Good Governance and Social

Responsibility
Module 1-Social Responsibility
Framework
Corporation- is an artificial
being created by operation of
law, having the right succession
and the powers, attributes and
properties expressly authorized
by law or incident to its
existence.
Artificial being
-by fiction of law a corporation is a juridical
person whose personality is separate and
distinct from its owners. Corporation has some
rights that a natural person possesses. It can sue
and be sued in court, it can own and dispose
properties and it is supposed to be given
independence by its owners in terms of
existence. Corporation can also be convicted on
criminal offense; fraud is an example.
-According to legal fiction, a corporation is a
juridical person with a personality that is
different from that of its owners. Corporations
are granted some of the same rights as natural
persons. It is expected to be given independence
in terms of existence by its owners, and it can
sue and be sued in court, hold property, and
dispose of it. Fraud is one criminal violation for
which a corporation can be found guilty.
Created by Operation of Law
-it will come into existence through a charter or a
grant from the state. It cannot exist but a mere
agreement or a unilateral and self-declaration of
existence. Functions of a corporations are governed
strictly and it has to do within the bounds of what is
being provided in the corporate charter.
-It will be founded by a state grant or charter. It
cannot exist as a simple agreement or a unilateral
proclamation of being. Functions of corporations are
rigorously governed and must fall within the
parameters set forth in the corporate charter.
Right of Succession
- A corporation can continue to exist even in
death, incapacity or insolvency of any
stockholder or member. The corporation will
not be dissolved even when there are
transfers of ownership.
- Even in the event of a stockholder or
member's demise, disability, or insolvency, the
corporation may still be in operation. Even if
there are ownership transfers, the corporation
will not be dissolved.
Powers, Attributes and Properties
-Which means it is authorized to do activities within
the purposes, of its creation, it has its own traits, and
it operates based on what has been expressly
provided in the charter including those that are
considered incident to its existence as a corporation.
-Which means it has its own characteristics, functions
in accordance with what has been specifically
provided in the constitution, including those that are
regarded incidental to its existence as a corporation,
and is entitled to do things that are consistent with
the purposes for which it was created.
THE PHILIPPINE CORPORATION
-Accdg. To the 2019 Revised Corporation Code,
ther is no minimum number of incorporators
(directors) but shall not have more than 20, and
each of the incorporators (directors) must own
atleast one share of stock.
The Revised Corporation Code focuses on four
areas of reforms:
• Enhancement of ease of doing business in the
Philippines
• Fortified stockholder protection and
institutionalized corporate governance
provisions
• Emphasizes on corporate social responsibility
• Improved policies and regulatory corporate
framework
STAKEHOLDERS OF A CORPORATION:
• Management-this refers to the party given the
authority to implement the policies as determined by
the board in directing the course/business activities of
the corporation (SEC), code of corporate governance.
-this is the group of people running the day-to- day
activities of a corporation.
-this team is composed of decision makers from the top
to the bottom of the corporate hierarchy.
-they are the ones entrusted by the stockholders to do
some maneuverings for the corporation to teach its
destinatin.
• Creditors-this refers to the party who lend to the
corporation goods, services or money. Creditors may
gain from corporation by way of interest for money
loaned or profit for goods sold or services rendered,
thus it is important that in running the corporate
affairs, the concerns of the creditors should be taken
into consideration.
• Shareholders-This refers to people who invest their
capital in the corporation. The people who, in some
cases considered as the first believer of what the
entity can do. These are people who bet their money
and assume the high risk of having their money going
down the drain.
• Employees- these are the people who contribute
their skills, abilities, and ingenuity to the
corporation. They are the one who invested their
future in the company with full trust and confidence
that the entity would make them secure.Running
the corporation with high emphasis on employees is
popular in corporate world nowadays tha when
business owners decide to expand or diversify they
always cite the number of jobs being created. And,
When the businessmen are confronted with
business challenges they always pose this question
“what will happen to the employees?”.
• Clients-the very reason for the existence of the
corporation. They are the buyers of the
corporation’s product or services for final
consumption, enjoyment, or maybe for the use in
the production/creation of another goods.
• Government-the government has several interests
in private corporations the most apparent of which
are the taxes that the corporations are paying.
Taxes make government stay afloat and survive as
highlighted in the “lifeblood theory” of taxation.
• Public-the public has a stake in
corporations considering that the
latter provides the citizens with the
essentials such as goods, services,
employment and tax money for
public programs. The result of
responsible or irresponsible conduct
of these corporations can also affect
public in so many ways.
Carroll's Framework of Corporate Social
Responsibility
Economic responsibilities
As a fundamental condition or requirement of existence,
--

