What Is Corporate Social Responsibility (CSR)?

You, Jeehye

doi:10.1007/978-81-322-2386-3_2

Jeehye You²

1047 Accesses
4 Citations

Abstract

Understanding the concept of corporate social responsibility (CSR) would be the first step towards developing a deeper theoretical foundation of CSR and its more effective legislative implementation. To clarify why CSR matters so much, this chapter presents problems stemming from the influence of corporate power in society by examining recent corporate scandals in Korea and the United States. It then introduces dynamic conceptions of CSR and finally seeks to articulate the legal issues pertaining to CSR in corporate law by providing an overview of the first modern US debate centering on the topic.

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Notes

1.
Sang-Hun Choe, Corruption Scandal Snowballs at South Korea’s Samsung Group, N.Y.Times, November 6, 2007.
2.
Sang-Hun Choe, Samsung Chairman Faces Tax Charges, N.Y.Times, April 18, 2008.
3.
Supreme Court [S.Ct.], 2007 Do 4949, May 29, 2009 (S. Kor.) [Hereinafter Everland case].
4.
Id.
5.
Id.
6.
Ser, supra note 6 in Chap. 1.
7.
The Samsung group is sometimes called the “Samsung Republic” because of its dominance over the nation’s economy and its internal power structure in Korea. See Song Baek Seok, “Samsung Republic Phenomenon” and the limits of the Capitalist State, 41-1 Korean Pol. Sci. Rev. 57 (2007) (in Korean).
8.
See OK-Rial Song, The Legacy of Controlling Minority Structure: A Kaleidoscope of Corporate Governance Reform in Korean Chaebol, 34 Law & Pol’y Int’l Bus. 183, 184 (2002). In general, chaebol refers to a family-controlled conglomerate; chaebols account for a substantial proportion of the national economy. Jeong-Pyo Choi, The Theory and the Reality of the Korean Chaebol 6–7 (2004). “More critically, ‘chaebol’ refers to Korea’s sprawling conglomerates in which [the] founding families exercise almost unchecked control despite small shareholdings.” Tae-gyu Kim, Judgment Day Approaching for Chaebol, Korea Times, April 27, 2009.
9.
Christopher Hale, Addressing the Incentive for Expropriation Within Business Groups: The Case of the Korean Chaebol, 30 Fordham Int’l L. J. 1, 26 (2006).
10.
Song, supra note 31, at 184–85.
11.
See Chico Harlan, In S. Korea, the Republic of Samsung, The Washington Post, December 9, 2012.
12.
See www.samsung.com/us/aboutsamsung/samsung_group/affiliated_companies/ (last visited November 18, 2014)
13.
See www.forbes.com/powerful-brands/list/ (last visited November 18, 2014)
14.
Jeong Seo, Who Will Control Frankenstein? The Korean Chaebol’s Corporate Governance, 14 Cardozo J. Int’l & Comp. L. 21, 25 (2006) (“Indeed, the reckless management of the chaebols is regarded as a primary contributor to the financial crisis. When Korea requested a bailout from the International Monetary Fund and the World Bank, both institutions required that Korea improve its corporate governance structure in order to receive loans.”).
15.
Kenneth Scott, Institutions of Corporate Governance: Implications of Korea, in An Agenda for Economic Reform in Korea 187, 197 (Kenneth L. Judd & Young-Ki Lee eds., 2000).
16.
Young-Ki Lee & Young-Jae Lim, In Search of Korea’s New Corporate Governance System, in An Agenda for Economic Reform in Korea 155, 174 (Kenneth L. Judd & Young-Ki Lee eds., 2000).
17.
Haksoo Ko, Korea’s Newly Enacted Unified Bankruptcy Act: The Role of the New Act in Facilitating (Or Discouraging) the Transfer of Corporate Control, 24 UCLA Pac. Basin L.J. 201, 213 (2007).
18.
Id.
19.
Song, supra note 31, at 201.
20.
Id.
21.
Id.
22.
Id.
23.
Id. at 185.
24.
