CORPORATE SOCIAL RESPONSIBILITY AND GOOD CSR is Conditional

GOVERNANCE REVIEWER - Robertson and Nicholson thought that: “a

certain amount of rhetoric may be inevitable in
Unit 1: Defining Social Responsibility the area of social responsibility, managers may
even believe that making statements about
Defining Corporate Social Responsibility social responsibility insulates the firm from the
- according to EU Commission, CSR is a concept necessity of taking socially responsible action”
whereby companies integrate social and - Moir is more ambivalent: “whether or not
environmental concerns in their business business should undertake CSR, and the forms
operations and in their interaction with their that responsibility should take, depends upon
stakeholders on a voluntary basis the economic perspective of the firm that is
adopted”
Corporations are Part of Society - CSR therefore is by no means certain that
- the social performance of a business has not everybody thinks that it is important or relevant
always however, been accepted and has been to modern business
the subject of extensive debate
- thus, Hetherington states: “there is no reason to The Effects of Organizational Activity
think that shareholders are willing to tolerate an - any actions which an organization undertakes
amount of corporate non-profit activity which will have an effect not just upon itself but also
appreciably reduces either dividends or the upon the external environment within which
market performance of the stock” that organization resides
- conversely, Dahl states: “every large corporation
should be thought of as a social enterprise; that THIS EFFECT OF THE ORGANIZATION CAN TAKE MANY
is an entity whose existence and decisions can be FORMS, SUCH AS:
justified insofar as they serve public or social
purposes” The utilization of natural resources as part of its
- similarly, Carol, one of the early CSR theorists’ production processes
states that: “business encompasses the The effects of competition between itself and other
economic, legal and discretionary expectations organizations in the same market
that society has of organization at a given point The enrichment of local community through the
in time” creation of employment opportunities
- Balabanis, Phillips and Lyall declared that: “in Transformation of the landscape due to raw material
the modern commercial area, companies and extraction or product waste storage
their managers are subjected to well publicized The distribution of wealth created within the firm to
pressure to play an increasingly active role in the the owners of that firm (via dividends) and the
welfare of society” workers of that firm (through wages) and the effect
of this upon the welfare of individuals
Profit is all that Matters And more recently, the greatest concern has been
- Milton Friedman says, “there is one and only with climate change and the way in which the
one social responsibility of business to use its emission of greenhouse gases (contributes to
resources and engage in activities designed to greenhouse effect – the trapping of the sun's warmth
increase its profits so long as it stays within the in a planet's lower atmosphere) are exacerbating
rules of the game, which is to say, engages in (making worse of) this
open and free competition

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 THE PRINCIPLES OF CSR 3. Transparency
- transparency, as a principle, means that the
1. Sustainability external impact of the actions of the
- it is concerned with the effect which action taken organization can be ascertained from that
in the present has upon the options available in organization’s reporting and pertinent facts are
the future not disguised within that reporting
- if resources are utilized in the present then they - thus, all the effects of the actions of the
are no longer available for use in the future, and organization, including external impacts, should
this is of particular concern if the resources are be apparent to all from using the information
finite in quantity provided by the organization’s reporting
- ex. raw materials of an extractive in nature, such mechanisms
as coal, iron, or oil, are finite in quantity and once - transparency is of particular importance to
used are not available for future use external users of such information as these users
- alternatives in the future therefore will be lack the background details and knowledge
needed to fulfil the functions currently provided available to internal users of such information
by these resources - transparency therefore can be seen to follow
- as resources becomes depleted then the cost of from the other two principles and equally can be
acquiring the remaining resources tends to seen to be a part of the process of recognition of
increase, and hence the operational costs of responsibility on the part of the organization for
organizations tend to increase the external effects of its actions and equally
- sustainability implies that society must use no part of the process of transferring power to
more of a resource than can be generated external stakeholders
- ex. the paper industry has a policy of replanting
trees to replace those harvested and this has the The Prominence of CSR
effect of retaining costs in the present rather - it is quite noticeable how much more prominent
than temporarily externalizing them corporate social responsibility (CSR) has become
- resources that are finite in quantity would – not just in the academic world and in the
require alternatives to fulfil the functions business world but also is everyday life
currently provided by these resources
- sustainability implies that society must use no FACTORS THAT CONTRIBUTE TO THE MORE
more of a resource than can be regenerated PROMINENT CORPORATE SOCIAL RESPONSIBILITY:
2. Accountability
- accountability is concerned with an organization 1. Poor business behavior towards customers
recognizing that its actions affect external - ex. individual customers are understanding and
environment, and therefore assuming that they do not expect perfection from a
responsibility for the effects of its actions business but do expect honesty and
- this concept implies a quantification of the transparency
effects of actions taken, both internal to the 2. Treating employees unfairly
organization and externally - ex. exploitation of people in developing
- it implies reporting of those quantifications to all countries, especially the question of child labor
parties affected by those actions but also such things as sweat shops (a factory or
- it implies a reporting to external stakeholders of workshop, especially in the clothing industry,
the effects of actions taken by the organization where manual workers are employed at very low
and how they are affecting stakeholders wages for long hours and under poor conditions)

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3. Ignoring the environment and the consequences of Externalizing Costs
organizational action - The externalization of costs can be externalized
- ex. issue of climate change both spatially and temporally

Changing Emphasis in Companies TYPES OF EXTERNALIZING COST

- companies themselves have changed-no longer
concerned with greenwashing-the pretense of 1. Spatial Externalization
socially responsible behavior through artful - spatial externalization describes the way in
reporting which costs can be transferred to other entities
- companies now are taking CSR much more in the current time period
seriously not just because they understand that 2. Temporal Externalization
it is a key to business success and can give them - the temporal externalization of costs describes
a strategic advantage, but also because people in the way in which costs are transferred from the
those organizations care about social current time period into another-the future
responsibility
- the growing importance of CSR is being driven by EXAMPLES OF SUCH SPATIAL EXTERNALIZATION
individuals who care-but those individuals are INCLUDE:
not just customers, they are also employees,
managers, owners and investors of a company Environmental degradation though such things as
- companies are partly reacting to external polluted-and therefore dead-rivers or through
pressures and partly leading the development of increased traffic imposes costs upon the local
responsible behavior and reporting community through reduced quality of life;
Causing pollution imposes costs upon society at
Environmental Issues and their Effects and Implications large;
- when an organization undertakes an activity, Waste disposal problems impose costs upon
which impacts upon the external environment, whoever is tasked with such disposal;
then this affects that environment in ways which Removing staff from shops imposes costs upon
are not reflected in the traditional accounting of customers who must queue for service;
that organization Just in time manufacturing imposes costs upon
- the environment can be affected either suppliers by transferring stockholding costs to them
positively, through for example a landscaping
project, or negatively, through for example the EXAMPLES OF TEMPORAL EXTERNALIZATION
creation of heaps of waste from a mining INCLUDE:
operation
- these actions of an organization impose costs Deferring investment to a future time period and so
and benefits upon the external environment increasing reported value in the present;
- these actions are excluded from traditional Failing to provide for asset disposal costs in capital
accounting of the firm, and by implication from investment appraisal and leaving such costs for
its area of responsibility-such costs and benefits future owners to incur
have been externalized
- the concept of externality therefore is concerned Social Contract
with the way in which these costs and benefits - in 1762 Jean-Jacques Rousseau produced his
are externalized from the organization and book on the social contract which was designed
imposed upon others to explain-and therefore legitimate – the
relationship between and individual and society
and its government

