CSR as Good Corporate Governance
Thanks for inviting me to guest blog for the month, and thanks Danielle for the kind introduction. I have written some about corporate social responsibility, which according to a Financial Times conference last week “is now an inextricable part of doing business.” Here’s a brief excerpt from the New York Times write-up:
“We believe that CSR is entering its second stage of evolution, whereby it is being integrated into corporate strategy and is becoming part of good corporate governance,” wrote Jayne Van Hoen, the global director for conferences and events at the Financial Times, in the program for the event.
The menu of speakers—a medley of sustainability and investor relations directors from companies like Ford, Dell and ExxonMobil; corporate environmental consultants; and socially conscious fund managers—formed the basis, Ms. Van Hoen said, “of a single program at companies that believe a strategy of ‘doing good’ will not only be its own reward, it will also enhance shareholder value.”
The quote makes two interesting points. The first is that corporate social responsibility is an indicator of good corporate governance. Cynthia Williams has made this point before, writing that firms that manage environmental and social issues intelligently probably manage other issues intelligently, too. Financial economist Michael Jensen’s enlightened stakeholder theory also supports this view; his theory holds that firms can best enhance their long-term value by taking into account the interests of all of the firm’s constituencies—its shareholders, to be sure, but also its consumers, employees, creditors, suppliers, and the public.
The second interesting point is the suggestion is that “doing good” turns a profit. Empirical studies tend to confirm this result (although they don’t speak to causation), as does the prevalence of green efforts by mainstream American corporations and venture capital money pouring into green startups. In these everybody-wins situations, there is no conflict between the shareholder primacy folks and CSR types like me. Where CSR comes at the expense of shareholder profits, however, these corporate law camps are at odds with one another. I hope to blog about that issue more as the month progresses.