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Corporate Social Responsibility in European Union Law: Foundations, Developments, Enforcement

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Globalisation of Corporate Social Responsibility and its Impact on Corporate Governance

Abstract

Corporate social responsibility (CSR) has long entered the corporate governance arena. In the European Union, the CSR Directive of 2014 requires reporting on an array of non-financial aspects from 2017 onwards. The Directive leaves the formulation of CSR policies to the individual corporation but it requires publishing a self-commitment to that policy and obliges the corporation to explain a possible non-compliance. This regulatory technique of ‘comply or explain’ is known from the more general area of corporate governance as a moderate form of harmonisation. Its effects will come over time and they can include changes of the societal role of corporations as well as of directors’ duties.

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Notes

  1. 1.

    CSR Directive (2014), Art. 4.

  2. 2.

    United Nations (2015), p. 16.

  3. 3.

    For an account of existing theories see Melé (2008), pp. 47, 52 et seq.

  4. 4.

    Cf. Schipani et al. (2017), in this volume, for an account from a US perspective.

  5. 5.

    Edmans et al. (2017), p. 18.

  6. 6.

    Friedman (1970).

  7. 7.

    European Commission (2011b), para. 1.1.

  8. 8.

    Cf. Veldman (2017), in this volume.

  9. 9.

    Sjåfjell (2015), p. 97.

  10. 10.

    See, for example, Ferrell et al. (2016), pp. 587, 591; on employee satisfaction Edmans et al. (2017), p. 18; on corporate donations Liang and Renneboog (2016), p. 20; on climate change, water and children’s rights Serafeim and Grewal (2017).

  11. 11.

    Lins et al. (2016).

  12. 12.

    Bénabou and Tirole (2010), pp. 9, 12.

  13. 13.

    Gutsche et al. (2015), p. 458.

  14. 14.

    Serafeim and Grewal (2017), p. 29.

  15. 15.

    Frentrop (2003), p 115; Gepken-Jager (2005), p. 47.

  16. 16.

    Baum (2005), p. 5 with further references.

  17. 17.

    Hutton v West Cork Railway Co (1883), per Bowen LJ.

  18. 18.

    Du Plessis (2017), p. 33.

  19. 19.

    Coase (1937), p. 386; Gelter (2016), p. 9.

  20. 20.

    Infra Sect. 3.3.

  21. 21.

    Enriques et al. (2017), p. 98.

  22. 22.

    Bullock Report (1977). For accounts of the debate see Davies (1978), p. 245; Lord Wedderburn of Charlton (1985), p. 36.

  23. 23.

    Department for Business, Energy & Industrial Strategy (2016), pp. 2, 34.

  24. 24.

    Section 76 German Stock Corporation Act (Aktiengesetz) 1965.

  25. 25.

    Kort (2015), paras. 52, 84.

  26. 26.

    German Corporate Governance Code (2015), preamble.

  27. 27.

    Dutch Corporate Governance Code (2016), preamble.

  28. 28.

    German Codetermination Act on Supervisory Boards in the Industries of Mining, Coal, and Steel 1951 (Montan-Mitbestimmungsgesetz).

  29. 29.

    Section 7 German Codetermination Act 1976 (Mitbestimmungsgesetz).

  30. 30.

    Baum (2005), p. 15; Hopt (1984), p. 1348.

  31. 31.

    Enriques et al. (2017), p. 98 for a functional account.

  32. 32.

    Habersack et al. (2016) for the most recent state of the discussion in Germany.

  33. 33.

    European Court of Justice (2017). For details of the discussion in Germany see Wansleben (2017).

  34. 34.

    Hopt and Leyens (2004), pp. 141, 160 on France, Germany, Italy and the UK.

  35. 35.

    UK Corporate Governance Code (2016), para. A.4, supporting principle: ‘Non-executive directors should scrutinise the performance of management in meeting agreed goals and objectives and monitor the reporting of performance. They should satisfy themselves on the integrity of financial information and that financial controls and systems of risk management are robust and defensible. They are responsible for determining appropriate levels of remuneration of executive directors and have a prime role in appointing and, where necessary, removing executive directors, and in succession planning.’

  36. 36.

    Sandrock and du Plessis (2012), pp. 168–172.

  37. 37.