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 - in it he argued that individual’s voluntary gave up extend this and say that the environment can be
certain rights in order for the government of the affected by organizational activity
state to be able to manage for the greater good
of all citizens THESE EFFECTS OF THE ORGANIZATION’S ACTIVITIES
- more recently the social contract has gained a CAN TAKE MANY FORMS, SUCH AS:
new prominence as it has been used to explain
the relationship between a company and society The utilization of natural resources as a part of its
- in this view the company (or other organization) production processes
has obligations towards other parts of society in The effects of competition between itself and other
return for its place in society organizations in the same market
The enrichment of a local community through the
Stakeholders & the Social Contract creation of employment opportunities
- although we considered the social contract in Transformation of the landscape due to raw material
the last chapter we now need to consider it in extraction or waste product storage
relationship to stakeholders and to Stakeholder
theory THESE EFFECTS OF THE ORGANIZATION’S ACTIVITIES
- this theory is one of the major influences on CSR CAN TAKE MANY FORMS, SUCH AS:

What is a stakeholder? The distribution of wealth created within the firm to

- those groups without whose support the The owners of that firm (via dividends) and the
organization would cease to exist Workers of that firm (through wages) and the effect
- any group or individual who can affect or is of this upon the welfare of individuals
affected by the achievement of the Pollution caused by increased volumes of traffic and
organization’s objectives increased journey times because of those increased
volumes of traffic
We can see from these definitions that a lot of people
can be a stakeholder to an organization. THUS, MANY PEOPLE ALSO CONSIDER THAT THERE IS
AND ADDITIONAL STAKEHOLDER TO AN
THE MOST COMMON GROUPS WHO WE CONSIDER ORGANIZATION, NAMELY:
TO BE STAKEHOLDERS INCLUDE:
The Environment
1. Managers - as we will see in the next discussions-the actions
2. Employees of an organization have a big effect upon future
3. Customers possibilities, it is for this reason that we also add
4. Investor one extra stakeholder
5. Shareholders The Future
6. Suppliers - it should be noted however that others do not
generally include the future as a stakeholder
THEN THERE ARE SOME MORE GENERIC GROUPS
WHO ARE OFTEN INCLUDED: Multiple Stakeholding
- it is normal to consider all of these stakeholder
Government groups separately
Society at large - it should be noted however hat each person will
The Local Community belong to several stakeholder groups at the
- many people consider that only people can be same time
stakeholders to an organization, some people

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 - for example, a single person might be a customer - stakeholder theory states that all stakeholders
of an organization and also an employee and a must be considered in the decision-making
member of the local community and of society at process of the organization
large
- for example, he or she may also be a shareholder THE THEORY STATES THAT THERE ARE 3 REASONS
and a member of a local environmental WHY THIS SHOULD HAPPEN:
association and therefore concerned about the
environment, most probably that person will It is the morally and ethically correct way to behave
also be concerned about the future also, on their Doing so actually also benefits the shareholders
own behalf or on behalf of their children It reflects what actually happens in an organization
As far as this third point is concerned then this is
THE CLASSIFICATION OF STAKEHOLDERS supported by research from Cooper at (2001) into
THERE ARE TWO MAIN WAYS TO CLASSIFY large firms
STAKEHOLDERS:
Stakeholder Theory
1. Internal vs. External - according to this theory, stakeholder
- internal stakeholders are those included within management, or corporate social responsibility,
the organization such as employees or is not an end in itself but is simply seen as a
managers, whereas means for improving economic performance
- external stakeholders are such groups as - this assumption is often understood although it
suppliers or customers who are not generally is clearly stated by Atkinson, water house and
considered to be a part of the organization wells (1997) and is actually inconsistent with the
ethical reasons for adopting stakeholder theory
Although this classification is fine it becomes - instead of stakeholder management improving
increasingly difficult in a modern organization to economic, or financial, performance therefore it
distinguish the two types when employees might be is argued that a broader aim of corporate social
subcontractors and suppliers might be another performance should be used (Jones and Wicks,
organization within the same group. 1999)

2. Voluntary vs. Involuntary Risk Reducing

- voluntary stakeholders can choose whether or - one thing which is of particular importance for all
not to be a stakeholder to an organization, corporations, and is becoming more important is
whereas, involuntary stakeholders cannot the matter of risk and the managing of that risk
- for example, an employee can choose to leave - a stakeholder approach to decision making and
the employment of the organization and managing the organization is likely to identify
therefore is a voluntary stakeholder, the local more risks and to manage them better
society or the environment are not able to make - risk is also very related to sustainability (see the
this choice and must therefore be considered to next chapter) and we will show that the lack of a
be involuntary stakeholders full understanding of what is meant by
sustainability, and particularly by sustainable
Stakeholder Theory development, means that the issue is confused
- the argument for stakeholder theory is based in corporate planning and reporting (Aras &
upon the assertion that maximizing wealth for Crowther 2008)
shareholders fails to maximize wealth for society - in order to fully recognize and incorporate
and all its members and that only a concern with environmental costs and benefits into the
managing all stakeholder interests achieves this investment analysis process the starting point

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 needs to be the identification of the types of THE STEPS INVOLVED IN THE INCORPORATION OF
costs and revenues which need to be ENVIRONMENTAL ACCOUNTING INTO THE RISK
incorporated into the evaluation process EVALUATION SYSTEM CAN THEREFORE BE
- once these types of costs have been identified SUMMARIZED AS FOLLOWS:
then it becomes possible to quantify such costs
and to incorporate qualitative data concerning Identify environmental implications in term of costs
those fewer tangible benefits which are not and benefits
easily subject to quantification Quantify those costs and incorporate qualitative
- the completion of an environmental audit will data regarding less tangible benefits
enhance the understanding of the processes Use appropriate financial indicators
involved and will make this easier Set an appropriate time horizon which allows
- once all the data has been recognized, collected environmental effects to be fully realized
and quantified it then becomes possible to --------------------------------------------------------------------------
incorporate this data, in financial terms, into an Unit II: Issues Concerning Sustainability
evaluation which incorporates risk in a more
consistent manner Of the three principles of CSR the one which is
- it is important to recognize benefits as well as most prominent at the present time is sustainability.
costs, and it is perhaps worth reiterating that Consequently, we are devoting a complete chapter to
many of these benefits are less subject to dealing with this topic. It is one that has recently become
quantification and are of the less tangible and very important for businesses and all large businesses –
image related kind and many smaller ones – have a sustainability plan, or at
least claim to have such a plan. We need therefore to
EXAMPLES OF RISK REDUCING start by establishing exactly what we mean by
sustainability.
Enhanced company or product image-this in itself
can lead to increased sales Defining Sustainability
Health and safety benefits - sustainability is concerned with the effect which
Ease of attracting investment and lowered cost of action taken in the present has upon the options
such investment available in the future
Better community relationships-this can lead to - the starting point for every definition of
easier and quicker approval of plans through the sustainability comes from the Brundtland
planning process Report, which was published in 1987
Improved relationship with regulators, where - this is actually a report named Our Common
relevant Future which was produced by the World
Improved morale among workers, leading to higher Commission on Environment and Development,
productivity, lower staff turnover and consequently it is generally known however, as the Brundtland
lower recruitment and training costs Report after its chair
General improved image and relationship with
stakeholders Strictly speaking the Brundtland Report was
concerned with sustainable development which they
Many of these benefits are not just intangible but will regarded as unquestioningly both possible and desirable.
take some time to realize. This definition of sustainability starts from the premise
that if resources are utilized in the present then they are
no longer available for use in the future. This has led to
the standard definition of sustainable development
which states that this is: “Development which meets the

