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The Theoretical Basis for the Implementation of CSR Principles Through Legal Regulation

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Legal Regulation of Corporate Social Responsibility

Part of the book series: CSR, Sustainability, Ethics & Governance ((CSEG))

Abstract

There are many ways of examining CSR, although as yet there is no single generally accepted, fully specified concept encompassing its practices. Contemporary scholars of CSR have shown that the voluntary mode of practising CSR is predominant. However, there are opponents of this mode, especially in the weak economies in which the non-legal drivers in society are sparse. In these circumstances, establishing a theoretical basis for implementing CSR through legislation is difficult, but important. It is difficult, since legal regulation could be detrimental to business development if it narrows the scope of innovation in business and becomes a barrier to companies’ usual business practices in the post-regulatory world. It is important, since the public interest groups—who are sceptical of the role of companies’ voluntary responsibility for social development—need a theoretical basis to demonstrate instances of corporate irresponsibility to society in an articulate manner. This chapter presents a detailed discussion of several theories to establish that a normative basis exists for implementing CSR principles through legal regulation.

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Notes

  1. 1.

    Rob Gray, Reza Kouhy and Saimon Lavers, ‘Corporate Social and Environmental Reporting: A Review of the Literature and A Longitudinal Study of UK Disclosure’ (1995) 8(2) Accounting, Auditing & Accountability Journal 47 in Ataur Rahman Belal, Corporate Social Responsibility Reporting in Developing Countries: The Case of Bangladesh (2008) 11. For a detailed discussion on the theoretical consideration of corporate motivation for CSR, see Belal, above, 11–27.

  2. 2.

    For details of these theories, see, for example David Campbell, ‘Legitimacy Theory or Managerial Reality Construction? Corporate Social Disclosure in Marks and Spencer Plc Corporate Reports, 1969–1997’ (2000) 24(1) Accounting Forum 80; Gray R, Owen D and Maunders K, Corporate Social Reporting: Accounting and Accountability (1987); James Guthrie and Lee D Parker, ‘Corporate Social Reporting: A Rebuttal of Legitimacy Theory’ (1989) 19(7) Accounting and Business Research; Markus Milne and Dennis Patten, ‘Securing Organisational Legitimacy: An Experimental Decision Case Examining the Impact of Environmental Disclosures’ (2002) 15(3) Accounting, Auditing and Accountability Journal; Marc Newson and Craig Deegan, ‘Global Expectations and their Association with Corporate Social Disclosure Practices in Australia, Singapore and South Korea’ (2002) 37(2) International Journal of Accounting 183; Gray O’Donovan, ‘Environmental Disclosures in the Annual Report: Extending the Applicability and Predictive Power of Legitimacy Theory’ (2002) 15(3) Accounting, Auditing and Accountability Journal 344; Dennis Patten, ‘Intra-industry Environmental Disclosures in Response to the Alaskan Oil Spill: A Note on Legitimacy Theory’ (1992) 15(5) Accounting, Organisations and Society 471; Mitchell William, ‘Voluntary Environmental and Social Accounting Disclosure Practices in the Asia-Pacific Region: An International Empirical Test of Political Economy Theory’ (1999) 34(2) International Journal of Accounting 209; Trevor Wilmshurst and Geoffry Frost, ‘Corporate Environmental Reporting: A Test of Legitimacy Theory’ (2000) 13(1) Accounting, Auditing and Accountability Journal 10.

  3. 3.

    Diane Swanson, ‘Toward an Integrative Theory of Business and Society: A Research Strategy for Corporate Social Performance’ (1999) Academy of Management Review 506.

  4. 4.

    Drik Matten and Andrew Crane, ‘Corporate Citizenship: Toward an Extended Theoretical Conceptualisation’ (2005) Academy of Management Review 166; Van Oosterhout, ‘Corporate Citizenship: An Idea Whose Time Has Not Yet Come’ (2005) 30(4) Academy of Management Review 677.

  5. 5.

    Belal, Above n 1, 14.

  6. 6.

    Craig Deegan, Michaela Rankin and Voght P, ‘Firms’ Disclosure Reactions to Major Social Incidents: Australian Evidence’ (2000) 24(1) Accounting Forum in Belal, above n 1, 14.

  7. 7.

    Rob Gray, Dave Owen and Adams Carol, Accounting and Accountability: Changes and Challenges in Corporate Social and Environmental Reporting (1996) 46.

  8. 8.

    Mark Mathews, Socially Responsible Accounting (1993) 26.

  9. 9.

    Mark Suchman, ‘Managing Legitimacy: Strategic and Institutional Approaches’ (1995) Academy of Management Review 571.

  10. 10.

    Swanson, above n 3.

  11. 11.

    Matten, above n 4; J. Van Oosterhout, ‘Corporate Citizenship: An Idea Whose Time Has Not Yet Come’ (2005) 30(4) Academy of Management Review 677.

  12. 12.

    It is also referred to as the process of communication.

  13. 13.

    Craig Deegan, Michaela Rankin and John Tobin, ‘An Examination of the Corporate Social and Environmental Disclosures of BHP from 1983 to 1997: A Test of Legitimacy Theory’ (2002) 15(3) Accounting, Auditing and Accountability Journal 312.

  14. 14.

    Gray, Kough and Lavers, above n 1; Campbell, below n 15, 82.

  15. 15.

    David J Campbell, ‘Legitimacy Theory or Managerial Reality Construction? Corporate Social Disclosure in Marks and Spencer Plc Corporate Reports, 1969–1997’ (2000) 24(1) Accounting Forum 80, 82.

  16. 16.

    For the ideas of these scholars, see John Rawls, A Theory of Justice (Revised Edition Ed, 1999); John Dowling and Jeffrey Pfeffer, ‘Organisational Legitimacy: Social Values and Organisational Behaviour’ (1975) Pacific Sociological Review 122; Thomas Donaldson and Thomas Dunfee, Ties That Bind: A Social Contracts Approach to Business Ethics (1999); Amartya Sen, The Idea of Justice (2009); Suchman, above n 9.

  17. 17.

    Dowling and Pfeffer, above n 16 in Campbell, above n 15, 83.

  18. 18.

    Campbell, above n 15, 83.

  19. 19.

    John G Maurer, Readings in Organisation Theory: Open-System Approaches (1971) in Campbell, above n 15, 83.

  20. 20.

    Suchman, above n 9, in Campbell, above n 15, 83.

  21. 21.

    Cristi Lindblom, ‘The Implications of Organisational Legitimacy for Corporate Social Performance Disclosure’ (1994) 2.

  22. 22.

    Ibid. 14.

  23. 23.

    Richard C Warren, ‘The Evolution of Business Legitimacy’ (2003) 15(3) European Business Review 153, 156; Craig Deegan and Jeffrey Unerman, Financial Accounting Theory (2006) 253.

  24. 24.

    Guido Palazzo and Andreas Georgscherer, ‘Corporate Legitimacy as Deliberation: A Communicative Framework’ (2006) 66(1) Journal of Business Ethics 71, 77.

  25. 25.

    Suchman, above n 9, 574 in Palazzo and Scherer, above n 24, 77.

  26. 26.

    Suchman, above n 9.

  27. 27.

    Ashforth, B.E. and Gibbs, B.W., ‘The Double-edge of Organizational Legitimation’ (1990) Organization Science 177.

  28. 28.

    Campbell, above n 15, 86.

