Activist shareholders sometimes urge companies to take strong CSR stances.
Maximizing profits and social responsibility, which is more known as a business ideology than a theory, are sometimes considered conflicting interests for companies. However, many corporate boards and shareholders recognize the importance of balancing shareholder profits and social and environmental responsibilities to other stakeholders.
Corporate Social Responsibility
Corporate social responsibility includes an informal list of guidelines compliant companies should follow. Integrity and honest in customer interactions, participation in community activities, fair working conditions and non-discrimination concerning employees and ethical interactions with partners are among the main CSR guidelines. Additionally, environmental preservation, including renewal and reuse of materials, is a main emphasis of a thorough CSR program.
Traditional Corporate Governance
Corporate governance is the systematic approach a corporate board takes in leading a company toward its purpose and vision. Traditionally, corporate governance guidelines have included plans largely centered on a vision of maximizing shareholder profits. Shareholders are investors in a publicly owned company that have fractional ownership in the company. Corporate boards historically, and some still presently, made governing decisions solely to appease investor interests.
Transition
In the late 20th to early 21st century, corporate governance saw a major transition toward a balance between shareholder interests and responsibility to other stakeholders. The Microsoft Corporate Governance Guidelines, for instance, indicate the company's accountability to shareholders along with customers, employees and business partners. The company describes its "Corporate Citizenship" by explaining its broader business focus of helping enhance the sustainability of and well-being of worldwide communities.
CSR Bottom Line
The connection between CSR and profits is up for debate. Proponents note that the long-term relationships improved through CSR compliance have to have positive bottom line benefits. While he agrees CSR helps companies avoid very damaging public backlash, David Vogel also points out in his October 2008 Forbes article, "CSR Doesn't Pay," that no tangible financial benefits have been proven from CSR iniatives.