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needs of the present without compromising the ability of Critiquing Brundtland
future generations to meet their own needs.” - for more than 20 years the starting point for any
discussion of sustainable corporate activity has
This principle has been incorporated in the been the Brundtland Report
Maastricht and Amsterdam Treaties on European Union, - its concern with the effect which action taken in
as well as in the Rio Declaration and Agenda 21, adopted the present has upon the options available in the
by the United Nations Conference on Environment and future has directly led to glib assumptions that
Development (UNCED), meeting in Rio de Janeiro 3 to 14 sustainable development is both desirable and
June 1992. The European Community and its Member possible and that corporation can demonstrate
States subscribed to the Rio Declaration and Agenda 21 sustainability merely by continuing to exist into
and committed themselves to the rapid implementation the future
of the principal measures agreed at UNCED. - the problem with Brundtland is that its concern
with the effect which action taken in the present
The Brundtland Report has upon the options available in the future has
- this report is considered to be extremely directly led to glib assumptions that sustainable
important in addressing the issue of development is both desirable and possible and
sustainability that corporation can demonstrate sustainability
merely by continuing to exist into the future
THE REPORT DESCRIBED SEVEN STRATEGIC (Aras & Crowther 2008b)
IMPERATIVES FOR SUSTAINABLE DEVELOPMENT:
IT HAS ALSO LED TO AN ACCEPTANCE OF WHAT
Reviving growth; MUST BE DESCRIBED AS THE MYTHS OF
Changing the quality of growth; SUSTAINABILITY:
Meeting essential needs for jobs, food, energy,
water and sanitation; Sustainability is synonymous with sustainable
Ensuring a sustainable level of population; development;
Conserving and enhancing the resource base; A sustainable company will exist merely by
Reorienting technology and managing risk; recognizing environmental and social issues and
Merging environment and economics in decision- incorporating them into its strategic planning
making
Critiquing Brundtland
The Brundtland Report Both are based upon an unquestioning acceptance of
- it also emphasized that the state of our market economics predicated in the need for growth and
technology and social organization, particularly a are based upon the false premise of Brundtland to which
lack of integrated social planning, limits the we will return later. An almost unquestioned assumption
world’s ability to meet human needs now and in is that growth remains possible and therefore
the future sustainability and sustainable development are
- this report makes institutional and legal synonymous. Indeed, the economic perspective
recommendations for change in order to considers that growth is not just possible but also
confront common global problems more and desirable and therefore that the economics of
- more, there is a growing consensus that firms development is all that needs to be addressed and that
and governments in partnership should accept this can be dealt with through the market by the clear
moral responsibility for social welfare and for separation of the three basic economic goals of efficient
promoting individuals’ interest in economic allocation, equitable distribution, and sustainable scale.
transactions (Amba-Rao, 1993)

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 Concomitantly all corporations are becoming Redefining Sustainability
concerned about their own sustainability and what the It is therefore time to re-examine the legacy of
term really means. Such sustainability means more than Brundtland and to redefine what is meant by sustainable
environmental sustainability. As far as corporate activity.
sustainability is concerned then the confusion is
exacerbated by the fact that the term sustainable has COMPONENTS OF SUSTAINABILITY:
been used in the management literature over the last 30
years to merely imply continuity. continuity. Thus Societal Influence
Zwetsloot (2003) is able to conflate corporate social - which we define as a measure of the impact that
responsibility with the techniques of continuous society makes upon the corporation in terms of
improvement and innovation to imply that sustainability the social contract and stakeholder influence
is thereby ensured. Consequently, the trajectory of all of Environmental Impact
these effects is increasingly being focused upon the same - which we define as the effect of the actions of
issue. the corporation upon its geophysical
environment
There have been various descendants of Brundtland, Organizational Culture
including the concept of the Triple Bottom Line. This in - which we define as the relationship between the
turn has led to an assumption that addressing the three corporation and its internal stakeholders,
aspects of economic, social and environmental is all that particularly employees, and all aspects of that
is necessary in order to ensure not just sustainability but relationship
to also enable sustainable development. Finance
- which we define in terms of an adequate return
Sustainability and the Cost of Capital for the level of risk undertaken
It is recognized in the financial world that the
cost of capital which any company incurs is related to the Redefining Sustainability
perceived risk associated with investing in that company These are all necessary in order to ensure not just
– in other words there is a direct correlation between the sustainability but to also enable sustainable
risk involved in an investment and the rewards which are development. Moreover, it is the balance between them
expected to accrue from a successful investment. which is crucial. These four must be considered as the
Therefore, it is generally recognized that the larger, more key dimensions of sustainability, all of which are equally
established companies are a more certain investment important. This analysis is therefore considerably
and therefore have a lower cost of capital. This is all broader and more complete – than that of others.
established fact as far as finance theory is concerned and
is recognized in the operating of the financial markets Furthermore, Aras & Crowther (2007b, 2007c)
around the world. Naturally a company which is consider that these four aspects can be resolved into a
sustainable will be less risky than one which is not. two-dimensional matrix along the polarities of internal v
Consequently, most large companies in their reporting external focus and short-term v long term focus, which
mention sustainability and frequently it features together represent a complete representation of
prominently. Indeed, it is noticeable that extractive organizational performance this can be represented as
industries – which by their very nature cannot be the given model:
sustainable in the long term – make sustainability a very
prominent issue.

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 future. This is in effect a radical reinterpretation of
corporate activity.

It is necessary to consider the operationalization of

this view of sustainability. Our argument has been that
sustainability must involve greater efficiency in the use
of resources and greater equity in the distribution of the
effects of corporate activity. To be operationalized then
of course the effects must be measurable and the
combination must of course be manageable.