  29. 29.

    Christine Oliver, ‘Strategic Responses to Institutional Processes’ (1991) Academy of Management Review 145; Suchman, above n 9; Oliver argues that this type of legitimacy could also be manipulated but a minor degree and through an indirect way. For details, see Christine Oliver, ‘Strategic Responses to Institutional Processes’ (1991) Academy of Management Review 145.

  30. 30.

    Campbell, above n 15, 87.

  31. 31.

    Suchman, above n 9 in Campbell, above n 15, 87.

  32. 32.

    Ashforth and Gibbs, above n 27.

  33. 33.

    The ‘invisible hand’ is the term economists use to describe the self-regulating nature of the marketplace. the theory of the invisible hand states that if each consumer is allowed free choice of what to buy and each producer is allowed free choice of what to sell and how to produce it, the market will settle on a product distribution and prices that are beneficial to all members of a community, and hence to the community as a whole. For details, see Ingrid Hahne Rima, Development of Economic Analysis (6th Ed, 2001).

  34. 34.

    Externalities means that the impact of one person’s actions on the wellbeing of a bystander.

  35. 35.

    Some markets have only one seller, and this seller sets the price. Such a seller is called a monopoly.

  36. 36.

    The phrase moral hazard refers to the risk, or ‘hazard’, of inappropriate or otherwise ‘immoral’ behaviour by the agent who is imperfectly monitored.

  37. 37.

    Edward Freeman, Stakeholder Theory of the Modern Company: Kantian Capitalism (1993) in Constantina Bichta, Corporate Social Responsibility: A Role in Government Policy and Regulation? (2003) 18; for details, see R Edward Freeman, Strategic Management: A Stakeholder Approach (1984).

  38. 38.

    Jurgen Habermas, Between Facts and Norms: Contributions to a Discourse Theory of Law and Democracy (1998).

  39. 39.

    Milton Friedman, Capitalism and Freedom (1982).

  40. 40.

    Georg Scherer and Gudio Palazzo, ‘Toward a Political Conception of Corporate Responsibility: Business and Society Seen from a Habermasian Perspective’ (2007) 32(4) Academy of Management Review1096 in Palazzo and Scherer, above n 24, 13.

  41. 41.

    Fabienne Peter, ‘Choice, Consent, and the Legitimacy of Market Transactions’ (2004) 20(01) Economics and Philosophy 1.

  42. 42.

    Theodore Levitt, ‘The Dangers of Social Responsibility’ (1958) 36(5) Harvard Business Review 41; Deepak Lal, ‘Private Morality and Capitalism: Learning from the Past’ in John Dunning (Ed), Making Globalisation Good: The Moral Challenges of Global Capitalism (2004) 41; ‘The Good Company’, The Economist 22 January 2005, 3–18; Robert Reich, ‘The New Meaning of Corporate Social Responsibility’ (1998) 40(2) California Management Review 8 in Palazzo and Scherer, above n 24, 86.

  43. 43.

    Palazzo and Scherer, above n 24, 88. For details, see Ulrich Beck, What is Globalisation? (2000); Stephen J Kobrin, ‘Sovereignty@ Bay: Globalisation, Multinational Company, and the international Political System’ (2001) Oxford Handbook of International Business 181; Patrizia Nanz and Jens Steffek, ‘Global Governance, Participation and the Public Sphere’ (2004) 39(2) Government and Opposition 314.

  44. 44.

    Currently, large companies are keen to enter national and global economic, fiscal, social, cultural, environmental and political systems, with the objective of creating a favourable climate for transnational investment and competition in the new global economy. This intervention creates confrontation on issues of employment policy, equality, job security and national security within developing states. There are many examples to illustrate this point. For example, it is argued that the concerns expressed by former Chilean president salvador allende to the un regarding the plans of the international telegraph and telephone company (ITT) and the kenneth copper corporation to overthrow his government was the main cause of his death in a military coup. For details, see Judith Richter, Holding Corporations Accountable: Corporate Conduct, International Codes and Citizen Action (2001); for a synopsis of this issue, visit the Corner House, ‘Codes in Context TNC Regulation in an Era of Dialogues and Partnerships’ (2002) at http://www.thecornerhouse.org.uk/sites/thecornerhouse.org.uk/files/26codes.pdf at 7 November 2011. In 1954, the United Fruit Company was a key actor in overthrowing Jacobo Arbenz’ government in Guatemala, resulting in decades of violence in this country. For details, see Gustavo Gonzalez, ‘Code of Conduct for TNCs Reappears’ (2001) http://www.twnside.org.sg/title/code-cn.htm at 7 November 2011. People rioted and one person was killed when bechtel, a US-based water consortium, took over the water system of cochabama in Bolivia and almost immediately raised water prices. Feelings ran so high that the corporation’s managers left the country and the service was returned to public ownership; Bechtel filed a legal suit against the Bolivian government for US $25 million. For details, see Barry James, ‘Challenges of Development for Corporate Responsibility’, International Herald Tribune 19 August 2002, 5.

  45. 45.

    The cost of damage to the environment by the business sector in 2008 estimated by London-based consultancy firm Trucost was worth US $2.2 trillion—a figure bigger than the national economies of all but seven economies in the world that year. For a sector wise graph of this cost, visit http://www.guardian.co.uk/environment/2010/feb/18/worlds-top-firms-environmental-damage at 7 November 2011.

  46. 46.

    Three billion people do not have access to clean water and basic sanitation and these causes about 5,000 children to die from water borne diseases every day. For details, see WHO, World Water Day Report (2002), available at http://www.who.int/water_sanitation_health/takingcharge.html 7 November 2011. Greenhouse gas emissions are causing severe climate change and ecological imbalance; receding glaciers threaten low lying coastal cities with rising sea levels; for details, see J Floor Anthoni, ‘Seafriends: Summary of Threats to the Environment’ (2001) www.seafriends.org.nz/issues/threats.htm at 7 November 2011.

  47. 47.

    Andrew Fergus and Julie Rowney, ‘Sustainable Development: Lost Meaning and Opportunity?’ (2005) 60(1) Journal of Business Ethics 24.

  48. 48.

    Ibid. The recent ‘occupy wall street’ movement in the USA is an appropriate example that illustrates the lack of public trust in corporate power, strategies and responsibility to the society in which they operate. The core tenet of this movement is that corporate power and position in society and politics is creating serious class conflicts (mostly economic) in society, and corporate society is liable for the misery of individual economic life in the USA. For details, visit http://www.guardian.co.uk/world/occupy-wall-street at 10 October 2011.

  49. 49.

    Ibid; for details of the political support of companies in the society and their impact on the social life of mass people, see Willis Harman, ‘The Great Legitimacy Challenge’ (1975) 42(5) Vital Speeches of the Day 147 in Fergus and Rowney, above n 47, 17, 24.

  50. 50.

    Paul Hawken, ‘A Declaration of Sustainability’ (1993) 54(61) Unte Reader; Harman, above n 49.

  51. 51.

    Belal, above n 1, 15.

  52. 52.

    Mark R Mathews, Socially Responsible Accounting (1993) 26 in Deegan, Rankin and Tobin, above n 13, 315.

  53. 53.

    Richard C Warren, ‘The Evolution of Business Legitimacy’ (2003) 15(3) European Business Review 153, 156.

  54. 54.

