Executive Briefings

Corporate Social Responsibility Is Good, But What Is It Supposed to Achieve?

Increasingly, boards, CEOs and CFOs are also adapting to the new cry for corporate (social) responsibility. Those who take a lead in setting high standards for themselves are gaining respect and value for their enterprises and organizations. But first they need to examine what corporate governance is supposed to achieve. The corporation is a separate legal entity with a pool of assets that do not belong to any particular constituents. These assets are not the property of those making the decisions. Corporate decisions regarding the use of such assets must be placed in a larger context. In the United States and in Europe, boards tend to focus on the principal-agent problem and to assume that directors should serve shareholder interests while producing outcomes for those served.

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Increasingly, boards, CEOs and CFOs are also adapting to the new cry for corporate (social) responsibility. Those who take a lead in setting high standards for themselves are gaining respect and value for their enterprises and organizations. But first they need to examine what corporate governance is supposed to achieve. The corporation is a separate legal entity with a pool of assets that do not belong to any particular constituents. These assets are not the property of those making the decisions. Corporate decisions regarding the use of such assets must be placed in a larger context. In the United States and in Europe, boards tend to focus on the principal-agent problem and to assume that directors should serve shareholder interests while producing outcomes for those served.

Read Full Article