Relating social responsibility with governance: the evidence
There has been a variety of research over time investigating the relationship between the characteristics of a firm and its disclosure (eg Cowen et al 1987; Gray et al 2001) and equally there is research (eg Burke & Longsdon 1996) showing the benefits of CSR. It is clear that these benefits are also directly related to the sustainability of a firm and that firm's success. It would seem apparent therefore that there should be some attention paid to social responsibility within the corporate governance of a corporation. It is therefore apposite to conduct an investigation as to what exactly is mentioned about CSR within such corporate governance. It is to be expected that good corporate governance will foster social responsibility in general.
There has been much work undertaken which investigates the failures of corporate governance and the ensuing problems which arise and this could be adapted to a consideration of our concern with the relationship between corporate governance and social responsibility. We argue however that this approach is not an appropriate methodology for this kind of research. Rather our starting assumption is that effective corporate governance will be largely unnoticed and that this will be manifest in examples of good practice rather than in the exceptional instances of poor practice.
Although there is a clear link between good corporate governance and all aspects of a firm's performance, which will ultimately affect the sustainability of that firm's activity our research does not show that this is at all clearly understood by many firms. Furthermore, although the majority of firms consider that corporate social responsibility is important, they do not make any connection between this and corporate governance. They clearly do not understand the link between good governance, the management of all stakeholder relations, corporate social responsibility and the longer term economic performance of their company.
Stakeholder Theory is one approach to the managing of an organisation. It is particularly important for an understanding of CSR and its incorporation into organisational activity. There are various aspects to this which we have considered in this chapter. At the same time we have introduced a variety of other aspects which are related. Our purpose is to show that all of these concepts are inter-related in the management of an organisation and that CSR cannot be considered in isolation from the rest of organisational activity. We will see this more clearly throughout this book.
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