East Asian corporations are notorious for tunneling. See Stijn Claessens et al., Expropriation of Minority Shareholders: Evidence from East Asia, in Pol’y Res. Dissemination Ctr., Working Paper No. 2088 (1999); Mara Faccio et al., Dividends and Expropriation, 91 Am. Econ. Rev. 54, 54–55 (2001).
25.
See Simon Johnson et al., Tunneling, 90 Am. Econ. Rev. 22 (2000).
26.
Song, supra note 31, at 208.
27.
Seo, supra note 37, at 57–58.
28.
See id. at 57
29.
Id.
30.
Song, supra note 31, at 203.
31.
Hale, supra note 32, at 35.
32.
See Hwa-Jin Kim, Living with the IMF: A New Approach to Corporate Governance and Regulation of Financial Institutions in Korea, 17 Berkeley J. Int’l L. 61, 67 (1999) (“In most cases, Korean corporate boards are nominal organizations under direct control of these controlling shareholders.”).
33.
See Hale, supra note 32, at 35–36.
34.
See Rahn Kim, Chairman Faces Indictment Without Physical Detention, Korea Times, April 16, 2008; See also Keith Collins and Chandra Illick, The Amusement Park That Controls Samsung, Bloomberg Businessweek, June 19, 2014.
35.
But See “ Samsung Group, is planning to list [Samsung Everland] by the first quarter of 2015, in a move widely Seen as key to a transfer of power within Samsung’s founding Lee family.” Min-Jeong Lee, Samsung’s Holding Company to Go Public, Easing Succession Process: Samsung Everland’s IPO Is Seen as Key to Power Transfer Within Conglomerate’s Founding Lee Family, The Wall Street Journal, June 2, 2014.
36.
The figure refers to the amount of assets and capital based on the currency exchange rate on October 15, 2009. Samsung Everland controls the group through a web of ownership that includes a 19 % controlling stake in Samsung Life Insurance. Samsung Life has a 7 % stake in Samsung Electronics, which in turn owns 35 % of Samsung Card, which has a 25 % stake in Samsung Everland. See Sang-uk Kim, Ten-years Debates: What is the Everland CBs Case, Edaily, May 29, 2009 (in Korean).
37.
Sangbeob [Commercial Act], Act. No. 1000, Jan. 20, 1962, newly inserted by Act No. 5591, December 28, 1998, art. 382–3 (S. Kor.) (“Directors shall perform their duties faithfully for the good of the company in accordance with Acts, subordinate statutes, and the articles of incorporation.”).
38.
Id. art. 389 (“A company shall appoint, by the resolution of the board of directors, a director who shall represent the company.”).
39.
Id. art. 391 (1) (“A resolution of the board of directors shall be adopted by the presence of a majority of directors in office and the affirmative votes of a majority of directors present at the meeting.”).
40.
Seoul High Court [Seoul High Ct.], 2005 No 2371, May 29, 2007 (S. Kor.).
41.
Id.
42.
Id.
43.
Id.
44.
Id.
45.
Id.
46.
Id.
47.
See Criticism on the control succession of Samsung Group, Newsis, August 27, 2009 (in Korean).
48.
See id.; see also Seoul Central District Court [Dist. Ct.], 2003 Gohab 1300, October 4, 2005 (S. Kor.).
49.
Seoul Central District Court [Dist. Ct.], 2003 Gohab 1300, October 4, 2005 (S. Kor.).
50.
Id.
51.
Seoul High Court [Seoul High Ct.], 2005 No 2371, May 29, 2007 (S. Kor.).
52.
Id.
53.
Id.
54.
Id.
55.
Id.
56.
Id.
57.
Id.
58.
Tong-hyung Kim, Samsung Heaves a Sigh of Relief, Korea Times, August 14, 2009.
59.
Id.
60.
In 1999, the Korean Parliament was determined to introduce a Special Prosecutor Act aimed at identifying governmental abuses of power and restoring public confidence. The special prosecutor can independently investigate allegations of any misconduct. Seven special prosecutor Acts have been enacted and eight special prosecutors appointed under such Acts since 1999. The most recently enacted Act (2007) concerned an investigation of President-elect Lee Myung-bak over his alleged involvement in a financial fraud case. See Wansik Hong, A Study on Special Prosecutor Acts in Korea, 4 J. Legis. Stud. 33 (2007) (in Korean).