    Deegan argues that the terms of a social contract are difficult to determine and different organisations might have different perceptions of the terms. It is in relation to the implicit terms where managers’ perceptions can vary to a great extent. For details, see Craig Deegan, Michaela Rankin and Peter Voght, ‘Firms’ Disclosure Reactions to Major Social Incidents: Australian Evidence’ (2000) 24(1) Accounting Forum 101.

  55. 55.

    Belal, above n 1, 15.

  56. 56.

    Craig Deegan, ‘The Legitimising Effect of Social and Environmental Disclosures–A Theoretical Foundation’ (2002) 15(3) Accounting, Auditing & Accountability Journal 282, 292–293.

  57. 57.

    Deegan, Rankin and Voght, above n 55.

  58. 58.

    Comment of Lewis F. Powell, Jr is mentioned in http://www.answers.com/topic/lewis-franklin-powell-jr at 22 November 2010.

  59. 59.

    For details on this point, see the discussion on the stakeholder approach to the corporate management at the later part of this chapter.

  60. 60.

    This Latin term is for ‘let the buyer beware’. It is a property law doctrine that controls the liabilities of the seller of a real property. According to this doctrine, the buyer could not recover from the seller for defects on the property that render the property unfit for general use. For detail, visit http://en.wikipedia.org/wiki/caveat_emptor at 1 August 2011.

  61. 61.

    Caveat venditor is the opposite of caveat emptor. This Latin term translates as ‘let the seller beware’. It suggests that sellers can also be deceived in a market transaction. This doctrine forces the seller to take responsibility for faulty products and discourages them from selling sub-standard products. For details, visit http://en.wikipedia.org/wiki/caveat_venditor#caveat_venditor at 1 August 2011.

  62. 62.

    The facts of this case are as follows: a lady was distributing religious handbills standing beside the road in a town owned by a company. She was arrested on a charge of ‘trespassing’. The United States Supreme Court decided that the right to freedom cannot be denied simply to uphold property rights. For details, visit http://en.wikipedia.org/wiki/marsh_v._alabama at 1 August 2011.

  63. 63.

    Freeman, above n 37.

  64. 64.

    Edsell Thomas Byrne, ‘Business in American Politics: Its Growing Power, Its Shifting Strategies’ (1990) Spring Dissent 248 in James K. Rowe, Corporate Social Responsibility As Business Strategy (2004) 131, available at http://escholarship.org/uc/item/5dq43315jsessionid=f6bafa0de62a77972be9ffebe8157cee at 3 December 2011.

  65. 65.

    Ibid.

  66. 66.

    Lewis F. Powell Jr., ‘Attack on the Free Company System’ (2004), available at http://www.mediatransparency.org/stories/powellmanifesto.htm at February 2004 cited in Rowe, above n 65.

  67. 67.

    Byrne, above n 65, 131.

  68. 68.

    Edsell Thomas Byrne, The New Politics of Inequality (1984) 107.

  69. 69.

    Ibid.

  70. 70.

    John Kline, International Codes and Multinational Business: Setting Guidelines for International Business Operations, London: Quorum Books, 161 in Rowe, above n 65, 129.

  71. 71.

    Michael Jensen, ‘Value Maximisation, Stakeholder Theory and the Corporate Objective Function’ (2002) Business Ethics Quarterly 235, 239.

  72. 72.

    Palazzo and Scherer, above n 24, 86.

  73. 73.

    Corporate organisations, especially the transnational companies are capable of contributing to the redressment of social and environmental problems to the same extent as the nation states. Of the 15 companies and governments with the world’s largest budgets, six are governments, nine are companies. Each of the 15 largest transnational companies now has a budget that exceeds the GDP of more than 120 nation states. Of the 100 largest economies, 51 are now transnational companies and 49 are nation states, with 90 % of these transnational companies being based in the 49 nation states. For details, visit http://www.wcc-coe.org/wcc/what/jpc/corp-account.pd at 10 October 2011.

  74. 74.

    For details, visit http://www.globescan.com/news_archives/csr_exec_brief.pdf at 10 October 2011.

  75. 75.

    Neil Mitchell, ‘Corporate Power, Legitimacy, and Social Policy’ (1986) Western Political Quarterly 197,208; Max Weber, ‘Economy and Society’ (1968) 213; Jens Steffek, ‘The Legitimation of International Governance: A Discourse Approach’ (2003) 9(2) European Journal of International Relations 249.

  76. 76.

    James P Walsh, Klaus Weber and Joshua D Margolis, ‘Social issues and Management: Our Lost Cause Found’ (2003) 29(6) Journal of Management 859.

  77. 77.

    Palazzo and Scherer, above n 24, 91; for details, see Suchman, above n 9; Andrew Wicks and Edward Freeman, ‘Organisation Studies and the New Pragmatism: Positivism, Anti-Positivism, and the Search for Ethics’ (1998) Organization Science 123; Daniel Swanson, ‘Toward an Integrative Theory of Business and Society: A Research Strategy for Corporate Social Performance’ (1999) 24(3) Academy of Management Review 506.

  78. 78.

    Palan shows how these two types of approaches for corporate legitimacy in society have been eroded. The unethical accounting in big companies, inadequate investment at the company level to minimise carbon emissions amid other issues has made previously accepted business behaviour the subject of critical public debate. For details, see Ronen Palan, The Offshore World: Sovereign Markets, Virtual Places, and Nomad Millionaires (2006) in Palazzo and Scherer, above n 24, 91.

  79. 79.

    Blake Ashforth and Barrie Gibbs, ‘The Double-Edge of Organisational Legitimation’ (1990) Organization Science 177, 181.

  80. 80.

    Milton Friedman, ‘The Social Responsibility of Business is to Increase its Profits’ (2007) Corporate Ethics and Corporate Governance 173,218; in the same fashion, Epstien and Votaw concludes that companies have to act according to the moral foundation of the society. For details, see Edwin Epstein and Dow Votaw, Rationality, Legitimacy, Responsibility: Search for New Directions in Business and Society (1978) 3.

  81. 81.

    Grolin, below n 90; John Dryzek, ‘Transnational Democracy’ (1999) 7(1) Journal of Political Philosophy 30, 35.

  82. 82.

    Friedman, above n 81; James Guthrie and Parker L D, ‘Corporate Social Reporting: A Rebuttal of Legitimacy Theory’ (1989) 19(7) Accounting and Business Research.

  83. 83.

    Ibid.

  84. 84.

    Brent Spar is an oil storage platform in the North-East Atlantic. Regarding its dumping, shell and greenpeace had conflicts started in 1995. Based on theories of corporate legitimacy and risk society, this conflict raised an argument that created a demand for a new balance between business, government and civil society as well as a radicalisation of the requirements for corporate legitimacy. For more details, see Jesper Grolin, Corporate Legitimacy in Risk Society—the Case of Brent Spar, Business Strategy and the Environment (1998), available at http://www3.interscience.wiley.com/journal/61003263/abstract?cretry=1&sretry=0 at 14 November 2011.

  85. 85.

    Grolin, above, in Bichta, above n 37, 22.

  86. 86.

    Ibid.

  87. 87.

    Bichta, above n 37, 22.

  88. 88.

    Kenneth E. Goodpaster and Jr. John B. Mathews, ‘Can A Corporation Have A Conscience?’ (1982) 60(1) Harvard Business Review 132 in Bichta, above n 37, 21.

  89. 89.

    Ibid.

