Corporate Governance and Social Responsibility
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Corporate Governance and Social Responsibility
Corporate governance is a technique by which companies are directed and managed. It consists of a set of rules, processes, and practices of governance, which varies from one company to another (Tricker, 2015). Corporate governance has a basic structure that consists of a board of directors who ensures accountability, fairness, and transparency of the company to its stakeholders. Shareholders are investors, and they appoint directors and auditors. However, companies have a corporate social responsibility to their stakeholders. It’s important to note that good governance does not always amount to profitability and social welfare. Social welfare is the welfare of the entire society.
According to Karnani Wall Street Journal article, the driving force behind the trend is social welfare (Kamani, 2010). Healthier foods and more fuel-efficient vehicles didn’t become so common until they become profitable for their makers. Energy conservation didn’t become so important to many companies until energy became more costly. These companies are benefiting society while acting in their interests; social activists urging them to change their ways had little impact. It is the relentless maximization of profits, not a commitment to social responsibility that has proved to be a boon to the public in these cases. I do agree with Kamana’s article. This is because most companies take advantage of such opportunities to boost their profits.
Though large companies claim that their main intentions in business is acting in public interest and are not there just for profits, sometimes, acting in the public interest more often can’t do themes they have to sacrifice profits to do what’s best for society. Consumer demands like fuel-efficient vehicles have become a trend where companies boost profits, and the interest of the public are aligned, however. Some of the large companies like Academy of Management and the United Nations among others have been putting many efforts to companies to employ strategies that produce more healthy foods, energy conservation processes and manufacture of vehicles that are fuel -efficient as this makes the world a better place.
Executives experience pressure from shareholders to maximize profits, and they are most unlikely to lose some profits to benefit society as this might result in them losing their jobs. In this case, corporate social responsibility in direct opposition as managers is fulfilling their duties to act in shareholders’ interests (Wang et al., 2015). However, these executives can also jeopardize with company’s long term success as they act on their interests by looking at short-term financial performance and they might have taken risks like production of new products as this focuses on company’s longer-term success. Therefore, shareholders can solve these problems by linking the executive’s compensations and incentives directly to the company’s long term success. Some Companies have a true commitment to social responsibility, for example, Bombast, Tom’s, and Starbucks.
Bombas is a collection of socks with a philanthropic mission. They donate a pair of sock for every pair sold in homeless shelters. The founders had done thorough research on the needs of the underprivileged populations they wanted to alleviate some of the struggles. However, their high-quality socks drive sales in and of themselves, unlike other social business companies that rely on their social mission to attract customers. Therefore, its righteous intentions from the mission to the business model have made the world a better place and its example to other social business companies. They were able to surpass their target of donating million pair of socks by 2025.five months later; they had donated 2 million socks since they buy one give one tag won those sales and hearts.
Toms is another company founded with a corporate social responsibility program. It was established in 2006 with the mission of a pair of shoe for a child in need for every pair of shoe purchased. The founder was inspired to take this compassionate action as he had seen extreme poverty and health conditions on his trip to Argentina.in every aspect of their operations, Toms is focused on the environmental and social impacts. Toms donates shoes in more than 50 countries together with charitable partners. Therefore buying Tom’s pair of shoe is more than purchase as this gives a needy child mode of transportation, safety, and a way to prevent disease.
Starbucks is an international coffee company with social responsibility strategy based on community, ethical sourcing, and the environment. It’s present on over 60 countries to date. The company was doing so poorly not long ago as a result of internal restructuring and financial crisis. As a result, the CEO launched an agenda that was centered on social welfare, and that led to starting bucks economic recovery that even exceeded prior revenue. Starbucks, with a partner from local nonprofits, develops community stores that are aimed to meet to meet those community’s needs. Therefore positive changes for the communities they work and serve has brought a positive image to the company.
In conclusion, Social responsibility just like any other aspect of the business needs financial calculation from executives and its needs to be regulated by the government, civil society to act as a watchdog and the companies to take up the responsibility of self-regulation. The Executives need to do the right thing as that’s a byproduct in their pursuit of profit.
References
Karnani, A. (2010, Aug 23). WSJ Executive Adviser (A Special Report): The Case Against Corporate Social Responsibility: The Idea That Companies Have A Duty To Address Social Ills Is Not Just Flawed, Argues Aneel Karnani; It Also Makes It More Likely That We’ll Ignore The Real Solutions To These Problems. Wall Street Journalretrieved from http://search.proquest.com.ezproxy.library.berkeley.org/docview/746396923?accountid=38129
Tricker, R. B., & Tricker, R. I. (2015). Corporate Governance: Principles, policies, and practices. Oxford University Press, USA.
Wang, H., Tong, L., Takeuchi, R., & George, G. (2016). Corporate social responsibility: An overview and new research directions: Thematic issue on corporate social responsibility.