61.
See Choe Sang-Hun, Samsung Group Chairman Indicted on Tax-Evasion Charge, N.Y.Times, April 17, 2008.
62.
See Jason Lim, Samsung’s Leadership on Edge, Korea Times, April 28, 2008.
63.
Around 10 financial companies, many of which were securities companies, were involved in these accounts. See Ja-young Yoon, FSS to Inspect Samsung’s False Name Accounts, Korea Times, April 30, 2008.
64.
See Si-soo Park, Prosecution Seeks 7-Year Jail Term for Lee Kun-hee, Korea Times, July 10, 2008.
65.
See Si-soo Park, Ex-Samsung Chief Gets Suspended Jail Term, Korea Times, July 16, 2008.
66.
Park, Prosecution Seeks 7-Year Jail Term for Lee Kun-hee, supra note 87.
67.
Id. (“Samaranch and other key decision makers in international sports also called for moderate punishment, citing Lee’s contribution to promoting the international sports community.”).
68.
Seoul Central District Court [Dist. Ct.], 2008 GoHab 366, July 16, 2008 (S. Kor.).
69.
Id.; Court Upholds Guilty Verdict for Ex-Samsung Chief, Int’l Herald Trib., October 10, 2008.
70.
Seoul High Court [Seoul High Ct.], 2008 No 1841, October 10, 2008 (S. Kor.).
71.
The Supreme Court used the terms “En Banc,” “Full Bench,” and “Grand Bench” interchangeably in the English translation. “The jurisdiction of the Supreme Court is exercised at the Grand Bench or the Petty Bench. The grand bench is convened with more than two-thirds of all the Justices with the Chief Justice presiding. A Petty bench is convened with four Justices. Currently, there are three petty benches. All judgments rendered by the petty bench must be made unanimously. As for the cases deliberated by the grand bench, the decisions are made on a majority basis. If the members of the Grand Bench are unable to reach a majority opinion, then the Supreme Court cannot reverse the judgment of the lower court.” http://eng.scourt.go.kr/eng/judiciary/court_sc.jsp (last visited November 19, 2014) “The judgment authority of the Supreme Court shall be exercised by the collegiate panel composed of not less than two-thirds of all the Justices of the Supreme Court with the Chief Justice of the Supreme Court presiding.” Beobwonjojikbeob [Court Organization Act], Act. No. 3992, December 4, 1987, amended by Act. No. 4765, July 27, 1994, art. 7 (S. Kor.).
72.
Supreme Court [S.Ct.], 2007 Do 4949, May 29, 2009 (S. Kor.).
73.
Korean courts generally apply the “business judgment rule” of US corporate law in the Korean corporate law system. See infra Sect. 6.1.2; for information on the rule of US corporate law, See infra Sect. 4.1.2.
74.
Supreme Court [S.Ct.], 2007 Do 4949, May 29, 2009 (S. Kor.)
75.
Id.
76.
Id.
77.
Id.
78.
Id.
79.
Id. (citing Supreme Court En Banc Decision Supreme Court [S.Ct.], 2003 Do 7645, June 17, 2004 (S. Kor.)).
80.
Supreme Court [S.Ct.], 2007 Do 4949, May 29, 2009 (S. Kor.)
81.
Seoul High Court [Seoul High Ct.], 2009 No 1421, August 27, 2009 (S. Kor.).
82.
Id.
83.
See Andrei Shleifer & Robert W. Vishny, A Survey of Corporate Governance, 52 J. Fin. 737, 742 (1997).
84.
Seo, supra note 37, at 59.
85.
Id. at 77.
86.
Supreme Court [S.Ct.], 2007 Do 4949, May 29, 2009 (S. Kor.)
87.
See infra Sect. 5.1.2.
88.
See infra Chap. 3.
89.
Court Upholds Guilty Verdict for Ex-Samsung Chief, supra note 92.
90.
Nohyun Gwack, The Worst Decision in Korean History, Pressian, October 13, 2008.