  90. 90.

    Ibid.

  91. 91.

    Ibid 132, 136.

  92. 92.

    Ibid 132.

  93. 93.

    Ibid.

  94. 94.

    For example, 80 % of ftse-100 companies now provide information about their environmental performance and social impact. For details, see Deegan and Rankin, above n 87; for more information, visit http://www.article13.com/a13_contentlist.asp?straction=getpublication&pnid=569 at 15 April 2009.

  95. 95.

    D. Neu, H. Warsame and K. Pedwell, ‘Managing Public Impressions: Environmental Disclosures in Annual Reports’ (1998) 23(3) Accounting, organizations and Society 265.

  96. 96.

    Palazzo and Scherer, above n 24, 93; for details, see Andrew Wicks and Edward Freeman, ‘Organisation Studies and the New Pragmatism: Positivism, Anti-positivism, and the Search for Ethics’ (1998) Organization Science 123; Iris Young, ‘From Guilt to Solidarity’ (2003) 50(2) Dissent 39.

  97. 97.

    Palazzo and Scherer, above n 24, 93; Carlton and Payne defines this strategy as ‘an interactive field of discourse’. For details, see Jerry Calton and Steven Payne, ‘Coping With Paradox’ (2003) 42(1) Business & Society 7; Timothy Kuhn and Karen Lee Ashcraft, ‘Corporate Scandal and the Theory of the Firm’ (2003) 17(1) Management Communication Quarterly 20.

  98. 98.

    Palazzo and Scherer, above n 24, 93.

  99. 99.

    Bosire Maragia, ‘Almost There: Another Way of Conceptualising and Explaining NGOs’ Quest for Legitimacy in Global Politics’ (2002) 2(3) Non-State Actors and International Law 301, 312.

  100. 100.

    John Dowling and Jeffery Pfeffer, ‘Organisation Legitimacy: Social Values and Organisational Behaviour’ (1975) 18(1) Pacific Sociological Review 122.

  101. 101.

    Georg Scherer and Gudio Palazzo, ‘Toward A Political Conception of Corporate Responsibility: Business and Society Seen from A Habermasian Perspective’ (2007) 32(4) Academy of Management Review 1096.

  102. 102.

    For an earlier version of this section, see Mia Mahmudur Rahim, ‘The Stakeholder Approach to Corporate Governance and Regulation: An Assessment’ (2011) 8 Macquarie Journal of Business Law 304–325.

  103. 103.

    Tom Cannon, Corporate Responsibility- A Textbook on Business Ethics, Governance, Environment, Role and Responsibilities (1994).

  104. 104.

    Archie B Carroll and Ann K Buchholtz, Business and Society: Ethics and Stakeholder Management (2008) 58 in Eeva Siljala, Development of Corporate Social Responsibility in Finnish Forest Industry (Masters Book, Lappeenranta University of Technology, 2009) 23.

  105. 105.

    Freeman, above n 37, 46.

  106. 106.

    Carroll and Buchholtz, above n 105.

  107. 107.

    Gray, Owen and Carol, above n 7, 45 in Siljala, above n 105, 24; for more details on the classification of stakeholders, see Archie B Carroll and Ann K Buchholtz, Business and Society: Ethics and Stakeholder Management (2008) 58; Ming-Dong Poul Lee, ‘A Review of the Theories of Corporate Social Responsibility: Its Evolutionary Path and the Road Ahead’ (2008) 10(1) International Journal of Management Reviews 53, 61.

  108. 108.

    Michael Hoffman and Robert Frederick, Business Ethics—Readings and Cases in Corporate Morality (3rd Ed, 1995).

  109. 109.

    Ibid.

  110. 110.

    William Evan and Edward Freeman, A stakeholder theory of the modern corporation: Kantian Capitalism (1993).

  111. 111.

    Ibid.

  112. 112.

    Ibid 148.

  113. 113.

    Ibid.

  114. 114.

    Bichta, above n 37.

  115. 115.

    Hoffman and Frederick, above n 109, 148.

  116. 116.

    Thomas Donaldson and Preston L E, ‘The Stakeholder Theory of the Company-Concepts, Evidence and Implications’ (1995) 20 Academy of Management Review 65.

  117. 117.

    Ronald Coase, ‘The Problem of Social Cost’ (1960) 3(October) Journal of Law and Economics 1.44.

  118. 118.

    For more information on contemporary arguments of property rights look at Anthony M Honoré, Ownership, Oxford Essays in Jurisprudence (1961); Svetozar Pejovich, The Economics of Property Rights—Towards A Theory of Comparative Systems (1990).

  119. 119.

    For details, see Donaldson and Preston, above n 117.

  120. 120.

    For details, see Edward Freeman, Business Ethics—Readings and Cases in Corporate Morality in Michael Hoffman, Robert Frederick, Schwartz (2001 4th Ed); Jerry I Porras and Jim Collins, Built to Last: Successful Habits of Visionary Companies (1994); Lynn Sharp Paine, ‘Managing for Organisational Integrity’ (1994) 72 Harvard Business Review 106.

  121. 121.

    Shawn Berman et al., ‘Does Stakeholder Orientation Matter? The Relationship Between Stakeholder Management Models and Firm Financial Performance’ (1999) 40(5) Academy of Management Journal 488,199; Belal, above n 1, 18.

  122. 122.

    Thomas Jones and Andrew Wicks, ‘Convergent Stakeholder Theory’ (1999) 24(2) Academy of Management Review 206,207; for a detailed discussion on this approach, see Belal, above n 1, 18.

  123. 123.

    Berman et al., above n 122.

  124. 124.

    Ibid 492; for a detailed discussion on this view of Freeman, see Ataur Rahman Belal, ‘Stakeholder Accountability or Stakeholder Management: A Review of UK Firms’ Social and Ethical Accounting, Auditing and Reporting (SEAAR) Practices’ (2002) 9(1) Corporate Social Responsibility and Environmental Management 8.

  125. 125.

    Edward Freeman, Strategic Management: A Stakeholder Approach (1988) in Belal, above n 1, 19.

  126. 126.

    Berman et al., above n 122; Belal, above n 1, 19.

  127. 127.

    Arieh A Ullmann, ‘Data in Search of A Theory: A Critical Examination of the Relationships among Social Performance, Social Disclosure, and Economic Performance of US Firms’ (1985) Academy of Management Review 540; Belal, above n 1, 19.

  128. 128.

    Belal, above n 1, 19; D. Neu, H. Warsame and K. Pedwell, ‘Managing Public Impressions: Environmental Disclosures in Annual Reports’ (1998) 23(3) Accounting, Organizations and Society 265, 278–279.

  129. 129.

    Belal, above n 1, 19.

  130. 130.

    Ullman, above n 131,553; MD López-Gamero, E Claver-Cortés and JF Molina-Azorín, ‘Complementary Resources and Capabilities for an Ethical and Environmental Management: A Qual/Quan Study’ (2008) 82(3) Journal of Business Ethics 701, 708.

  131. 131.

    Deegan, above n 57, 294.

  132. 132.

    Gray, above n 7, 46.

  133. 133.

    Craig Deegan and Jeffrey Unerman, Financial Accounting Theory (2006) 272.

  134. 134.

    Robin Robert, ‘Determinants of Corporate Social Responsibility Discloser: An Application of Stakeholder Theory’ (1992). 17(6) Accounting, Organization and Society; for details, see Belal, above n 1, 19.

