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Definition of corporate social responsibility (CSR)

Movement aimed at encouraging companies to be more aware of the impact of their business on
the rest of society, including their own stakeholders and the environment. [1]

Corporate social responsibility (CSR) is a business approach that contributes to sustainable


development by delivering economic, social and environmental benefits for all stakeholders.

CSR is a concept with many definitions and practices. The way it is understood and implemented
differs greatly for each company and country. Moreover, CSR is a very broad concept that
addresses many and various topics such as human rights, corporate governance, health and
safety, environmental effects, working conditions and contribution to economic development.
Whatever the definition is, the purpose of CSR is to drive change towards sustainability.

Although some companies may achieve remarkable efforts with unique CSR initiatives, it is
difficult to be on the forefront on all aspects of CSR. Considering this, the example below
provides good practices on one aspect of CSR – environmental sustainability.

THE STAKEHOLDER CONCEPT


According to Post, Lawrence, and Weber, stakeholders are
individuals and groups that are affected by an organization's
policies, procedures, and actions. A "stake" implies that one has an
interest or share in the organization and its operations, per Carroll
and Buchholtz. Some stakeholders, such as employees and owners,
may have specific legal rights and expectations in regard to the
organization's operations. Other stakeholders may not have specific
rights granted by law, but may perceive that they have moral rights
related to the organization's operations. For example, an
environmental group may not have a legal right in regard to a
company's use of natural resources, but may believe that they have
a moral right to question the firm's environmental policies and to
lobby the organization to develop environmentally friendly policies.
All companies, especially large corporations, have multiple
stakeholders. One way of classifying stakeholder groups is to
classify them as primary or secondary stakeholders. Primary
stakeholders have some direct interest or stake in the organization.
Secondary stakeholders, in contrast, are public or special interest
groups that do not have a direct stake in the organization but are
still affected by its operations. Exhibit 2 classifies some major
stakeholder groups into primary and secondary categories.

Exhibit 2
Table based on Carroll and Buchholtz, 2003: p. 71

Primary Shareholders
Stakeholders (Owners)
Employees
Customers
Business Partners
Communities
Future Generations
The Natural
Environment
Secondary
Local, State, and
Stakeholders
Federal Government
Regulatory Bodies
Civic Institutions
and
Groups
Special Interest
Groups
Trade and Industry
Groups
Media
Competitors
The owners of a firm are among the primary stakeholders of the
firm. An organization has legal and moral obligations to its owners.
These obligations include, but are not limited to, attempting to
ensure that owners receive an adequate return on their investment.
Employees are also primary stakeholders who have both legal and
moral claims on the organization. Organizations also have specific
responsibilities to their customers in terms of producing and
marketing goods and services that offer functionality, safety, and
value; to local communities, which can be greatly affected by the
actions of resident organizations and thus have a direct stake in
their operations; and to the other companies with whom they do
business. Many social commentators also suggest that companies
have a direct responsibility to future generations and to the natural
environment.
An organization's responsibilities are not limited to primary
stakeholders. Although governmental bodies and regulatory
agencies do not usually have ownership stakes in companies in free-
market economies, they do play an active role in trying to ensure
that organizations accept and meet their responsibilities to primary
stakeholder groups. Organizations are accountable to these
secondary stakeholders. Organizations must also contend with civic
and special interest groups that purport to act on behalf of a wide
variety of constituencies. Trade associations and industry groups
are also affected by an organization's actions and its reputation. The
media reports on and investigates the actions of many companies,
particularly large organizations, and most companies accept that
they must contend with and effectively "manage" their relationship
with the media. Finally, even an organization's competitors can be
considered secondary stakeholders, as they are obviously affected
by organizational actions. For example, one might argue that
organizations have a social responsibility to compete in the
marketplace in a manner that is consistent with the law and with
the best practices of their industry, so that all competitors will have
a fair chance to succeed.

What is 'Corporate Governance'


Corporate governance is the system of rules, practices and processes by which a
company is directed and controlled. Corporate governance essentially involves
balancing the interests of a company's many stakeholders, such as shareholders,
management, customers, suppliers, financiers, government and the community.
Since corporate governance also provides the framework for attaining a company's
objectives, it encompasses practically every sphere of management, from action
plans and internal controls to performance measurement and corporate disclosure.

!--break--Governance refers specifically to the set of rules, controls, policies and


resolutions put in place to dictate corporate behavior. Proxy advisors and
shareholders are important stakeholders who indirectly affect governance, but these
are not examples of governance itself. The board of directors is pivotal in
governance, and it can have major ramifications for equity valuation

What is Corporate Governance?


Corporate Governance refers to the way a corporation is governed. It is the technique by which
companies are directed and managed. It means carrying the business as per the stakeholders’
desires. It is actually conducted by the board of Directors and the concerned committees for the
company’s stakeholder’s benefit. It is all about balancing individual and societal goals, as well as,
economic and social goals.

Corporate Governance is the interaction between various participants (shareholders, board of


directors, and company’s management) in shaping corporation’s performance and the way it is
proceeding towards. The relationship between the owners and the managers in an organization must
be healthy and there should be no conflict between the two. The owners must see that individual’s
actual performance is according to the standard performance. These dimensions of corporate
governance should not be overlooked.

Corporate Governance deals with the manner the providers of finance guarantee themselves of
getting a fair return on their investment. Corporate Governance clearly distinguishes between the
owners and the managers. The managers are the deciding authority. In modern corporations, the
functions/ tasks of owners and managers should be clearly defined, rather, harmonizing.

Corporate Governance deals with determining ways to take effective strategic decisions. It gives
ultimate authority and complete responsibility to the Board of Directors. In today’s market- oriented
economy, the need for corporate governance arises. Also, efficiency as well as globalization are
significant factors urging corporate governance. Corporate Governance is essential to develop added
value to the stakeholders.