91.
Appeals Court Spares Jail Term for Samsung Group Ex-Chairman Lee Kun-Hee, Seoul Times, http://theseoultimes.com/ST/?url=/ST/db/read.php?idx=7392 (last visited November 18, 2014).
92.
See Sangbeob [Commercial Act], Act. No. 1000, Jan. 20, 1962, newly inserted by Act. No. 5591, December 28, 1998, art. 401 (S. Kor.).
93.
Gwack, supra note 113.
94.
Tong-hyung Kim, Samsung Puts More Faith in Younger Lees, Korea Times, September 16, 2009.
95.
See Court Upholds Guilty Verdict for Ex-Samsung Chief, supra note 92.
96.
See, e.g., Chul-Song Lee, The Officer’s Criminal Responsibility for the Capital Transaction, supra note 18 in Chap. 1 See also Chul-Song Lee, Further Comment on the Officer’s Criminal Responsibility for the Capital Transaction, supra note 18 in Chap. 1.
97.
Dodd-Frank Wall Street Reform and Consumer Protection Act, H.R. 4173, Pub. L. No. 111–203 (2009).
98.
See Helene Cooper, Obama Signs Overhaul of Financial System, N.Y. Times, July 21, 2010, www.nytimes.com/2010/07/22/business/22regulate.html (last visited November 18, 2014).
99.
See International Monetary Fund, World Economic Outlook 63 (2009) [hereinafter World Economic Outlook] (indicating that “Real GDP contracted by 6.3 percent in the fourth quarter of 2008, and recent data suggest another substantial drop in the first quarter of 2009… [E]mployment has continued to fall rapidly—5.1 million jobs have been lost since December 2007—pushing the unemployment rate to 8.5 percent in March.”).
100.
Chairman Ben S. Bernanke, Four Questions about the Financial Crisis, at Morehouse College, Atlanta, Georgia, April 14, 2009, www.federalreserve.gov/newsevents/speech/bernanke20090414a.htm (last visited December 18, 2014).
101.
Obama Asks Wall Street to Support Financial Overhaul, President Obama’s remarks on Wall Street reform at Cooper Union, New York, April 22, 2010, http://video.nytimes.com/video/2010/04/22/business/economy/1247467679106/obama-s-speech-on-financial-regulation.html?ref=financial_regulatory_reform (last visited December 18, 2014).
102.
See Bernanke, supra note 123 (presenting his personal view of the financial crisis background). Bernanke stated: “The proximate cause of the crisis was the turn of the housing cycle in the United States and the associated rise in delinquencies on subprime mortgages, which imposed substantial losses on many financial institutions and shook investor confidence in credit markets. However, although the subprime debacle triggered the crisis, the developments in the U.S. mortgage market were only one aspect of a much larger and more encompassing credit boom whose impact transcended the mortgage market to affect many other forms of credit. Aspects of this broader credit boom included widespread declines in underwriting standards, breakdowns in lending oversight by investors and rating agencies, increased reliance on complex and opaque credit instruments that proved fragile under stress, and unusually low compensation for risk-taking.” Id. See also Martin Neil Baily & Douglas J. Elliott, The US Financial and Economic Crisis: Where Does It Stand and Where Do We Go From Here? , The Initiative on Business and Public Policy, The Brookings Institution 5 (2009).
103.
See Bernanke, supra note 123.
104.
A real estate bubble or housing bubble is a type of economic bubble that can result in many owners holding negative equity. Then, the value of the property can go below than a mortgage debt. More about Housing Bubble, See Margaret Hwang Smith & Gary Smith, Bubble, Bubble, Where’s the Housing Bubble?, Brookings Papers on Econ. Activity, January 2006, at 1.
105.
See Baily & Elliott, supra note 125.
106.
Id.
107.
Id.
108.
World Economic Outlook, supra note 122, at 133; “The situation deteriorated rapidly after the dramatic blowout of the financial crisis in September 2008, following the default by a large U.S. investment bank (Lehman Brothers), the rescue of the largest U.S. insurance company (American International Group, AIG), and intervention in a range of other systemic institutions in the United States.” Id. at 2.
