Governance and Social Responsibility 

To do business we use the resources in the community and when we earn a profit we pay taxes and that is used by governments to create the infrastructure required for businesses. By creating employment and encouraging production and using produces made by suppliers, we also help society to fend for themselves and then they also pay taxes from their earnings which is again reinvested in infrastructure and the community. Then there are consumers who also contribute through consumption taxes to society. The list goes on and hence nobody owes anybody and there is no need to “give back”. However, in order to boost company reputation and strengthen product brands companies engage in giving back to society what they take by way of resources. One way companies have attempted to “give back” is through corporate social responsibility (CSR) initiatives. This is also used to address perceived inequalities in society! But there are risks that CSR can undermine good governance in less developed countries where business takes on roles beyond their core competencies.

In 2002, Bill Gates told the World Economic Forum, “We need a discussion about whether the rich world is giving back what it should to the developing world.” so the whole discussion of  “give back” was rekindled by the world’s richest man. While it is welcome that so many executives are determined to act responsibly, reliance on some CSR strategies can undermine good governance in the developing world. In a Country like Sri Lanka, CSR is led by individual passion and cannot look for governance structures, as such measures can do good or do no-good! ‘The Foundation of Goodness’ (a Muralidaran foundation in SL) is an example of identifying a need in society and just doing what is needed by any means as long as it benefits the larger community. The donors in these circumstances should be ‘in the loop’ and be kept aware of the projects. Critics will dispute the way something is done but not what was done.

At global level also this is common; The trustees and top officers at the Gates Foundation remain family members and Warren Buffett, who donated $30 billion worth of stock in 2006. It is not even clear the Gates Foundation has a formal board of directors. Bill and Melinda Gates are trustees and co-chairs of the foundation, Buffett is a trustee of the foundation and Bill Gates Sr. is co-chair of the foundation. People may ask: Why has the Gates Foundation with over $30 billion in assets still run as a “mom and pop” enterprise? But they forget that the Trustees gave their own money for such philanthropy and why would you need others to undermine their objectives. It’s a double edge sword kind of discussion and I’m sure there will be others who will want a transparent governance structure to see what the Foundation is doing. However, other non-profit organizations which collect money from the public or use UN funds will need to be accountable and be transparent.

Due to a moral business case, almost every multinational and many local companies have adopted such voluntary CSR initiatives, which can include codes of conduct, energy saving measures, social and eco friendly practices as well as philanthropy. As growing numberof firms source and produce globally, many of their stakeholders have insisted that global firms be held accountable for conduct that could undermine economic, social or environmental progress. If governments were doing all what is required then there will be only limited attention to CSR but the  trend in CSR reflects globalization as well as the retreat of the state. So let’s not operate like the state in doing CSR activities but be more responsible and accountable to our stakeholders.


About surenraj

“Views expressed are my own”
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