Corporate Governance ensures transparency which ensures strong and balanced economic
development. This also ensures that the interests of all shareholders (majority as well as minority
shareholders) are safeguarded. It ensures that all shareholders fully exercise their rights and that the
organization fully recognizes their rights.

Corporate Governance has a broad scope. It includes both social and institutional aspects. Corporate
Governance encourages a trustworthy, moral, as well as ethical environment.

Benefits of Corporate Governance


1. Good corporate governance ensures corporate success and economic growth.
2. Strong corporate governance maintains investors’ confidence, as a result of which, company
can raise capital efficiently and effectively.

3. It lowers the capital cost.

4. There is a positive impact on the share price.

5. It provides proper inducement to the owners as well as managers to achieve objectives that
are in interests of the shareholders and the organization.

6. Good corporate governance also minimizes wastages, corruption, risks and mismanagement.

7. It helps in brand formation and development.

8. It ensures organization in managed in a manner that fits the best interests of all.

Four Pillars of Corporate Governance


The Four Pillars of Corporate Governance: The value of corporate
governance may well lie on its four pillars, on which the OECD Principles of
corporate Governance are based.
Transparency
“Sunlight is the best disinfectant“
The corporate governance framework should ensure that timely and accurate
disclosure is made on all matters regarding the company, including its financial
situation, performance, ownership, and governance structure.

 Accountability
“You can’t manage what you can not measure“
The corporate governance framework should provide for the strategic guidance of
the company, the effective monitoring of management by the board, and the board’s
accountability to the company and shareholders.

 Fairness
“The fairness of markets is closely linked to investor protection and, in
particular, to prevention of improper trading practices, which leads to
confidence in the markets“
The corporate governance framework should protect shareholder rights and ensure
the equitable treatment of all stakeholders, including minority and foreign
shareholders.

 Responsibility
An effective system of corporate governance must strive to channel the self-interests
of managers, directors, and the advisers upon whom they rely, into alignment with
corporate , shareholder and public interests.

Corporate Governance and ethics


“Corporate Governance is …holding the balance between economic and social
goals and between individual and communal goals. the governance framework is
there to encourage the efficient use of resources and equally to require
accountability for the stewardship of these resources.
The aim is to align as nearly as possible the interests of individuals, corporations,
and society. the incentives to corporations is to achieve their corporate aims and to
attract investment

Examples of Unethical Marketing Practices That Can Destroy your


Reputation
1. Making false, exaggerated, or unverified claims
In a desperate bid to compel potential and existing customers to buy their products or
services, some marketers use false statements, exaggerated benefits, or make
unverifiable claims about their offers. This is common in the weight loss industry, where
marketers convince potential buyers that a particular product can help them shed so-
and-so pounds within two weeks without exercise or dieting!
2. Distortion of facts to mislead or confuse potential buyers
This is another common unethical marketing practice. A typical example is when a food
processing company claims that its products are sugar-free or calorie-free when indeed
they contain sugar or calories. Such a company is only trying to mislead potential
buyers, since they are unlikely to buy the products if it is made known that they contain
sugar or calories.
3. Concealing dark sides or side effects of products or services
This unethical marketing practice is rife in the natural remedies industry, where most
manufacturers deceive potential buyers that their products have no side effects because
they are “made from natural products”. But in reality, most of these products have been
found to have side effects, especially when used over a long period. In fact, there’s no
product without side effects—it’s just that the side effects might be unknown. It’s better to
say, “There are no known side effects” than to say “there are no side effects“.
4. Bad-mouthing rival products
Emphasizing the dark sides of your rival’s products in a bid to turn potential customers
towards your own products is another common but unethical marketing practice. Rather
than resort to this bad strategy, you should emphasize on those aspects that make your
offer stand out from the rest of the pack. That’s professional and ethical.
5. Using women as sex symbols for advertising
The rate at which even reputable brands are resorting to this unethical marketing
practice is quite alarming. If you observe TV, billboard, and magazine adverts, there’s
something common to most of them; a half-naked lady is used to attract attention to the
product or service being advertised. While it might be intuitive to use models in adverts
for beauty products and cosmetics, having half-naked models in adverts for generators,
heavy machinery, smartphones, and other products not strongly related to women is
both nonsensical and unethical.
5. Using fear tactics
This is another common unethical marketing practice among snake oil salespersons.
You will hear them saying something like: “This price is a limited-time offer. If you don’t
buy now, you might have to pay much more to buy it later because the offer will end up
in two days time, and the price will go up.” The only motive behind those statements is to
prompt the potential buyer to make a decision on the spot. And that’s wrong. Why
subject someone to undue pressure because you want to make money off him or her?
7. Plagiarism of marketing messages
Though uncommon, some business owners and salespersons engage in using the exact
marketing messages of their competitors to market their own products or services.
Creativity is a huge part of marketing, and using other businesses’ marketing messages
just passes you off as being creatively bankrupt and fraudulent.
8. Exploitation
This is charging for much more than the actual value of a product or service. For
marketing efforts to remain with ethical limits; the prices of your offers must be equal to
or less than the value they give the buyer. If the value is less than the cost, it’s unethical.
9. Demeaning references to races, age, sex, or religion
Ethical marketing must be devoid of all forms of discrimination. If your marketing
messages contain lines that place people of certain age range, sex, religion, nationality,
or race at a higher level than others, then you are crossing the bounds of ethical
marketing.
10. Spamming
Spamming is when you send unsolicited emails to potential customers, encouraging
them to buy your products or services. This is the commonest unethical marketing
practice done online. The number of time you send such emails doesn’t matter. Whether
you send them once, or on occasions, or frequently, you remain a spammer.