109.
Baily & Elliott, supra note 125, at 6.
110.
Id.
111.
Emergency Economic Stabilization Act, H.R.1424, Pub. L. No. 110–343 (2008).
112.
See Jon Hilsenrath et. al., Worst Crisis Since ’30s, With No End Yet in Sight, Wall St. J., September 18, 2008, http://online.wsj.com/article/SB122169431617549947.html.
113.
World Economic Outlook, supra note 122, at 64–65.
114.
American International Group Inc. Overview , N. Y. Times, http://topics.nytimes.com/top/news/business/companies/american_international_group/index.html (last visited November 20, 2014).
115.
$ 200 million more was slated for such bonuses in 2009. Peter Cohan, After $ 182 Billion Taxpayer Rescue, Is AIG On The Verge Of Collapse?, Daily Finance, July 31, 2009, www.dailyfinance.com/story/company-news/after-182-billion-taxpayer-rescue-is-aig-on-the-verge-of-colla/19115352/ (last updated December 4, 2009).
116.
Hugh Son, Comments on Possible Unit Bankruptcies in the 13th, AIG’s Rescue Had ‘Poisonous’ Effect, U.S. Panel Says, Bloomberg Businessweek, June 10, 2010.
117.
See Sherrie Savett, Plaintiffs’ Vision of Securities Litigation: Current Trends And Strategies, Practicing Law Institute Corporate Law And Practice Course Handbook Series, 537 n. 14 (2010).
118.
See Securities and Exchange Commission v. Goldman, Sachs & Co. and Fabrice Tourre, 10 Civ. 3229 (BJ) (D.N.Y. filed April 16, 2010).
119.
See Expanded Guidance for Subprime Lending Programs, Office of the Comptroller of the Currency Board of Governors of the Federal Reserve System Federal Deposit Insurance Corporation (2001), www.fdic.gov/news/news/press/2001/pr0901a.html (last visited November 20, 2014) (“The term ‘subprime’ refers to the credit characteristics of individual borrowers. Subprime borrowers typically have weakened credit histories that include payment delinquencies, and possibly more severe problems such as charge-offs, judgments, and bankruptcies. They may also display reduced repayment capacity as measured by credit scores, debt-to-income ratios, or other criteria that may encompass borrowers with incomplete credit histories. Subprime loans are loans to borrowers displaying one or more of these characteristics at the time of origination or purchase. Such loans have a higher risk of default than loans to prime borrowers.”).
120.
The hedge fund Paulson & Co. assisted in picking the backed securities and placed a bet on the investment vehicles. See Securities and Exchange Commission v. Goldman, Sachs & Co. and Fabrice Tourre, 10 Civ. 3229 (BJ) (D.N.Y. filed April 16, 2010).
121.
See Kevin Dowd, Moral Hazard and the Financial Crisis, 29–1 Cato J. 141, 142 (2009) (“A moral hazard is where one party is responsible for the interests of another, but has an incentive to put his or her own interests first… a pervasive and inevitable feature of the financial system and of the economy more generally.”)
122.
Too-big-to-fail “is a term frequently used in banking to describe how bank regulators may deal with severely financially troubled large banks.” George G. Kaufman, Too Big To Fail In Banking: What Remains?, 42–3 Q. Rev. Econ. & Fin. 423 (2002). “[S]ome banks are ‘too big to fail,’ the federal government might rescue large, failing banks to prevent a greater contagion of the banking system, with disastrous spillover effects to the general economy, as occurred during the Great Depression.” Bruce E. Aronson, The Financial Crisis One Year Later: Proceedings of A Panel Discussion on Lessons of The Financial Crisis and Implications for Regulatory Reform, 43 Creighton L. Rev. 275, 280 (2010).
123.
Obama Asks Wall Street to Support Financial Overhaul, supra note 124.
124.
Ross Colvin, Obama Signs Sweeping Wall Street Overhaul Into Law, Reuters, July 21, 2010, www.reuters.com/article/idUSTRE66K1QR20100722 (last visited November 20, 2014).
125.