THESE CAN BE DESCRIBED DIFFERENTLY:

Maintaining economic activity, which must be the

central raison d’etre of corporate activity and the
principle reason for organizing corporate activity.
This of course maps onto the finance aspect
Conservation of the environment, which is essential
for maintaining the options available to future
generations. This maps onto the environmental
impact aspect
Ensuring social justice, which will include such This acts as a form of balanced scorecard to provide
activities as the elimination of poverty, the ensuring a form of evaluation for the operation of sustainability
of human rights, the promotion of universal within an organization.
education and the facilitation of world peace. This
maps onto the societal influence aspect IT CONCENTRATES UPON THE 4 KEY ASPECTS,
Developing spiritual and cultural values, which is NAMELY:
where corporate and societal values align in the
individual and where all of the other elements are 1. Strategy
promoted or negated; sadly, at present they are 2. Finance
mostly negated 3. Distribution
4. Technological Development
Distributable Sustainability
At this point we deliberately use the term Moreover, it recognizes that it is the balance
distributable sustainability in order to reflect one of the between these factors which is the most significant
key components of this argument. This is that true aspect of sustainability. From this a plan of action is
sustainability depends not just upon how actions affect possible for an organization which will recognize
choices in the future but also upon how the effects of priorities and provide a basis for performance
those actions – both positive and negative – are evaluation.
distributed among the stakeholders involved. A central
tenet of our argument is that corporate activity, to be Summarizing Sustainability
sustainable, must not simply utilize resources to give To summarize, sustainability requires a radical
benefit to owners but must recognize all effects upon all rethink and a move aware from the cozy security of the
stakeholders and distribute these in a manner which is Brundtland definition. We therefore reject the accepted
acceptable to all of these – both in the present and in the terms of sustainability and sustainable development,

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preferring instead to use the term durability to - globalization also should be a process which
emphasize the change in focus. integrates world economies, culture, technology
and governance
THE ESSENTIAL FEATURES OF DURABILITY CAN BE - globalization also involves the transfer of
DESCRIBED AS FOLLOWS: information, skilled employee mobility, the
exchange of technology, financial funds flow and
Efficiency is concerned with the best use of scarce geographic arbitrage (investment) between
resources. This requires a redefinition of inputs to developed countries and developing countries
the transformational process and a focus upon - moreover, globalization has religious,
environmental resources as the scarce resource environmental and social dimensions, in order to
Efficiency is concerned with optimizing the use of the encompass this broad impact area, globalization
scarce resources (i.e. environmental resources) covers all dimensions of the world economy,
rather than with cost reduction environment and society
Value is added through technology and innovation - moreover, it is apparent all over the world and
rather than through expropriation the world is changing dramatically, every
Outputs are redefined to include distributional government has a responsibility to protect all of
effects to all stakeholders their economy and domestic market from this
-------------------------------------------------------------------------- rapid changing
Globalization & CSR - the question is how a company will adapt to this
change
Introduction - first of all, companies have to know different
Globalization is a leading concept which has become effects of globalization, globalization has some
the main factor in business life during the last few opportunities and threats, a company might
decades have learned how to protect itself from some
This phenomenon affects the economy, business life, negative effects and how to get opportunities
society and environment in different ways, and from this situation
almost all corporations have been affected by these
changes GLOBALIZATION AFFECTS THE ECONOMY, BUSINESS
We can see these changes mostly related with LIFE, SOCIETY AND ENVIRONMENT IN DIFFERENT
increasing competition and the rapid changing of WAYS:
technology and information transfer
This issue makes corporations more profit oriented Increasing competition
than a long term and sustainable company. Technological development
However, corporations are a vital part of society Knowledge/Information transfer
which needs to be organized properly Portfolio investment (fund transfer between
Therefore, we need some social norms, rules and developed countries and emerging markets)
principles in society and business life for socially Regulation/deregulation, International standards
responsible behavior Market integration
Intellectual capital mobility
Globalization Financial crisis-contagion effect-global crisis
- globalization can be defined as the free
movement of goods, services and capital, this Competition
definition does not cover all the aspects of - globalization leads to increased competition
globalization or global changing (increased competition is a consequence of
globalization)

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 - this competition can be related to product and efficient technology management and efficient
service cost and price, target market, R&D management
technological adaptation, quick response and
quick production by companies Knowledge/Information Transfer
- when a company produces with less cost and - information is a most expensive and valuable
sells cheaper, it will be able to increase its production factor in the current environment
market share (presently/currently/at the current time),
- customers have too much choice in the market information can be easily transferred and
and they want to acquire goods and services exchanged from one country to another
quickly and in a more efficient way, and also, - if a company has a chance to use knowledge and
they are expecting high quality and a cheap price information then it means that it can adapt to
which they are willing to pay, all these this global changing, this issue is similar with the
expectations need a response from the technology transfer issue in global markets, the
company, otherwise sales of company will rapid changing of the market requires also quick
decrease and they will lose profit and market transfer of knowledge and efficient using of that
share knowledge and information
- a company must be always ready for price,
product and service and customer preferences Portfolio Investment (Financial Fund Flows)
because all of these are global market - globalization encourages increased international
requirements portfolio investment, additionally, financial
markets have become increasingly open to
Exchange of Technology international capital flows
- one of the most striking manifestations of - for this reason, portfolio investment is one of the
globalization is the use of new technologies by major problems of developing economies, it is
entrepreneurial and internationally oriented almost the only way to increase liquidity of the
firms to exploit new business opportunities markets and economies for emerging countries
- internet and e-commerce procedures hold through attracting foreign funds, significantly,
particular potential for SMEs (small and mid-size this short-term investment can dramatically
enterprises) seeking to broaden their impact on the financial markets
involvement into new international markets - when the emerging economies have some
(Wrighta & Etemad, 2001) problem in their country or investors make
- technology is also one of the main tools of enough profit from their investment then these
competition and the quality of goods and investors might leave the market, this would
services, on the other hand, it necessitates quite mean that market liquidity decreased and
a lot of cost for the company, the company has financial markets indicators drop immediately
to use the latest technology for increasing their
sales and product quality Regulation/Deregulation & International Standards
- globalization has increased the speed of - globalization needs more regulation of the
technology transfer and technological markets and economy, there are many new and
improvement, customer expectations are complicated financial instruments and methods
directing markets in the market and such instruments easily
- mostly, companies in capital intensive markets transfer and trade in other countries because of
are at risk and that is why they need quick/rapid the globalization effect
adapting concerning the customer/market - every new system, instrument or tool requires
expectation, these companies have to have new rules and regulations to determine its
impact area, these regulations are also necessary

