Academic journal article Journal of Management and Public Policy

Corporate Citizenship and Governance of Firms in India

Academic journal article Journal of Management and Public Policy

Corporate Citizenship and Governance of Firms in India

Article excerpt

[A portion of the paper formed internal content as conference resource material prepared by IICA, School of Corporate Governance, for annual conference by the author as research material.]

Introduction

Firms today operate with conscience, something that in the past was unthinkable and unacceptable. This phenomenon could be attributed to the sequence of events that took place in the 1920s in the American society, which led to a riveting argument between Adolf A. Berle Jr and E. Merrick Dodd (both Law Professors) over the role of managers, whether they should merely act in a fiduciary manner towards shareholders or accept a greater trusteeship; and a series of corporate collapses in the eighties and nineties which acted as catalyst in rallying organizational change and championing responsible and cogent behaviour.

Corporate Citizenship is more than a catchphrase for businesses; a 'modus operandi' to create dynamism within firms, and to expand the horizon of the impact of businesses in civic life. Constant deliberation over issues related to the purpose of Corporations, role of Corporate Managers and how Corporations should function within society have convinced organizations to go all-out for competitive edge and demonstrate upright and ethical behaviour. Reports on Corporate Citizenship are being released annually by firms to demonstrate their commitment, best practice and initiatives that add new perspective to business. From being a voluntary initiative, Corporate Citizenship has become imperative for businesses today for demonstrating excellence, sustainable financial performance, corporate governance and stewardship.

Who is a 'Corporate Citizen'?

International Finance Corporation defines 'Corporate Citizenship' as the commitment to ethical behaviour in business strategy, operations and culture and what investors, creditors and other stakeholders have come to recognize as vital for effective and responsible governance in organisations, and long-term sustainability. The approach of Corporate Citizenship is oriented towards stakeholder's management; a concept popularised by Edward Freedom who in his book 'Stakeholder Approach to Strategic Management' published in 1984 indicated that it is the necessity for organizations to manage the relationships with its specific stakeholder groups in an action-oriented way. But like the terminology, the approach to Corporate Citizenship varies across organizations and countries. For some it means dealing with governance issues, many refer to it as Corporate Social Responsibility (CSR), few others denote it as means to increase brand value and share price, Freeman et al.(2010).

A 'Corporate Citizen' is not an individual or figurative organization, but the substance or value that is created within an organisation or in the business space. Companies are engaged in corporate citizenship activities, taking proactive measure to design successful business plans that will benefit firms in terms of share price and creating opportunities for people of the society.

Archie B Caroll, a Professor of Business Ethics in the article titled 'The Four Faces of Citizenship' published in Business and Society Review (1998) stated that Corporate Citizenship includes four faces - an economic face, a legal face, an ethical and a philanthropic face. The New-Age corporate citizen are those firms who do not restrict themselves to philanthropy and CSR activities, but essay good business practices, promote diversity, advocate positive employee relations, and responsible behaviour within and outside organizations. Caroll in the same document proposes Corporate Social Responsibility (CSR) also as Discretionary Responsibilities purely of voluntary nature like philanthropic contributions. The addition of CSR, Corporate Citizenship and Sustainability expands the horizon of Corporate Excellence (Caroll, 2016)

Interpreting Corporate Citizenship

There are alternate approaches to interpreting the term 'Corporate Citizenship' from being philanthropic to a social activist model. …

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