CASE STUDY

Case Study

Case Study

Introduction

Corporate governance has traditionally specified the rules of business decision making that apply to the internal mechanisms of companies. This set of norms and laws has, first and foremost, served to shape the relations among boards of directors, shareholders, and managers as well as to resolve agency conflicts. Yet in the aftermath of Enron, corporate governance has emphasized issues that go beyond this traditional focus to touch on corporate ethics, accountability, disclosure, and reporting. As companies seek to assure regulators and investors that they are fully transparent and accountable, corporations have increasingly pledged their commitment to honest and fair corporate governance principles on a wide spectrum of business practices, Simultaneously, the corporate social responsibility (CSR) movement has developed the notion of corporate governance as a vehicle for pushing management to consider broader ethical considerations, CSR has drawn on the dramatic progress made by companies in recent decades in balancing shareholder goals with the need to reduce externalities that impact other stakeholders.

Thus, CSR has joined the political endeavors to make corporations more attuned to public, environmental, and social needs by pursuing corporate governance as a framework for boards and managers to treat employees, consumers, and communities similarly to, if not the same as, stockholders.

Discussion

In view of these processes, large public companies have recently created mechanisms of corporate governance that seek to engender investor accountability and stakeholder engagement. Such mechanisms include CSR board committees, company units dealing with business ethics, corporate codes of conduct, non-financial reporting practices, and stakeholder complaint and dialogue channels, among others. All of these governance devices have normally been created on a voluntary basis to constitute what is referred to as "corporate self regulation," Institutional investors, regulators, NGOs, and social groups have generally responded by collaborating with the private sector to make self-regulation more enforceable and effective. Pension funds, consumer coalitions, non-profit organizations, and other groups have developed monitoring schemes that incorporate corporate governance aspects into their CSR guidelines, ratings, and best practices.

For example, the California Public Employees' Retirement System (CalPERS), one of the largest institutional investors in the United States, has used its proxy power to implement its Core Principles of Accountable Corporate Governance, The Dow-Jones Sustainability Indexes, which are among the most promitient CSR indexes in America, have paid close attention to corporate governance criteria while measuring corporate social and environmental performance. Such efforts are referred to as "meta-regulation" or "the regulation of self-regulation,” At the crossroads of corporate self-regulation and meta-regulation, scholars have recently pointed to an evolving interplay between corporate governance and CSR These inquiries can and should be read as indicating a convergence between corporate governance and social responsibility.

On the one hand, corporate governance is gradually becoming a framework for ensuring the public interest in business as well as structuring the procedures by which a company demonstrates its good citizenship and commitment to various constituencies. On the other hand, CSR-driven social coalitions are increasingly focusing on corporate governance as mirroring the company's conscience and long-term commitment to stakeholder ...