Corporate Governance and Corporate Social Responsibility

Abstract

The environmental, financial, social, and governance crisis, which countries across the globe are struggling with, warns the world of a resource constrained future where progress can no longer be sustained. This has made it imperative for companies, governments and civil societies to act together to address the common, universal cause of saving the ‘People’ (society), the ‘Planet’ (environment) in the process of making ‘Profits’ (economic development). The concept of corporate sustainability (CS) has come from environmental concerns, the concept of corporate social responsibility (CSR) has emerged from social concerns, and the concept of corporate governance (CG) has originated from agency problems. They all seem to have evolved to embrace the three pillars of corporate responsibility toward environmental balance, social justice and economic prosperity. This broad concept of corporate responsibility has almost become synonymous with ‘corporate sustainability.’ Within the overall broad realms of corporate sustainability, CSR can be narrowly looked upon as the responsibilities of companies toward the society in which they operate and on which they thrive. The concept of CG evolved around the ‘way’ in which business corporations should be managed and governed toward achieving their objectives, with the primary focus being maximisation of shareholders’ interests. In this chapter, an attempt has been made to understand the inter relationships between these concepts and their implications. The interrelationships are discussed through factors such as institutional investors, risk management, information asymmetry, board of directors, regulations, media, ethics and financial performance. A brief empirical analysis has also been conducted in the Indian corporate context to check whether CG has any impact on CS.