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 to protect countries against global risks and Qualitative Intellectual Capital Mobility
crises - another effect of globalization is human capital
- when the crisis comes out of one country then it mobility through knowledge and information
influences other countries with trade channels transfers
and fund transfers, which we call the contagion - one of the reasons is that
effect international/multinational companies have
- on the other hand, during globalization the subsidiaries, partners and agencies in different
shares of big companies are trading in the countries
international stock markets and these - they need skilled and experienced international
companies have shareholders and stakeholders employees and rotation from country to country
in many different countries to provide appropriate international business
- international rules and regulations also offer practice, this changing also requires more skilled,
protection to small investors against the big well-educated and movable employees who can
scandals and other problems in companies adapt quickly to different market conditions
- international standards also regulate markets
and economies by means of international Financial Crisis-Contagion Effect-Global Crisis
principles and rules such as international - financial crises are mostly determined through
accounting standards, international auditing globalization and as a result of the globalization
standard impact
- it aims to make corporate reporting - in fact, this is quite a true explanation, the
standardized and comparable financial world has witnessed a number of crises
- that is why the globalized world has more rules cases
and more regulations and international - generally, financial crises come out from
standards than before international funds/capital flows (portfolio
investments), lack of proper regulations and
Market Integration standards, complex financial instruments, rapid
- globalization leads to the conversion of many development of financial markets, asymmetric
markets and economies into one market and information and information transfers
economy, the aim of international standards and - one country crisis can turn into a global crisis
regulations is also to deregulate all these with systemic risk effect, systemic risk refers to a
markets spreading financial crisis from one country to
- the economy needs financial structures capable another country
of handling the higher risk in the new economy, - in some cases, crises spread even between
for this reason, financial markets must be broad, countries which do not appear to have any
deep, and liquid and at present only the US common economic fundamentals/problems,
financial markets are large enough to provide previous global crises have also showed that one
this financial structure in the world market of the reasons for the crisis is unregulated
- global stock market projection and Pan- markets
European stock market projection are part of
this changing, there are many similar examples How Globalization Affects CSR
in the current situation for market integration The question might be how Globalization affects
which are also the result of increasing CSR. But the answer to this question is not only related
competition in the economy to the last quarter of the 20th century but also related to
- integration examples are prominent in company previous centuries.
mergers and acquisitions as well

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- John Maynard Keynes calculated that the - there are many reasons for ethical and socially
standard of living had increased 100 percent responsible behavior of the company
over four thousand years - however, there are many cases of misbehavior
- Adam Smith had an important (seminal) idea and some illegal operations of some companies,
about the wealth of communities and in 1776 he increasing competition makes business more
described conditions which would lead to difficult than before in the globalized world
increasing income and prosperity - the good news and our expectations are that
- similarly, there is much evidence from economic competition will not have any longer bad
history to demonstrate the benefit of moral influence on company behavior, according to
behavior; for example, Robert Owen in New international norms (practice) and expectations,
Lanark, and Jedediah Strutt in Derbyshire – both companies have to take into account social,
in the UK – showed the economic benefits of ethical and environmental issues more than
caring for stakeholders during the last two decades
- more recently Friedman has paid attention to - one of the reasons is more competition not
the moral impact of the economic growth and always more profit; another reason is consumer
development of society expectation is not only related to the cost of
- it is clear that there is nothing new about products but also related to quality, proper
economic growth, development and production process and environmental
globalization, economic growth generally brings sensitivity
out some consequences for the community, this
is becoming a world phenomenon Globalization, Corporate Failures and CSR
- one of the most important reasons is that we are - Enron, WorldCom, Qwest, Parmalat, Sunkill,
not taking into account the moral, ethical and ImClone, and various other corporate failures
social aspects of this process, some theorists bring out some governance and CSR issues and
indicated the effect of this rapid changing more have increased attention to the role of business
than a hundred year ago, economic growth and ethics, managers and CEO’s of these companies
economic development might not be without must be considered responsible for all of these
social and moral consequences and implications failures and these are cases of “corporate
- another question is who is responsible of this on- irresponsibility”
going process and for ensuring the well-being of - many people have the opinion that if
people and safeguarding their prosperity, is it corporations were to behave responsibly, most
this the responsibility of governments, the probably corporate scandals would stop
business world (businessman), consumers, - CSR protects firms against some long-term loss,
shareholders, or of all people? when corporations have social responsibilities,
- government is part of the system and the they calculate their risk and the cost of failure
regulator of markets and lawmakers, managers, - firstly, a company has to have responsibility to
businessmen and the business world take action shareholders and also all stakeholders which
concerning the market structure, consumer means that it has responsibility to all society
behavior or commercial conditions - corporate failures have an important impact on
- moreover, they are responsible to the all society also, in particular, big scandals such as
shareholders for making more profit to keep Enron have sharply affected the market and the
their interest long term in the company economy, various stakeholders (e.g. employee,
- therefore, they are taking risk for their customer, consumer, suppliers) as well as
benefit/profit, this risk is not opposed to the shareholders and regulators of the firm have a
social or moral/ethical principles which they responsibility to ensure good performance
have to apply in the company

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- therefore, CSR is not only related to firms but stakeholders of the company and for responsible
also related to all society, so, changing the role and accountable behavior
of corporate responsibility shifts/moves the - firms will consciously need to focus on creating
focus from the real problem that society needs value not only in financial terms, but also in
to address ecological and social terms, the challenge facing
- one of the reasons for this result is increasing the business sector is how to set about meeting
competition between the company and the these expectations, firms will need to change not
market, managers tend to become much more only in themselves, but also in the way they
ambitious than before in their behavior and interact with their environment (Cramer, 2002)
status in the globalized world, thus we have to
focus on corporate and managerial behavior Is Globalization an Opportunity or Threat For CSR?
- the question is how to behave as a socially - we have no certain answer for this question
responsible manager and how to solve this vital which depends on from where you are looking,
problem in business life and in society, in the it is clear that the globalization has different
business world there are always some rules, effects on the social responsibility of the
principles and norms as well as regulations and company and the behavior of managers
some legal requirements - some of these are supporting
- however, to be socially responsible one must be companies/managers for motivating towards
more than simply law abiding who has to be socially responsible behavior, while others of
capable of acting and being held accountable for them are destroying fair business and all
decisions and actions, the problem is the principles, norms and regulations which are the
implication for all of these directions for result of increasing competition
company and managerial behavior - globalization has been created bigger companies
- on the other hand, one perspective is that a in terms of turnover, market capitalization, and
corporation is a “legal person” and has the rights amount of assets, this causes imperfect
and duties that go with that status – including competition with other small and medium size
social responsibility, in the case of Enron, companies which is a major threat for them
managers were aware of all regulations, even - but it might also provide to company’s great
though they have known all irresponsible and opportunities for reaching people and
unethical problems in the company customers, and for collaboration with other
management; they did not change their companies from all over the world, in fact, we
approach and behavior have to accept that globalization is an inevitable
- the conclusion is that it is not always possible to phenomenon for which we have no alternative
control behavior and corporate activity with yet
regulations, rules and norms - well-regulated and controlled markets are not a
- so, another question arises in this situation, that big problem and threat, but lack of regulation
if people do not know their responsibility and and norms is the main problem in a developing
socially responsible things to do and if they do country which globalization has a big influence in
not behave socially responsibly then, who will these economies
control this problem in business life and in the - moreover, CSR implementation is one of the
market most important issues for globalized economies
- the concern is that the social responsibility and markets, CSR requires some rules for the
implication of the company cannot be controlled determination of the relationship between the
through legal means, this is the only social corporation and society, which is still a
contract between mangers and society and complicated process