  135. 135.

    Richard Warren, ‘The Evolution of Business Legitimacy’ (2003) 15(3) European Business Review 153, 154, 156. For details, see Deegan, above n 57, 292–293.

  136. 136.

    The theory also explores the criteria on evaluating the legitimacy of CSR.

  137. 137.

    Michael Hoffman and J.M. Moore, Business Ethics: Readings and Cases in Corporate Morality (1990) in Bichta, above n 37, 20.

  138. 138.

    Ibid.

  139. 139.

    Michael Dorf and Charles F Sabel, ‘A Constitution of Democratic Experimentalism’ (1998) 98(2) Columbia Law Review 267, 278–279.

  140. 140.

    Micheal Dorf, ‘After Bureaucracy’ (2004) University of Chicago Law Review 1245, 1269.

  141. 141.

    Jody Freeman, ‘Collaborative Governance in the Administrative State’ (1997) 45 UCLA L. Rev. 1, 3.

  142. 142.

    Jason M Solomon, ‘Law and Governance in the 21st Century Regulatory State’ (2007) 86 Texas Law Review 819, 822.

  143. 143.

    Adam Winkler, ‘Corporate Law or the Law of Business?: Stakeholders and Corporate Governance at the End of History’ (2004) 67(4) Law and Contemporary Problems 109; Michael Bradley et al., ‘The Purposes and Accountability of the Corporation in Contemporary Society: Corporate Governance at A Crossroads’ (1999) 62 Law and Contemporary Problems 9.

  144. 144.

    For details on this concept, see Charles F. Sabel and William H. Simon, Epilogue: Accountability Without Sovereignty, Law and New Governance in the EU and the US (2006) 395; David M Trubek and Louise Trubek, ‘New Governance and Legal Regulation: Complementarity, Rivalry and Transformation’ (2007) 13 Columbia Journal of European Law 639; Neil Walker and Grainne De Burca, ‘Reconceiving Law and New Governance’ (2006) 13 Columbia Journal of European Law 519.

  145. 145.

    Sabel and Simon, above n 150, 399.

  146. 146.

    Corporate Governance http://en.wikipedia.org/wiki/corporate_governance at 6 June 2011.

  147. 147.

    Recent major corporate scandals have contributed to cg gaining attention as a public policy topic. These incidents have prompted legislators and businesses to allow greater scrutiny over accounting manoeuvres and more transparency in order to prevent managers from engaging in fraud. After the enron crisis, the US President announced his ‘ten point plan to improve corporate responsibility and protect America’s shareholders’ focusing on cg reform in the USA. Subsequently, the sarbanes-oxley act was passed. This Act, which introduced comprehensive accounting reforms for public companies and severe penalties for failure to comply, divided pro-business and pro-regulation advocates over the value of these reformative approaches and their political effects. For details see the President’s leadership in combating corporate fraud at http://georgewbush-whitehouse.archives.gov/infocus/corporateresponsibility/ at 6 June 2011; Public Company Accounting Reform and investor Protection Act 2002 (USA) at http://www.j-bradford-delong.net/movable_type/refs/2002-07-25-sarbanes.html at 6 June 2011; Scott Harshbarger and Goutam Jois, ‘Looking Back and Looking Forward: Sarbanes-Oxley and the Future of Corporate Governance’ (2007) 40(1) Akron Law Review 1.

  148. 148.

    Michael Dorf and Charles Sabel’s concept of ‘democratic experimentalism’ and ‘directly deliberative polyarchy’ are consistent of this view of law. For details, see Sabel and Simon, above n 150,284. For an example of how these approaches could be used in corporate regulation, see Archon Fung, Dara Rourke and Charles Sabel, ‘Realising Labour Standards. Boston Review’ (2007) 26 Boston Review, available at http://bostonreview.net/br26.1/fung.html 24 July 2011.

  149. 149.

    Amir Gill, ‘Corporate Governance as Social Responsibility: A Research Agenda’ (2008) 26 Berkeley Journal of International Law 452, 463; regarding fiduciary duty aspect in NG, see Lyman Johnson and David Millon, ‘Recalling Why Corporate officers are Fiduciaries’ (2004) 46 William and Mary Law Review 1597; Margaret Blair and Lynn Stout, ‘A Team Production Theory of Corporate Law’ (1999) 85(2) Virginia Law Review 247. For stakeholder aspect see, Mitchell, below n 168. For economic analysis, see Craig Mackenzie, ‘Boards, Incentives and Corporate Social Responsibility: The Case for a Change of Emphasis’ (2007) 15(5) Corporate Governance: An International Review 935; Jayson Scott Johnston, ‘Signaling Social Responsibility: On the Law and Economics of Market incentives for Corporate Environmental Performance’ (University of Pennsylvania, Institute for Law and Economic Research, 2005).

  150. 150.

    Winkler, above n 145; Michael Bradley et al., ‘The Purposes and Accountability of the Corporation in Contemporary Society: Corporate Governance at a Crossroads’ (1999) 62 Law and Contemporary Problems 9.

  151. 151.

    Adam Sulkowski and Kent Greenfield, ‘A Bridle, A Prod, and A Big Stick: An Evaluation of Class Actions, Shareholder Proposals, and the Ultra Vires Doctrine as Methods for Controlling Corporate Behaviour’ (2005) 79. John Marshall Law Review 929; Tomas W Joo, ‘A Trip Through the Maze of Corporate Democracy: Shareholder Voice and Management Composition’ (2003) 77. John Marshall Law Review 735.

  152. 152.

    Ans Kolk, ‘Sustainability, Accountability and Corporate Governance: Exploring Multinationals’ Reporting Practices’ (2008) 17(1) Business Strategy and the Environment 1; Meir Statman, ‘Socially Responsible Indexes: Composition and Performance’ (Leavey School of Business, Santa Clara University, 2005); Deegan, above n 57.

  153. 153.

    See Generally Yadong Luo, Global Dimensions of Corporate Governance (2007); Arthur R. Pinto, ‘Globalisation and the Study of Comparative Corporate Governance’ (2005) 23 Wisconsin International Law Journal 477.

  154. 154.

    David Hess, ‘Social Reporting and New Governance Regulation: The Prospects of Achieving Corporate Accountability Through Transparency’ (2007) 17 Business Ethics Quarterly 455; see also Orly Lobel, ‘The Renew Deal: The Fall of Regulation and the Rise of Governance in Contemporary Legal Thought’ (2004) 89 Minnesota Law Review 342.

  155. 155.

    John M. Conley and Cynthia A. Williams, ‘Engage, Embed, and Embellish: Theory Versus Practice in the Corporate Social Responsibility Movement’ (2005) 31 Journal of Corporation Law 1.

  156. 156.

    Phlip Selznick, The Communitarian Persuasion (2002) 101; see generally, John Braithwaite, Crime, Shame, and Reintegration (1999).

  157. 157.

    Bradley Karkkainen, ‘New Governance in Legal Thought and in the World: Some Splitting as Antidote to Overzealous Lumping’ (2004) 89 Minnesota Law Review 471.

  158. 158.

    Cary Coglianese and David Lazer, ‘Management Based Regulation: Prescribing Private Management to Achieve Public Goals’ (2003) 37(4) Law & Society Review 691.

  159. 159.

    Christine Parker and Vibeke Nielsen, ‘Do Corporate Compliance Programs influence Compliance?’ (University of Melbourne, 2006).