businesses have an economic responsibility to the society that

permitted them to be created and sustained. At first, it may seem
unusual to think about an economic expectation as a social
responsibility, but this is what it is because society expects, indeed
requires, business organizations to be able to sustain themselves
and the only way this is possible is by being profitable and able to
incentivize owners or shareholders to invest and have enough
resources to continue in operation. In its origins, society views
business organizations as institutions that will produce and sell the
goods and services society needs and desires. As an inducement,
society allows businesses to take profits. Businesses create profits
when they add value, and in doing this they benefit all the
stakeholders of the business.
Legal responsibilities
-Society has not only sanctioned businesses as economic entities, but it has also
established the minimal ground rules under which businesses are expected to
operate and function. These ground rules include laws and regulations and in
effect reflect society’s view of “codified ethics”. They articulate fundamental
notions of fair business practices as established by lawmakers at federal, state
and local levels. Businesses are expected and required to comply with these
laws and regulations as a condition of operating. It is not an accident that
compliance officers now occupy an important and high level position in
company organization charts. While meeting these legal responsibilities,
important expectations of business include their

• Performing in a manner consistent with expectations of government and law

• Complying with various federal, state, and local regulations
• Conducting themselves as law-abiding corporate citizens
• Fulfilling all their legal obligations to societal stakeholders
• Providing goods and services that at least meet minimal legal requirements
Ethical responsibilities
-The normative expectations of most societies hold that laws are
essential but not sufficient. In addition to what is required by laws
and regulations, society expects businesses to operate and conduct
their affairs in an ethical fashion. Taking on ethical responsibilities
implies that organizations will embrace those activities, norms,
standards and practices that even though they are not codified into
law, are expected nonetheless. Part of the ethical expectation is
that businesses will be responsive to the “spirit” of the law, not just
the letter of the law. Another aspect of the ethical expectation is
that businesses will conduct their affairs in a fair and objective
fashion even in those cases when laws do not provide guidance or
dictate courses of action. Thus, ethical responsibilities embrace
those activities, standards, policies, and practices that are expected
or prohibited by society even though they are not codified into law.
• The goal of these expectations is that businesses will be responsible for and
responsive to the full range of norms, standards, values, principles, and expectations
that reflect and honor what consumers, employees, owners and the community
regard as consistent with respect to the protection of stakeholders’ moral rights. The
distinction between legal and ethical expectations can often be tricky. Legal
expectations certainly are based on ethical premises. But, ethical expectations carry
these further. In essence, then, both contain a strong ethical dimension or character
and the difference hinges upon the mandate society has given business through legal
codification.

While meeting these ethical responsibilities, important expectations of business include