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- the implication is that CSR is not merely a simple - so, from this aspect, globalization has a multi-
process but also needs a long-term strategic dimensional effect relating to socially
approach by companies which need to learn responsible behavior, good and bad behaviors
socially responsible behavior and their decision are easily visible around the world and all
makers must enforce these principles in the company stakeholders will be aware of it, a
company company can use this opportunity both ways,
- when the company takes a long-term which is that good behavior affects the company
perspective, it will have benefits concerning positively but unethical behavior will
profit and stakeholder interests in the company, undoubtedly have negative effects for them
some studies show that there is a clear - companies already know that proper behavior is
relationship between CSR and corporate the only way they can survive and enhance their
financial performance which is an important commercial interests and thereby increase their
academic research topic profits, so the demands of society will be
- research results focus on the existence of slack reflected in corporate behavior
resources resulting from better financial - in summary, a firm has an investment in
performance made when companies invest in reputation, including its reputation for being
areas that are related to social actions socially responsible
- some other results also support the good - an increase in perceived social responsibility may
management approach which states that good improve the image of the firm’s management
management practice resulting from and permit it to exchange costly explicit claims
engagement in social actions enhances the for less costly implicit charges
relationship with stakeholders, leading to better - in contrast, a decline in the level of stakeholders’
financial performance, this topic still needs more view of a firm’s social responsibility may reduce
research for finding better solutions for its reputation and result in an increase in costly
corporate behavior explicit claims (Mcguire & Sundgren &
- the duty of corporations is serving their Schneeweis, 1988), we can also confidently say
shareholder through providing proper products about csr’s impact at the present time is that it
and services, the purchasing decision of the benefits some people and some companies in
customer is not only related with price and some situations
quality but also based on a consideration of the --------------------------------------------------------------------------
social behavior of the company CSR and Strategy
- socially responsible investment and behavior
give some opportunities to the company which Introduction
are more visible than others and show more - the development and implementation of
concern for stakeholders also strategy is of course important for every
- in particular, the development of information organization, and this has always been so
technology is helpful for the company for trading - increasingly however in the present CSR is being
in any place in the world to any customer, considered as a crucial part of that strategy with
customers want the corporation to behave corresponding advantages to the organization
properly to its suppliers, and their suppliers to - in this discussion, therefore, we will consider
treat their laborers fairly even in far distant aspects of this in the context of the objectives of
countries the firm and its procedures for governance
- when the company behaves unethically then
people will know this problem all over the word A Role of a Business Managers
and its effect on company sales and stakeholder - a manager of any modern business has a difficult
interests for the company job to perform, a crucial part of his job is to meet

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 the objectives of the organization of which he is dissatisfied customers and the possible effect
a part and in order to do so he must pay this might have upon the future of the business
attention to a number of important issues but also what the effects of over-ordering and
- although the exact nature of a manager’s job having waste might be upon the profitability of
may vary quite significantly from one the business
organization or department to another, so that - the manager therefore needs to consider
the role of a marketing manager, a production alternatives and their consequences and decide
manager or a manager of a supermarket may what course of action to take after this
appear to be quite different consideration of the facts
- every manager plans his/her work and the work - decision making is a crucial part of the job of any
of others as well as organizing him/herself and manager, and decisions need to be made
others, directing others as to what to do, between conflicting alternatives, these decisions
motivating them and exercising control over are often to a large extent conflicting in their
situations and other people, the results are fed possible outcomes and there is a degree of
back into the planning process in order to modify uncertainty surrounding the consequences
future plans for the business - selecting the best possible decision to make is
- all managers are concerned with working with therefore often a difficult and skillful process but
people: those they work with, those they it is important that the decisions made are the
supervise, those they report to, and those who right ones because of this a manager needs tools
are the customers for the product or service to help him/her to evaluate the consequences of
which is provided by that area of an organization the alternative decisions which he might make,
which the manager is responsible for these tools will assist him/her in making better
- all managers are therefore naturally concerned decisions
with the output for their particular area of
responsibility and so are also concerned with the The Objectives of a Business
inputs to their area of responsibility, whether - a business manager must be concerned not just
these be raw materials, information or goods to with the internal running of the business but
be displayed and sold must also be concerned with the external
- using the information available, a manager must environment in which the business operates –
plan for the future of the business. In this context that is with his/her customers and suppliers,
a manager must decide upon the courses of with competitors, and with the market for the
action which need to be taken in order to products or services supplied by the business
achieve the best results, and must consider what - such concerns of a business manager comprise
alternative courses of action are available, and the strategic element of the manager’s job and a
what the consequences of any particular manager must therefore be familiar with this
decision might be aspect of management, and with the way in
- thus, the manager of a restaurant, for example, which accounting can help in this area
will need to decide what its opening hours need - this discussion, therefore, is concerned with a
to be and how these might affect possible consideration of the external environment of a
customers who might want to dine when the business and with the strategic part of a
restaurant is closed manager’s job
- the manager, however, needs also to decide - first, however, we need to consider the various
upon the ingredients of the menu and how much objectives which an organization might have.
of each to order; in doing so he needs to The objectives of a manager need to be
consider what the effect of not ordering enough considered in terms of their helping to meet the
of a particular item might be in terms of objectives of the organization in which he works

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 - while most business organizations aim to make a 5. Maximizing Shareholder Value
profit, this is not true of all, and the not-for-profit - the value of a business depends partly upon the
sector of the economy is one which is increasing profits it generates and partly upon the value of
in importance, and making a profit is not the only the assets it possesses, these assets can
objective of most organizations comprise partly of tangible assets such as plant
and machinery or land and buildings and partly
NEVERTHELESS, ORGANIZATIONS DO HAVE of intangible assets such as brand names
OBJECTIVES, AND THE FOLLOWING POSSIBLE - thus, the value of Coca Cola as a business far
OBJECTIVES OF AN ORGANIZATION CAN BE outweighs the value of its fixed assets because of
IDENTIFIED: the value of its brand name which is recognized
world-wide, maximizing the value of the
1. Profit Maximization business to shareholders therefore involves
- for organizations which exist to make a profit it much more than maximizing the profit
seems reasonable that they should seek to make generated
as large a profit as possible 6. Growth
- it is not however always clear what course of - growth through expansion of the business, in
action will lead to the greatest profit, and it is by terms of both assets and earnings, and the
no means clear whether profit maximization in increase in market share which the business
the short term will be in the best interests of the holds is one objective which appeals to both
business and will lead to the greatest profit in the owners and managers, if this is an objective of
longer term the business then it will lead to different
- thus, profit maximization may not be in the best decisions to those of profit maximization
interests of a business and it certainly may 7. Long Term Stability
conflict with other objectives which a business - the survival of a business is of great concern to
may have both owners and managers and this can lead to
2. Maximizing Cash Flow different behavior and reluctance to accept risk
- cash flow is not the same as profit and an - all decisions involve an element of risk and
organization needs cash to survive, in some seeking to reduce risk for the purpose of long-
circumstances this cash flow may be more term stability can lead to performance which is
important than profit because the lack of cash less than desirable
can threaten the survival of the organization 8. Satisficing
3. Maximizing Return on Capital Employed - it must be recognized that all objectives of an
- this is a measure of performance of a business in organization are dependent upon the people
terms of its operating efficiency and therefore, who set them and business behavior cannot be
provides a measure of how a business is considered without taking this into account
performing over time - satisficing is a way of reducing risk and taking
- comparative measures are useful in helping the multiple objectives into account by making
owners and managers of a business to decide decisions which are acceptable from several
what course of action may be beneficial to the viewpoints without necessarily being the best to
business meet any particular objective
4. Maximizing Service Provision - any business is likely to seek to pursue a number
- this is the not-for-profit sector equivalent of of these objectives at any point in time, the
maximizing the return on capital employed and precise combination of them is likely to vary
thus provides a similar means of evaluating from one organization to another and from one
decisions time to another, depending upon the individual