  160. 160.

    For details of ‘Corporate Governance’ see Andre Shleifer and Robert Vishny, ‘A Survey of Corporate Governance’ (1997) 52(2) Journal of Finance 737; Shann Turnbull, ‘Corporate Governance: Its Scope, Concerns and Theories’ (1997) 5(4) Corporate Governance 180; Oliver Hart, ‘Corporate Governance: Some Theory and Implications’ (1995) 105(430) The Economic Journal 678; Marco Becht, Patrick Bolton and Alisa Röell, ‘Corporate Governance and Control’ (2003) 1 Handbook of the Economics of Finance 1; Catherine Daily, Dan Dalton and Albert Cannella Jr, ‘Corporate Governance: Decades of Dialogue and Data’ (2003) 28(3) Academy of Management Review 371; Lucian Bebchuk, Alma Cohen and Allen Ferrell, ‘What Matters in Corporate Governance?’ (2009) 22(2) Review of Financial Studies 783.

  161. 161.

    K. Keasey, S. Thompson and M. Wright, Corporate Governance: Economic and Financial Issues (1997) 2.

  162. 162.

    Shleifer and Vishny, above n 162.

  163. 163.

    Margaret Blair, Ownership and Control: Rethinking Corporate Governance for the Twenty-First Century (1995) 3.

  164. 164.

    Corporate Governance, http://en.wikipedia.org/wiki/corporate_governance at 3 February 2011.

  165. 165.

    John Farrar, Corporate Governance: Theories, Principles and Practice (2008) 69–146.

  166. 166.

    Lawrence E Mitchell, ‘The Board as A Path toward Corporate Social Responsibility’ in Doreen Mcbarnet, Aurora Voiculescu and Tom Campbell (Eds), New Corporate Accountability (2007) 280.

  167. 167.

    For details of the corporate board of directors reform and the beginning of modern CSR, see Mitchell, above n 155, 284–288.

  168. 168.

    Aron Eisenberg, ‘The Modernisation of Corporate Law: An Essay for Bill Cary’ (1982) 37 University of Miami Law Review 187, 209–210.

  169. 169.

    Lester Salamon, ‘The New Governance and the Tools of Public Action: An Introduction’ (2000) 28 Fordham Urban Law Journal 1611.

  170. 170.

    Orly Lobel and On Amir, ‘Behavioural Versus Institutional Antecedents of Decentralised Enforcement in Organisations: An Experimental Approach’ (2007) Regulation; see generally, Orly Lobel, ‘Setting the Agenda for New Governance Research’ (2004) 89 Minnossota Law Review 498.

  171. 171.

    Orly Lobel, ‘Interlocking Regulatory and Industrial Relations: The Governance of Workplace Safety’ (2005) 57 Administrative Law Review 1071.

  172. 172.

    Christine Parker, ‘Meta-regulation: Legal Accountability for Corporate Social Responsibility?’ in Doreen Mcbarnet, Aurora Voiculescu and Tom Campbell (Eds), The New Corporate Accountability: Corporate Social Responsibility and The Law (2007).

  173. 173.

    Christine Parker, The Open Corporation: Effective Self-Regulation and Democracy (2002).

  174. 174.

    Kees Bastmeijer and Jonathan M. Verschuuren, NGO-Business Collaborations and the Law: Sustainability, Limitations of the Law, and the Changing Relationship between Companies and NGOs, Corporate Social Responsibility, Accountability and Governance. Global Perspectives (2005).

  175. 175.

    Orly Lobel, ‘The Renew Deal: The Fall of Regulation and the Rise of Governance in Contemporary Legal Thought’ (2004) 89 Minnesota Law Review 1071; Parker, above n 175.

  176. 176.

    Peer Zumbansen, ‘The Parallel Worlds of Corporate Governance and Labour Law’ (2006) 13(1) Indiana Journal of Global Legal Studies 261, 299–305.

  177. 177.

    Brian A. Warwick, ‘Reinventing the Wheel: Firestone and the Role of Ethics in the Corporation’ (2002) 54 Alabama Law Review 1455.

  178. 178.

    Guhan Subramanian, ‘Board Silly’, New York Times 14 February 2007.

  179. 179.

    Wikipedia, ‘Corporate Governance’ (2011).

  180. 180.

    Lobel and Amir, above n 172.

  181. 181.

    Economist Intelligence Unit, Global Business Barometer January 2008 (January 2008) The Economist http://www.economist.com/media/pdf/barometer2.pdf 13 June 2011.

  182. 182.

    Ibid.

  183. 183.

    Sandra Dawson, ‘Balancing Self Interest and Altruism: Corporate Governance Alone is Not Enough’ (2004) 12(2) Corporate Governance: An International Review 130.

  184. 184.

    See generally Stephen M Bainbridge, ‘Director Primacy: The Means and Ends of Corporate Governance’ (2002) 97 Northwestern University Law Review 547, 549, 552, 563; Stephen M Bainbridge, ‘In Defense of the Shareholder Wealth Maximisation Norm: A Reply to Professor Green’ (1993) 50 Washington and Lee Law Review 1423; Mark Roe, ‘The Shareholder Wealth Maximisation Norm and Industrial Organisation’ (2000) 149 University of Pennsylvania Law Review 2063.

  185. 185.

    Andrew Keay, ‘Tackling the Issue of the Corporate Objective: An Analysis of the United Kingdom’s Enlightened Shareholder Value Approach’ (2007) 29 Sydney Law Review 577.

  186. 186.

    Colin Mayer, ‘Corporate Governance, Competition, and Performance’ (1997) 24(1) Journal of Law and Society 152, 155.

  187. 187.

    Keay, above n 191, 578.

  188. 188.

    Ian B. Lee, ‘Efficiency and Ethics in the Debate about Shareholder Primacy’ (2006) 31 Delware Journal of . Corporation Law 533, 537.

  189. 189.

    170 N.W. 668, 684 (Mich. 1919); the core finding of the court is: ‘a business company is organised and carried on primarily for the profit of the stockholders. The powers of the directors are to be employed for that end. The discretion of directors is to be exercised in the choice of means to attain that end and does not extend to a change in the end itself, to the reduction of profits or to the non-distribution of profits among stockholders in order to devote them to other purposes.’

  190. 190.

    Ewald Engelen, ‘Corporate Governance, Property and Democracy: A Conceptual Critique of Shareholder Ideology’ (2001) 31(3) Economy and Society 391; T. Clarke, Theories of Corporate Governance: The Philosophical Foundations of Corporate Governance (2004) 309.

  191. 191.

    Bryan Horrigan, Comparative Corporate Governance Developments and Key Ongoing Challenges From Anglo-American Perspectives, Research Handbook on Corporate Legal Responsibility (2005) 39.

  192. 192.

    Margaret Blair and Lynn Stout, ‘Directors Accountability and the Mediating Role of the Corporate Board’ (2001) 403(79) Washington University Law Quarterly 411–414.

  193. 193.

    This is based on a large number of work, amongst those the most influential are: Michael C Jensen and William H. Meckling, ‘Theory of the Firm: Managerial Behaviour, Agency Costs and Ownership Structure’ (1976) 3(4) Journal of Financial Economics 305; Eugene Fama, ‘Agency Problems and the theory of the Firm’ (1980) 88(2) Journal of Political Economy 288; Eugene Fama and Michael Jensen, ‘Separation of Ownership and Control’ (1983) 26 Journal of Law and Economics 301; Frank Easterbrook and Daniel Fischel, The Economic Structure of Corporate Law (1996).