their:
• Performing in a manner consistent with expectations of societal mores and ethical
norms
• Recognizing and respecting new or evolving ethical/moral norms adopted by society
• Preventing ethical norms from being compromised in order to achieve business goals
• Being good corporate citizens by doing what is expected morally or ethically
• Recognizing that business integrity and ethical behaviour go beyond mere compliance
with laws and regulations
Philanthropic responsibilities
-Corporate philanthropy includes all forms of business giving. Corporate
philanthropy embraces business’s voluntary or discretionary activities. Philanthropy
or business giving may not be a responsibility in a literal sense, but it is normally
expected by businesses today and is a part of the everyday expectations of the
public. Certainly, the quantity and nature of these activities are voluntary or
discretionary. They are guided by business’s desire to participate in social activities
that are not mandated, not required by law, and not generally expected of business
in an ethical sense. Having said that, some businesses do give partially out of an
ethical motivation. That is, they want to do what is right for society. The public does
have a sense that businesses will “give back,” and this constitutes the “expectation”
aspect of the responsibility. When one examines the social contract between
business and society today, it typically is found that the citizenry expects businesses
to be good corporate citizens just as individuals are. To fulfill its perceived
philanthropic responsibilities, companies engage in a variety of giving forms – gifts
of monetary resources, product and service donations, volunteerism by employees
and management, community development and any other discretionary
contribution to the community or stakeholder groups that make up the community.
Brief History of CSR
• For decades, companies have been using 
corporate social responsibility (CSR) to give
back to society while 
bolstering brand reputation. This management
concept as we know it today is mainly a
product of the twentieth century, taking shape
in the early 1950s.
• However, the history of corporate social
responsibility is one that actually spans over
two centuries.  
The 1800s and the Birth of Responsible Organizations
• While there has been a recent spike in the popularity of CSR, evidence of businesses’
concern for society can be traced back to practices originating from the Industrial
Revolution. In the mid-to-late 1800s, there was growing concern about worker wellbeing
and productivity among industrialists. 
• Growing criticisms of the emerging factory system, working conditions, and the
employment of women and children were being brought to light, especially in the United
States. The consensus among reformers was that current employment practices were
contributing to social problems, including poverty and labor unrest. However, industrial
betterment and welfare movements at the time were viewed as a combination of
humanitarianism and business acumen.
• Also making an appearance in the late 1800s was the rise of philanthropy. Industrialist
Andrew Carnegie, who made most of his fortune in the steel industry, was known for
donating large portions of his wealth to causes related to education and scientific
research. 
• Following in the footsteps of Carnegie, oil industry business magnate John D.
Rockefeller also donated more than half a billion dollars to religious, educational, and
scientific causes. 
The Catalyst for Modern Corporate Social
Responsibility
• Although responsible companies had already existed for more than a
century before, the term Corporate Social Responsibility was officially
coined in 1953 by American economist Howard Bowen in his
publication Social Responsibilities of the Businessman. As such, Bowen is
often referred to as the father of CSR.
• However, it wasn’t until the 1970s that CSR truly began to take flight in
the United States. In 1971, the concept of the ‘social contract’ between
businesses and society was introduced by the Committee for Economic
Development. This contract brought forward the idea that companies
function and exist because of public consent and, therefore, there is an
obligation to contribute to the needs of society.
• By the 1980s, early CSR continued to evolve as more organizations began
incorporating social interests in their business practices while becoming
more responsive to stakeholders. 
Universal Acceptance of Corporate Social
Responsibility
• The 1990s marked the beginning of widespread approval of CSR. In 1991,
University of Pittsburgh professor Donna J. Wood published Corporate
Social Performance Revisited, which expanded and improved on early CSR
models by providing a framework for assessing the impacts and outcomes
of CSR programs. 
• In the same year, business management author and professor at the
University of Georgia Archie B. Carroll published his article The Pyramid of
Corporate Social Responsibility. In his paper, Carroll expanded on areas he
believed were crucial when implementing CSR in an organization. 
• By the early 2000s, CSR had become an essential strategy for many
organizations, with multi-million dollar companies, such as Wells Fargo,
Coca-Cola, Walt Disney, and Pfizer incorporating this concept into their
businesses processes. 
 Drivers and Barriers of CSR
DRIVERS CSR BARRIERS

Regulation CSR Limited Financial Resources

Market Behavior CSR

Social Activism CSR Profit Maximization

Culture CSR

Strategy CSR Availability of Human Resouces

DRIVERS:
• Regulation-regulation and law provide a
framework that companies must comply with.
This is in relation to the legal dimension of
Caroll’s CSR framework discussed previously.
Example:
In China, CSR is no longer a voluntary act but is
mandated by the central government (Hudtohan
& Zhang, 2018)
• Market behavior-Benchmarks have been
established because of companies’ best
practices that use CSR as a builder of
reputation; how the market behaves and
influences; and how the companies engage in
their respective CSR initiatives and have
become a source of competitive advantage.
• Social activism-it is how stakeholder in society
react and voice out their concerns to
corporations publicly through various means
(such as social media, demonstrations,
lawsuits, and the like) have impacted how
organizations behave.
-Social activism can either be internally or
externally driven, meaning companies do not
necessarily have to respond to public clamor but
can internally drive change from within the
organization.
• Culture- is a mixture of beliefs, norms,
symbols, and the heritage that a particular
country or geographic area shares and
practices. This is built over time and becomes
part of its normative values. For CSR and good
governance to thrive, a culture of benevolence
and philanthropy must be ingrained or deeply
embedded in an organization.
• Strategy- the most significant driver of CSR.
-Integrating CSR in its planning from the
different functional areas of a company fortifies
the relationship and becomes a creator of value
that benefits the corporation in the long term. It
is also important that the focus and objectives of
a company’s desired CSR iitiatives must be
clearly articulated to its internal (management)
and external partners
(beneficiaries/intermediaries which will be
discussed in the next chapter).
BARRIERS:
• Limited Financial Resources-as with Caroll’s
economic perspective of CSR, a company
needs to be profitable and take care of its own
needs before it has the ability and resources
to engage effectively in social repsonsibility.
CSR requires a long-term stance in its
commitment of reosurces to truly see the
benefits of its initiatives.
• Profit Maximization-A company that single-
mindedly focuses on operational effeciency is
usually driven by profit maximization. Accrdg
to Kolstad (2007), most executives support the
Friedmanian view of maximizing returns to
shareholders despite the growing literature on
CSR’s positive effects on corporate financial
performance, persistence, and acceptance of
maximizing profits act as barriers to CSR.
• Availability of Human Resources-no matter
how good the intentions are in promoting CSR
in organizations, it will need efficient
mobilization through employee involvement
and engagement in its programs. Without the
support of human resources in its
implementation, CSR activities will be
lackluster.