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 circumstances of the organization at any point in -
planning is a task that needs to consider
time alternatives, not just in terms of alternative
- the organization will not, however, view all the targets to set, but, also in terms of alternative
objectives which it is pursuing at any particular methods of achieving these targets, planning
time as equally important and will have more cannot be done in isolation but needs to take
important ones to follow into account what effect the planning has upon
- these objectives will therefore tend to be viewed the plans of other managers within the
as a hierarchy, which may vary from time to time organization
- none of these conflict with socially responsible - this is especially true when the inputs of this plan
behavior and there is growing evidence that come from the outputs of the plan of another
social responsibility actually enhances the ability manager or when these outputs affect the
to achieve all of these objectives planning of another manager
- thus, a sales manager cannot plan how much to
The Tasks of a Manager sell without taking into account the plan of the
- we have seen how the role of a manager of a production manager concerning how much will
business will vary greatly according to his area of be produced, and the production manager
responsibility, we have also seen how the cannot make his plans for production without
manager needs to help the organization meet its taking into account the planning of the sales
objectives and that these can vary significantly manager regarding how much can be sold
from one organization to another - the planning tasks of the manager therefore are
- the roles of different managers are therefore important but cannot be made in isolation
very different and the tasks which they 2. Control
undertake to perform their roles are also very - control is concerned with making sure that
different, nevertheless, we can classify these things happen in accordance with the plan, it
different tasks into one of several types therefore involves monitoring the plan, and
according to their nature progress being made in accordance with the plan
- it also involves taking action when things are not
THESE TASKS CAN BE CLASSIFIED AS FOLLOWS: going in accordance with the plan in order to
attempt to change things so that the plan can be
1. Planning achieved
- a manager needs to plan for the future in order - control is therefore an on-going activity for a
to decide how best to meet the objectives of the manager and involves comparing actual
organization, he needs to decide what can be performance with targets, providing feedback on
achieved and what inputs are needed to help actual performance and taking action to change
him meet his plan performance when it diverges from the plan
- planning, therefore, needs to be not just - although the manager may be able to achieve
qualitative but also quantitative in order to this by physical observation and communication
evaluate the plan and determine inputs and with people, it is likely that this will not be
outputs to the plan, all business processes can be sufficient
considered as taking a set of inputs and - he will probably need to rely to a large extent
performing operations in order to add value and upon reports in order to exercise control, the
transform them into outputs reports which management accounting provide
- the function of any business can therefore are therefore crucial in assisting a manager to
consider to be adding value through the exercise control
transformations made during its processing

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3. Decision Making evaluate the performance of its units and the
- one of the key aspects of a manager’s job is managers running these units
concerned with making decisions - the managers in turn need to evaluate the actual
- there is always more than one course of action performance of their tasks against that which
which a manager can take in any particular has been planned, in order to evaluate
situation (even if one of the courses is to do performance, there needs to be acceptable
nothing) and so, he needs to decide between the measures of performance
alternatives in order to make the decision which - measurement needs to be relative to be
is most beneficial meaningful – to compare performance with
- in order to make a decision the manager needs plans and with past performance
to identify the possible alternative courses of - performance measures also need to be
action open to him, to gather data about those quantitative in order to enable comparisons to
courses of action and to evaluate the be made and financial information provides
consequences of each particular alternative important data for the measurement of
- the stages in the decision-making process are performance
shown in the diagram below, which illustrates - unless performance can be evaluated managers
that the decision-making process is not complete have no basis upon which to exercise control, to
when an alternative has been selected and make decisions and to plan for the future
implemented but that the outcomes of the 5. Communication
decision need to be followed through into the - information available to help managers in their
control process tasks needs to be communicated to them, and
managers in turn need to communicate their
plans and decisions to others
- communication involves both the sender of
information and its recipient and for the
information to be of value it needs to be
understood by the recipient as intended by the
sender
- any interference which prevents the message
being received by the recipient is known as noise
and the diagram below shows that two types of
noise prevent a message being received as
- in order to make a decision, a manager needs transmitted
information, management accounting is one tool - technical noise is that, such as, occurrence on a
which exists to help the manager by providing telephone or radio which is concerned with the
information about the consequences of the technical means of communication, a more
alternatives open to him crucial type of noise however is semantic noise
4. Performance Evaluation which occurs because a message is not
- while the performance of organizations is transmitted in a clear and unambiguous (plain)
evaluated by such measures as return on capital manner and so is not correctly understood by
employed, the organization in turn needs to the recipient
evaluate the performance of its units and the - quantitative information is less likely to be
managers running these units misunderstood than qualitative information and
- while the performance of organizations is this is one of the importance features of
evaluated by such measures as return on capital accounting information
employed, the organization in turn needs to

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 - management accounting therefore has an led the serious economic problems in the USA
important part to play not just in enabling which then spread elsewhere
decisions to be made but also in the - accounting information has often been accused
communication of this information of providing an excuse for unethical behavior,
indeed, this accusation has been extended to
accountants and business managers generally
who have been accused of behaving unethically
in their search for profits to the exclusion of all
else
- the unethical ways in which accounting
information has been used have been described
in detail by Smith (1992) who describes the way
The Importance of Performance Measurement in which new accounting techniques have been
- in order for a business to be able to control its created with the sole purpose of boosting
operations, it is necessary that the managers of reported profits
that business are able to measure the - these techniques have become known as
performance of the business and of individual creative accounting and have been the subject of
parts of that business, a significant feature of much media attention, Smith’s book,
business management therefore is the need to “accounting for growth”, makes interesting
measure and evaluate performance, both of the reading for any prospective business manager
business as a whole and of individual parts of - other writers have however been concerned
that business with highlighting the value of ethical behavior
- of equal significance is the ability to evaluate the and have claimed that this actually leads to
performance of individual managers, this is of better business performance
importance to the business but particularly to - thus, McCoy (1985) considers that ethics need to
the managers themselves, as their rewards are be at the core of business behavior and that
increasingly based, at least in part, upon an effective business management is based upon
assessment of their performance ethical behavior, he claims that this recognition,
- increasingly also managerial rewards are based and acting accordingly, actually increases the
upon a variety of aspects of performance and performance of a business
this includes their effect upon the CSR activity of - the UK accounting bodies are also concerned
the corporation, this is another reason why CSR with business ethics and all have a stance in this
is being increasingly linked into the strategic matter, and have incorporated a requirement for
planning process ethical behavior into their codes of conduct
- the subject of ethical behavior amongst
Managers and Business Ethics businesses has also had an effect upon auditing
- business ethics is a subject of considerable practice and upon the financial reporting of
importance to any organization and we have businesses
considered some of the high-profile business - any manager operating in a business
failures which have led to the current interest in environment needs to be aware of the
CSR importance of ethical behavior
- freedom in the markets is of course another - equally (s)he will experience conflicts, in
source of potential abuse and unethical behavior attempting to behave ethically, between
and late 2008 provide just such an example different alternative courses of action, and may
where the misbehavior in the housing lending find conflicts between the firm’s objectives and
market – the so called sub-prime scandal – has his/her own personal motivation and objectives