  194. 194.

    Mark E Van Der Weide, ‘Against Fiduciary Duties to Corporate Stakeholders’ (1996) 21 Delware Journal of Corporate Law 27, 56–57.

  195. 195.

    Keay, above n 191, 584.

  196. 196.

    The Committee on Corporate Law, ‘Other Constituencies Statutes: Potential for Confusion’ (1990) 45 Business Lawyer 2253, 2269.

  197. 197.

    Luigi Zingales, in The New Palgrave Dictionary of Economics and the Law (1998) 501.

  198. 198.

    Jill Fisch, ‘Measuring Efficiency in Corporate Law: The Role of Shareholder Primacy’ (2005) 31 Journal of Corporate Law 637.

  199. 199.

    Keay, above n 191, 584.

  200. 200.

    Fisch, above n 204, 662.

  201. 201.

    Henry Hansmann and Reiner Kraakman, ‘The End of History for Corporate Law’ (2000) 89 Georgetown Law Journal 439.

  202. 202.

    Ibid.

  203. 203.

    Ibid 4; see generally D. Gordon Smith, ‘The Shareholder Primacy Norm’ (1997) 23 Journal of Corporation Law 277.

  204. 204.

    Milton Friedman, Capitalism and Freedom (1982) 39.

  205. 205.

    Steven Wallman, ‘Understanding the Purpose of A Corporation: An introduction’ (1998) 24 Journal of Corporation Law 807; Michael C Jensen and William H. Meckling, ‘Theory of the Firm: Managerial Behaviour, Agency Costs and Ownership Structure’ (1976) 3(4) Journal of Financial Economics 305.

  206. 206.

    See generally, Henry Butler, ‘The Contractual Theory of the Corporation’ (1988) 11 George Mason University Law Review 99.

  207. 207.

    Armen A Alchian and Harold Demsetz, ‘Production, Information Costs, and Economic Organisation’ (1972) 62(5) American Economic Review 777, 779.

  208. 208.

    Margaret Blair and Lynn Stout, ‘Director Accountability and the Mediating Role of the Corporate Board’ (2001) 79 Washington University Law Quarterly 403, 404–405; Margaret Blair and Lynn Stout, ‘A Team Production Theory of Corporate Law’ (1999) 85(2) Vandebuilt Law Review 247, 250–251.

  209. 209.

    Einer Elhauge, ‘Sacrificing Corporate Profits in the Public Interest’ (2005) 80 New York University Law Review 733, 739. Some other noteworthy contribution in developing this concept are Lawrence E Mitchell, Corporate Irresponsibility: America’s Newest Export (2001); Ian B. Lee, ‘Corporate Law, Profit Maximisation and the“ Responsible Shareholder”’ (2005) 10(31) Stanford Journal of Law, Business and Finance 442.

  210. 210.

    Blair and Stout, above n 210, 259.

  211. 211.

    Lynn Stout, ‘Bad and Not-So-Bad Arguments for Shareholder Primacy’ (2001) 75 S. California Law Review 1189, 1196.

  212. 212.

    Ibid 1997.

  213. 213.

    Ibid 1998.

  214. 214.

    Margaret Blair and Lynn Stout, ‘A Team Production Theory of Corporate Law’ (1999) 85(2) Vanderbilt Law Review 247.

  215. 215.

    Michael Klausner, ‘The Contractarian theory of Corporate Law: A Generation Later’ (2005) 31 Journal of Corporation Law 779, 782–784; Melvin Eisenberg, ‘The Conception that the Corporation is A Nexus of Contracts, and the Dual Nature of the Firm’ (1998) 24 Journal of Corporation Law 819, 825–826.

  216. 216.

    David S. Allen, ‘The First Amendment and the Doctrine of Corporate Personhood’ (2001) 2(3) Journalism 255.

  217. 217.

    Kent Greenfield, ‘The Place of Workers in Corporate Law’ (1997) 39 Boston College Law Review 283; William Allen, ‘Our Schizophrenic Conception of the Business Corporation’ (1992) 14 Cardozo Law Review 261.

  218. 218.

    Keay, above n 191, 578.

  219. 219.

    Freeman, above n 37 in Tom L Beauchamp, Norman E Bowie and D.G. Arnold, Ethical Theory and Business (2001) 69.

  220. 220.

    Edward E Freeman, ‘The Politics of Stakeholder theory: Some Future Directions’ (1994) 4(4) Business Ethics Quarterly 409.

  221. 221.

    Roberta S Karmel, ‘Implications of the Stakeholder Model’ (1992) 61 George Washington Law Review 1156, 1171.

  222. 222.

    Keay, above n 191, 578.

  223. 223.

    Damien Grace and Stephen Cohen, Business Ethics: Australian Problems and Cases (1998) Chap. 3; Thomas Clarke and Stewart Clegg, Changing Paradigms: The Transformation of Management Knowledge for the twenty-first century (1998) Chap. 6.

  224. 224.

    Adolf Berle and Gardiner C Means, The Modern Corporation and Private Property (1991) 80.

  225. 225.

    Ibid.

  226. 226.

    Steven Wallman, ‘The Proper Interpretation of Corporate Constituency Statutes and Formulation of Director Duties’ (1991) 21 Stetson Law Review 163, 176–177; see also Martin Lipton and Steven Rosenblum, ‘A New System of Corporate Governance: The Quinquennial Election of Directors’ (1991) University of Chicago Law Review 187, 203,205–215; Mark E Van Der Weide, ‘Against Fiduciary Duties to Corporate Stakeholders’ (1996) 21 Delware Journal of Corporate Law 27, 61.

  227. 227.

    Larry Mitchell, Corporate Irresponsibility: America’s Newest Export (2001); for a critic of the whole notion of shareholder maximisation in corporate law, see Lawrence Mitchell, ‘Theoretical and Practical Framework for Enforcing Corporate Constituency Statutes’ (1991) 70 Texas Law Review 579.

  228. 228.

    Keay, above n 191, 585.

  229. 229.

    Keay, above n 191, 586.

  230. 230.

    Ibid 586.

  231. 231.

    Daniel Sullivan and David Conlon, ‘Crisis and Transition in Corporate Governance Paradigms: The Role of the Chancery Court of Delaware’ (1997) 31(4) Law & Society Review 713 in Janet Dine, Company Law (2001) 27–30.

  232. 232.

    David Millon, ‘New Directions in Corporate Law: Communitarians, Contractarians and the Crisis in Corporate Law’ (1993) 50 Washington and Lee Law Review 1373, 1382.

  233. 233.

    David Millon, Communitarianism in Corporate Law: Foundations and Law Reform Strategies, Progressive Corporate Law: New Perspectives on Law, Culture and Society (1995) 10.

  234. 234.

    Gavin Kelly and John Parkinson, The Conceptual Foundations of the Company: A Pluralist Approach, The Political Economy of the Company (1998) 131.

  235. 235.

    Lyman Johnson, ‘Delaware Judiciary and the Meaning of Corporate Life and Corporate Law’ (1989) 68 Texas Law Review 865, 934.

  236. 236.

    Ibid 934.

  237. 237.

