24 Idowu and Capaldi, vii.
25 European Commission. (2001). “Prompting a European Framework for Corporate Social Responsibility,” Green Paper and COM 366, Brussels, at page 6 (par. 2(20–26)). Available from http://eur-lex.europa.eu/LexUriServ/site/en/com/2001/com2001_0366en01.pdf [accessed on 7th February 2013].
26 Certified General Accountants Association of Canada. (2005). “Measuring up: A study on Corporate Sustainability Reporting in Canada,” 20.
27 Dunne, S. (2007). “What is Corporate Social Responsibility?” Ephemera 7(2): 372–380, 372.
28 Idowu and Capaldi, v.
29 Schwartz M. S. and Carroll, A. B. (2003). “Corporate Social Responsibility: A three-domain approach,” Business Ethics Quarterly, Volume 13, Issue 4, 503–530, see page 504.
30 Carroll, 42.
31 Ibid.
32 Ibid.
33 Zhao, J. (2014) “The Curious Case Stakeholder Theory: Calling a More Realistic Theory” International Trade and Business Law Review, 3.
34 Ibid.
35 Ibid., 5.
36 Carroll, A. B. (1993). “Business Society and Stakeholders: The Business and Society Relationship” at page 10 and “Business Society and Stakeholders (The Stakeholder Approach to Business Society and Ethics)” at page 84 in 2nd ed. Business and Society: Ethics and Stakeholder Management. Cincinnati: South-Western Publishing.
37 Caroll, 43.
38 Zhao, (2014), 2.
39 Clarkson, M.B.E. (1994), “A Risk Based Model of Stakeholder Theory”, The Centre for Corporate Social Performance & Ethics, Univers40 Donaldson T. & Preston L. E. (1995).”The Stakeholder Theory of the Corporation:
Concept, Evidence, and Implications”.20 Academy of Management Review 65 at 69. 41 Zhao (2011), 277; Zhao, (2014), 42. 42 Zhao (2011), 279. 43 Jensen, M. C. (2001) ‘Value Maximization, Stakeholder Theory, and the Corporate
Objective Function’ (2001) 14 Journal of Applied Corporate Finance 8, 246.ity of Toronto.
40 Donaldson, T. & Preston, L. E. (1995). “The Stakeholder Theory of the Corporation: Concept, Evidence, and Implications”. Academy of Management Review 20, 65 at 69.
41 Zhao (2011), 277; Zhao (2014), 42.
42 Zhao (2011), 279.
43 Jensen, M. C. (2001). “Value Maximization, Stakeholder Theory, and the Corporate Objective Function”. Journal of Applied Corporate Finance 14, 8, 246.
44 Cox, G. (2013). “Overcoming short-termism within British Business: the key to sustained economic growth”. Labour Policy Review, available from http://www.yourbritain.org.uk/uploads/editor/files/Overcoming_Short-termism.pdf [accessed on 17 March 2014], pp. 12–14, 26, 54.
45 Zhao, (2014), p. 25.
46 Buhmann, K. (2004). “Corporate Social Responsibility: What role for law? Some aspects of law and CSR”. Emerald Group Publishing, Vol. 6 No. 2 (2006), pp. 188–202, at p. 190.
47 Chen, C. H. (2011). “The major components of corporate social responsibility”. Journal of Global Responsibility 2(1): 85–89, at p. 88.
48 Rindova, V. P., Williamson, I. O., Petkova, A. P., and Sever, J. M. (2005). “Being good or being known: an empirical examination of the dimensions, antecedents, and consequences of organizational reputation”. Academy of Management Journal 48(6): 1033–49, pp. 1033–1036.
49 Campbell, M. C. (1999). “Perceptions of price unfairness: antecedents and consequences”. Journal of Marketing Research 36(2): 187–99, at p. 191.
50 Rindova, Williamson, Petkova, Sever (2005), pp. 1037–1038.
51 Ibid.
52 Zhao (2011), p. 277.
53 Zhao (2014), p. 38.
54 Zhao (2011), p. 278.
55 Ibid.
56 Chen (2011), p. 86.
57 Ibid.
58 Snider, J., Hill, R. and Martin, D. (2003), “Corporate social responsibility in the 20th century: a view from the world’s most successful firms”, Journal of Business Ethics, 48: 175–87, pp. 180–181.
59 www.bcorporation.net, available information about the company [accessed 11th February 2014].
60 Cockburn Report. (2000). “Winning with integrity”. Available from http://www.orendaconnections.com/Winning-with-integrity-Summary.pdf [accessed on 16th of March 2014].
61 Zhao (2014), p. 30.
62 Bruner (2010), p. 310.
63 Copp, S. F. (2009). “Corporate Social Responsibility and the Companies Act 2006”, Economic Affairs, 29(4): 16–21, p. 16.
64 Company Law Review Steering Group (2000), Modern Company Law for a Competitive Economy: Developing the Framework, London: Department of Trade and Industry (‘DTF, 2000’).
65 Sheikh, S. (1996). “Are Corporate Manager Trustees?” in 1st ed. Corporate Social Responsibilities: Law & Practice, Cavendish, pp. 153–157.
66 Companies Act 2006, s. 172.
67 Keay, A. (2007). “Section 172(1) of the Companies Act 2006: An Interpretation and Assessment”, The Company Lawyer, 29(4): 106–110, p. 108.
68 Hansard (HL), 6 February 2006, cols 255–256.
69 Copp (2009), p. 19.
70 Statutory Instruments; The Companies Act 2006 (Strategic Report) Regulations 2013, No. 1970.
71 Ibid., s. 414A.
72 Ibid., s. 414C.
73 Ibid., s. 414C(1)–(14).
74 Ramaswamy, S. (2014). “Companies Act 2013: A critical analysis of the proposed new company law in India” International Company and Commercial Law Review 25(1): 31–35, p. 31.
75 Ibid., p. 31.
76 India, Companies Act 2013.
77 Ibid., section 135(3)(a)–(c).
78 Ibid., section 135(5).
79 Zhao, J., Corporate Social Responsibility in Contemporary China. Cheltenham: Edward Elgar Publishing (2014), pp. 261–262.
† LLM, Queen Mary University of London; LLB, University of Sussex.
(2016). Corporate Social Responsibility: Here to Stay. Legal issues Journal, 4 (1), https://www.legalissuesjournal.com/article/04-01-11012016/