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 - no ready solution to these conflicts is available financial markets after the tremendous firm
but a manager should be aware that research failures and scandals
has shown that ethical behavior leads to better - investors are demanding that companies
performance in the longer term, and so should implement rigorous corporate governance
be encouraged to act accordingly principles in order to achieve better returns on
their investment and to reduce agency costs,
Corporate Governance most of the times investors are ready to pay
- another important issue which has been more for companies to have good governance
exercising the minds of business managers, standards
accountants and auditors, investment managers - similarly, a company’s corporate governance
and government officials – all over the world – is report is one of the main tools for investors’
that of corporate governance (Aras 2008) decisions
- often companies main target is to became global - because of this reason, companies cannot ignore
– while at the same time remaining sustainable the pressure for good governance from
– as a means to get competitive power shareholders, potential investors and other
- but the most important question is concerned markets actors
with what will be a firm’s route to becoming - on the other hand, banking credit risk
global and what will be necessary in order to get measurement regulations are requiring new
global competitive power rules for a company’s credit evaluations, new
- there is more than one answer to this question international bank capital adequacy assessment
and there are a variety of routes for a company methods (Basel II) necessitate that credit
to achieve this evaluation rules are elaborately concerned with
- probably, since the mid-1980s, corporate operational risk which covers corporate
governance has attracted a great deal of governance principles
attention (Aras & Crowther 2008), early impetus - in this respect, corporate governance will be one
(motivation) was provided by Anglo-American of the most important indicators for measuring
codes of good corporate governance risk, another issue is related to firm’s credibility
- stimulated by institutional investors, other and riskiness, if the firm needs a high rating
countries in the developed as well as in the score, then, it will have to pay attention for
emerging markets established an adapted corporate governance rules also
version of these codes for their own companies - credit rating agencies analyze corporate
- supra-national (having power or influence that governance practices along with other corporate
transcends national boundaries or governments) indicators
authorities like the Organization for Economic - even though corporate governance principles
Co-operation and Development (OECD) and the have always been important for getting good
World Bank did not remain passive and rating scores for large and publicly-held
developed their own set of standard principles companies, they are also becoming much more
and recommendations important for investors, potential investors,
- this type of self-regulation was chosen above a creditors and governments
set of legal standards (Van den Barghe, 2001), - because of all of these factors, corporate
after the various big corporate scandals, governance receives high priority on the agenda
corporate governance has become central to of policymakers, financial institutions, investors,
most companies companies and academics, this is one of the
- it is understandable that investors’ protection main indicators that the link between corporate
has become a much more important issue for all governance and actual performance is still open
for discussion

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 - in the literature, a number of studies have resources, accountability in the use of its power,
sought investigated the relation between and the behavior of the corporation in its social
corporate governance mechanisms and environment
performance (eg Agrawal and Knoeber, 1996;
Millstein and MacAvoy, 2003) IN PRACTICE, THERE ARE FOUR PRINCIPLES OF GOOD
- most of the studies have showed mixed result CORPORATE GOVERNANCE, WHICH ARE:
without a clear-cut relationship, based on these
results, we can say that corporate governance 1. Transparency
matters to a company’s performance, market 2. Responsibility
value and credibility, and therefore that 3. Accountability
company has to apply corporate governance 4. Fairness
principles
- but most important point is that corporate HOWEVER, GOOD CORPORATE GOVERNANCE WILL
governance is the only means for companies to ADDRESS ALL THESE MAIN POINTS:
achieve corporate goals and strategies
- therefore, companies have to improve their Creating sustainable value
strategy and effective route to implementation Ways of achieving the firm’s goals
of governance principles, so, companies have to Increasing shareholders’ satisfaction
investigate what their corporate governance Efficient and effective management
policy and practice needs to be Increasing credibility
Ensuring efficient risk management
Corporate Governance Principles Providing an early warning system against all risk
- since corporate governance can be highly Ensuring a responsive and accountable corporation
influential for firm performance, firms must Describing the role of a firm’s units
know what the corporate governance principles Developing control and internal auditing
are and how it will improve strategy to apply Keeping a balance between economic and social
these principles benefit
- all these principles are related with the firm’s Ensuring efficient use of resources
corporate social responsibility Controlling performance
- corporate governance principles therefore are Distributing responsibility fairly
important for a firm but the real issue is Producing all necessary information for stakeholders
concerned with what corporate governance Keeping the board independent from management
actually is Facilitating sustainable performance
- management can be interpreted as managing a
firm for the purpose of creating and maintaining As can be seen, all of these issues have many
value for shareholders ramifications (complications) and ensuring their
- corporate governance procedures determine compliance must be thought of as a long-term
every aspect of the role for management of the procedure. However, firms naturally expect some
firm and try to keep in balance and to develop tangible benefit from good governance.
control mechanisms in order to increase both
shareholder value and the satisfaction of other SO GOOD GOVERNANCE OFFERS SOME LONG-TERM
stakeholders BENEFIT FOR FIRMS, SUCH AS:
- in other words, corporate governance is
concerned with creating a balance between the Increasing the firm’s market value
economic and social goals of a company Increasing the firm’s rating
including such aspects as the efficient use of Increasing competitive power

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 Attracting new investors, shareholders and more
equity
More or higher credibility
Enhancing flexible borrowing condition/facilities
from financial institutions
Decreasing credit interest rate and cost of capital
New investment opportunities
Attracting better personnel/employees
Reaching new markets

Although corporate governance is primarily

considered to be concerned with how a firm conducts
itself in relationship to its investors, increasingly it is
being extended to a consideration of how it conducts
itself in relation to all of its stakeholders. This is a part of
the current concern for greater accountability. Thus,
governance is increasingly being considered to be related
to CSR and the concerns of the two are merging (Aras &
Crowther 2009).

NOTE: Mabaha man ang ating rereviewhin matatapos

din, hehehehe. Good luck sa 23 pages, labern lang.
“It always seems impossible until it's done (Nelson
Mandela)”

-CRIZA RIENE-