    There are some models that describe the strategies for incorporating stakeholders in corporate regulation. Amongst these models, Clarkson’s risk-based models, the normative stakeholder accountability model and the managerial stakeholder model are noteworthy. The underlying notion in Clarkson’s risk-based model is that ‘a stake represents some form of risk and that without risk there is no stake’ and hence the rights of stakeholders in any strategy should be based on the stakeholder’s liabilities. On the basis of this notion, this model divides stakeholders into two groups: voluntary stakeholders and involuntary stakeholders. For details see M.B.E. Clarkson, ‘A Risk Based Model of Stakeholder theory’ (1994) 1; Belal, above n 1, 21. The normative stakeholder accountability model argues that the corporate strategies related with stakeholders should not be based on the ability of the stakeholder; rather, it is the duty of the company to look after the interest of all stakeholders without dividing them according to their ability to further the economic objective of the company. For details, see Craig Deegan and Jeffrey Unerman, Financial Accounting Theory (2006); Belal, above n 1, 21. The managerial stakeholder model puts emphasis on the strategies to relate the voluntary stakeholders with corporate issues in accordance with their abilities to further corporate interests. For details, see generally Gray, above n 7.

  238. 238.

    Ewald Engelen, Corporate Governance, Property and Democracy: A Conceptual Critique of Shareholder Ideology, Theories of Corporate Governance: The Philosophical Foundations of Corporate Governance (2004) 309.

  239. 239.

    Edward Freeman, Andrew Wicks and Bidhan Parmar, ‘Stakeholder Theory and “the Corporate Objective Revisited”’ (2004) 15 Organization Science 364, 365; see also Sankaran Venkataraman, Stakeholder Value Equilibration and the Entrepreneurial Process, Ethics and Entrepreneurship (2002) 45.

  240. 240.

    John Plender, A Stake in the Future: The Stakeholding Solution (1997) in Janice Dean, Directing Public Companies: Company Law and the Stakeholder Society (2001) 117; see also Freeman, above n 227, 413.

  241. 241.

    John Farrar, Corporate Governance: Theories, Principles and Practice (2008) 451.

  242. 242.

    Adolf A Berle, ‘Corporate Powers as Powers in Trust’ (1930) 44 Harvard Law Review 1049. See also Adolf A Berle, ‘For Whom Corporate Managers Are Trustees: A Note’ (1931) 45 Harvard Law Review 1365; Adolf A Berle and Gardiner Means, The Modern Corporation and Private Property (1991).

  243. 243.

    E Merrick Dodd, ‘For Whom Are Corporate Managers Trustees?’ (1932) 45(7) Harvard Law Review 1145, 1148; see also E Merrick Dodd, ‘Is Effective Enforcement of the Fiduciary Duties of Corporate Managers Practicable?’ (1935) University of Chicago Law Review 194.

  244. 244.

    For some instances of court decisions, see Provident International Company V International Leasing Corp Ltd [1969] 1 NSWR 424, 440; Paramount Communications Inc V Time Inc 571 A. 2d 1140 (Del, 1989).

  245. 245.

    Corporations and Market Advisory Committee, ‘Social Responsibility of Corporations’ (CMAC, 2006) 84–89. Available at http://www.camac.gov.au/camac/camac.nsf/byheadline/pdffinal+reports+2006/$file/csr_report.pdf at 8 June 2011.

  246. 246.

    Parliamentary Joint Committee on Corporations and Financial Services, Corporate Responsibility: Managing Risk and Creating Value (2006) 46; see also UK Steering Group, Modern Company Law for A Competitive Environment: The Strategic Framework (1999) 5, 41.

  247. 247.

    UK Steering Group, Modern Company Law for A Competitive Environment: The Strategic Framework (1999) 3.16–3.61.

  248. 248.

    Kent Greenfield, ‘New Principles for Corporate Law’ (2005) 1 Hastings Business Law Journal 87; Lawrence Mitchell, ‘Theoretical and Practical Framework for Enforcing Corporate Constituency Statutes’ (1991) 70 Texas Law Review 579.

  249. 249.

    Kent Greenfield, ‘Corporate Social Responsibility: There’s A Forest in Those Trees: Teaching About Corporate Social Responsibility’ (2000) 34 Georgia Law Review. 1011; Ronen Shamir, ‘The Age of Responsibilisation: On Market-Embedded Morality’ (2008) 37(1) Economy and Society 1.

  250. 250.

    For a recent critique of the existing scholarship of corporate regulation thought, see generally Kent Greenfield, The Failure of Corporate Law: Fundamental Flaws and Progressive Possibilities (2006).

  251. 251.

    Parliamentary Joint Committee on Corporations and Financial Services, Corporate Responsibility: Managing Risk and Creating Value (2006) 59.

  252. 252.

    Fiona Buffini, ‘Calls to Protect Corporate Conscience’, Australian Financial Review (Sydney) 2005, 4; see also L.E. Preston and H.J. Sapienza, ‘Stakeholder Management and Corporate Performance’ (1990) 19(4) Journal of Behavioral Economics 361.

  253. 253.

    International Accounting Standards Board, ‘Discussion Paper on Preliminary Views on an Improved Conceptual Framework for Financial Reporting: The Objective of Financial Reporting and Qualitative Characteristics of Decision-Useful Financial Reporting Information’ (2006) in Investment Management Association, ‘IMA Response to Discussion Paper on An Improved Conceptual Framework for Financial Reporting’ (2006) 4.

  254. 254.

    Parliamentary Joint Committee on Corporations and Financial Services, above n 253, 50.

  255. 255.

    Hansmann and Kraakman, above n 203; see also Michael Jensen, ‘Value Maximisation, Stakeholder Theory and the Corporate Objective Function’ (2001) 7(3) European Financial Management 297.

  256. 256.

    Keay, above n 187, 602.

  257. 257.

    Based on this approach, different economies are incorporating different strategies into their corporate regulation. For instance, the operational and financial review completed in the UK was built on the concept of ‘enlightened shareholder value’, that is, it was designed to provide shareholders with better information concerning company performance. The EU adopted this approach in its modernisation directive that requires a balanced review of a company’s non-financial key performance indicators, including information relating to environmental and employee matters. The European Management Audit Scheme and the Companies Act 2006 (UK) are other instances where considerable weight has been given to this approach. For details, see Filip Gregor, ‘How Can Reporting Become A Relevant tool for Corporate Accountability at the European Level?’ (2007) Discussion Paper for European Coalition for Corporate Justice http://ec.europa.eu/company/policies/sustainable-business/corporate-social-responsibility/reporting-disclosure/swedish-presidency/files/position_papers/how_can_reporting_become_a_relevant_tool_en.pdf at 14 July 2011.

  258. 258.

    Gill, above n 151, 461; see generally, Doreen Mcbarnet, Aurora Voiculescu and Tom Campbell, The New Corporate Accountability: Corporate Social Responsibility and the Law (2007); David Vogel, The Market for Virtue: The Potential and Limits of Corporate Social Responsibility (2005).

  259. 259.

    OECD, OECD Principles of Corporate Governance (2004) 17.

  260. 260.

    The impact of such drawbacks in Bangladesh has been discussed in Chap. 6 of this book.

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Rahim, M.M. (2013). The Theoretical Basis for the Implementation of CSR Principles Through Legal Regulation. In: Legal Regulation of Corporate Social Responsibility. CSR, Sustainability, Ethics & Governance. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-40400-9_3

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