Academic journal article Journal of Corporation Law

Engage, Embed, and Embellish: Theory versus Practice in the Corporate Social Responsibility Movement

Academic journal article Journal of Corporation Law

Engage, Embed, and Embellish: Theory versus Practice in the Corporate Social Responsibility Movement

Article excerpt


One of the most striking developments in the business world over the last decade has been the emergence of a coherent and energetic "corporate social responsibility" (CSR) movement.1 This Article reports the results of an empirical study of that movement. "CSR," as it is universally referred to, has as its theoretical base the notion that the responsibility of a corporation extends beyond the traditional Anglo-American objective of providing financial returns to its shareholders. Instead, CSR proponents have argued, the legitimate concerns of a corporation should include such broader objectives as sustainable growth, equitable employment practices, and long-term social and environmental well-being.2 Corporate managers, it is argued, should consider not only their shareholders in making their decisions but also a variety of "stakeholder" constituencies, including employees, residents of communities affected by their activities, governments, and organizations advocating for various social and environmental interests.

The CSR movement has manifested itself in a variety of ways. On the legal front, it has thus far had limited impact in this country. Although Enron and related disasters have led to legislation to make corporate conduct more transparent, the focus has been principally on financial issues.3 In Europe and the United Kingdom, however, the CSR movement has been a major factor in moving corporate disclosure in the stakeholder direction. On the Continent, stakeholder interests have long enjoyed greater recognition than in the "Anglo-Saxon" corporate world,4 as evidenced by the requirements in some European countries of labor representation on boards of directors and facility-level works council.5 Building on this tradition of stakeholder thinking, several countries now require direct attention to stakeholder interests through highly detailed disclosure of social and environmental risks and impact.6 Those countries with the most expansive disclosure regulations are the very countries where a stakeholder concept of the firm has been most dominant: France, Germany, the Netherlands, Belgium, Norway, Denmark, and Sweden.7 At the European Union level, though progress has been uneven, the trend has been in the same general direction.8 The EU's own gradual turn in the direction of mandatory disclosure is clearly based on the broader European penetration of the stakeholder concept.

The United Kingdom has become an especially interesting case as it pursues what we have elsewhere described as a "third way."9 In some important respects, the United States and the UK continue to share corporate law values. These include broad-based, dispersed share ownership, in contrast to Europe and Japan, which feature ownership by families, dominant shareholders, or banks.10 The United States and Britain both have well-developed securities markets" and depend on financial transparency, stock market valuations, and the market for corporate control to promote managerial accountability.12

In other respects, though, the UK is beginning to diverge from the American model in pursuit of a long-term "enlightened shareholder value" perspective that incorporates significant elements of European stakeholder theory. This divergence is driven in substantial part by institutional interests that can be loosely characterized as elements of the CSR movement.13 These interests include the British government; institutional investors, particularly pension funds and insurance companies (which are increasingly concerned about climate change and other long-term environmental risks); and nongovernmental organizations (NGOs). The pressures that such institutions bring to bear have yet to be felt anywhere near as strongly in the United States.

Perhaps the best example of the growing-but not yet dominant-influence of CSR thinking in the UK is the ebb-and-flow process of developing a new code concerning the disclosure of environmental and social risk. …

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