    Hopt (2004), pp. 52, 74; Sandrock and du Plessis (2012), pp. 168–170, n. 120.

  38. 38.

    Leyens (2012), p. 187.

  39. 39.

    For details see Grundmann (2011), p. 262.

  40. 40.

    E.g. Italy; cf. Hopt and Leyens (2004), p. 164.

  41. 41.

    Art. 39, 43 SE Statute (2001).

  42. 42.

    Hopt (2011), p. 20.

  43. 43.

    European Commission (2003, 2012).

  44. 44.

    For accounts of the foregoing corporate governance failures see the background reports by the High Level Group of Company Law Experts (2002), pp. 27, 43; de Larosière Report (2009), p. 29, paras. 110 et seq.; Reflection Group (2011), p. 10.

  45. 45.

    Cadbury-Report (1992), para. 2.5. European Commission (2011b), p. 2.

  46. 46.

    Grundmann (2011), p. 165 et seq.

  47. 47.

    Leyens (2016), p. 398.

  48. 48.

    Initiating EU legislation is difficult. To give an example: the struggle for the 13th directive, the takeover directive, reaches back to the 1970s Pennington proposal but came into force only in 2002.

  49. 49.

    European Commission (2005), p. 51.

  50. 50.

    Treaty on the Functioning of the European Union (2012), Art. 288.

  51. 51.

    Directive 2006/46/EC, Art. 46a.

  52. 52.

    European Commission (2014), p. 43.

  53. 53.

    European Commission (2001), p. 6.

  54. 54.

    European Commission (2011a), p. 2.

  55. 55.

    CSR Directive (2014), recital 1.

  56. 56.

    Infra, Sect. 3.5.

  57. 57.

    CSR Directive (2014), recital 6, Art 19a.

  58. 58.

    Ahern and Clarke (2013), p. 32 on diversity aspects.

  59. 59.

    Lutter and v. Werder (2016), para. 1929.

  60. 60.

    Recital 9 CSR Directive (2014) lists ‘national frameworks, Union-based frameworks such as the Eco-Management and Audit Scheme (EMAS), or international frameworks such as the United Nations (UN) Global Compact, the Guiding Principles on Business and Human Rights implementing the UN ‘Protect, Respect and Remedy’ Framework, the Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises, the International Organisation for Standardisation’s ISO 26000, the International Labour Organisation’s Tripartite Declaration of principles concerning multinational enterprises and social policy, the Global Reporting Initiative, or other recognised international frameworks.’

  61. 61.

    On enforcement, infra, Sect. 4.

  62. 62.

    Schön (2016), p. 286.

  63. 63.

    Supra Sect. 2.2.

  64. 64.

    Du Plessis (2017), pp. 30, 31 et seq.

  65. 65.

    Bundesgerichtshof (2009a), para. 18; Bundesgerichtshof (2009b), para. 16.

  66. 66.

    Leyens (2017b), forthcoming.

  67. 67.

    Supra Sect. 2.2.

  68. 68.

    Leyens (2016), p. 402.

  69. 69.

    Economiesuisse (2014) n. 27, 29; SIX Exchange Regulation (2014), Art. 7. For background information cf. Hofstetter (2014), p. 26.

  70. 70.

    European Company Law Experts (2011), p. 22 on the annual corporate governance statement.

  71. 71.

    Leyens (2017a), pp. 4, 35, 212–214.

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Authors and Affiliations

  1. Humboldt University of Berlin, School of Law, Berlin, Germany

    Patrick C. Leyens

  2. Erasmus University Rotterdam, School of Law, Rotterdam, The Netherlands

    Patrick C. Leyens

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Editors and Affiliations

  1. Geelong Waurn Ponds Campus, Deakin University, Waurn Ponds, Victoria, Australia

    Jean J. du Plessis

  2. Faculty of Law, National University of Singapore, Singapore, Singapore

    Umakanth Varottil

  3. Cass Business School, City, University London, London, United Kingdom

    Jeroen Veldman

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Leyens, P.C. (2018). Corporate Social Responsibility in European Union Law: Foundations, Developments, Enforcement. In: du Plessis, J., Varottil, U., Veldman, J. (eds) Globalisation of Corporate Social Responsibility and its Impact on Corporate Governance. Springer, Cham. https://doi.org/10.1007/978-3-319-69128-2_7

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