Frank René López, Corporate Social Responsibility In A Global Economy After September 11: Profits, Freedom, And Human Rights, 55 Mercer L. Rev. 739, 749 (2004) (citing Sarah Anderson & John Cavanagh, The Top 200: The Rise of Global Corporate Power i (2000)).
126.
See id.
127.
Steven White, The Top 175 Global Economic Entities, 2011, http://dstevenwhite.com/2012/08/11/the-top-175-global-economic-entities-2011/ (last updated Aug. 11, 2012). White measures statistics using Gross Domestic Product based on the World Bank figures, World Development Indicators Database (July 2011), and Total Revenue at Fortune Magazine, 26 July 2010, http://fortune.com/global500/2011/.
128.
Global 500 2014, http://fortune.com/global500/ (last visited November 20, 2014).
129.
The World Bank, World Development Indicators Database (2013), http://databank.worldbank.org/data/download/GDP.pdf (last visited November 20, 2014).
130.
See Michael Kerr Et Al., Corporate Social Responsibility 11 (2009).
131.
About the concept of CSR, See generally infra Sect. 2.2.
132.
Milton Friedman, Capitalism and Freedom 133, 134 (1962).
133.
Charles Handy, What’s a Business For?, Harv. Bus. Rev. 54 (2002) (quoting 1939 statement by Dave Packard, Co-founder of Hewlett Packard Company).
134.
Today, “[t]he notion that corporation[s] have this social responsibility is becoming increasingly widespread.” Jean Jacques du Plessis et al., Principles of Contemporary Corporate Governance 345 (2005); See also Communication from the Commission, Concerning Corporate Social Responsibility: A Business Contribution to Sustainable Development 5, at 7 (COM(2002) 347 final, Brussels, 2 July 2002) (“The main function of an enterprise is to create value through producing goods and services that society demands, thereby generating profit for its owners and shareholders as well as welfare for society, particularly through an ongoing process of job creation.”).
135.
See supra Sect. 2.1.2; See Colvin, supra note 147.
136.
See supra Sect. 2.1.1.
137.
The John F. Kennedy School of Government, CSR Initiative, Initiative Our Approach , www.hks.harvard.edu/m-rcbg/CSRI/init_approach.html (last visited November 20, 2014) [hereinafter Kennedy School of Government, CSR Initiative] (“CSR is not an absolutely acknowledged term. Other than the term CSR, there are several synonyms and overlapping terms. The term CSR is frequently used compatibly with Corporate Citizenship, Social Enterprise, Sustainability, Sustainable Development, Triple-Bottom Line, Corporate Ethics, and in some cases Corporate Governance. Although these synonyms are not identical, they all have the same purpose.”).
138.
Wayne Visser et al., The A to Z of Corporate Social Responsibility 106 (2010).
139.
See E Merrick Dodd, Jr., For Whom Are Corporate Managers Trustees?, 45 Harv. L. Rev. 1145, 1154 (1932).
140.
Joochan Son, Corporate Social Responsibility, 5 Joongang Univ. L. Rev. 40 (1978) (in Korean).
141.
See Henry G. Manne & Henry C. Wallich, The Modern Corporation and Social Responsibility 3 (1972).
142.
See generally Note, Finding Strategic Corporate Citizenship: A New Game Theoretic View, 117 Harv. L. Rev. 1957 (2004).
143.
See generally Antony Page & Robert A. Katz, Is Social Enterprise the New Corporate Social Responsibility?, 34 Seattle U. L. Rev. 1351 (2011).
144.
See generally Robert Sprague, Beyond Shareholder Value: Normative Standards for Sustainable Corporate Governance, 1 Wm. & Mary Bus. L. Rev. 47 (2010).
145.
See generally John Elkington, Cannibals with Forks: The Triple Bottom Line of the 21st Century Business (1997).
146.
Manne & Wallich, supra note 164, at 3.
147.
Kerr et al., supra note 153, at 5.
148.
See also Janet E. Kerr, The Creative Capitalism Spectrum: Evaluating Corporate Social Responsibility Through A Legal Lens, 81 Temp. L. Rev. 831, 855 (2008).
149.
See id.
150.
Professor Carroll originally suggested four types of CSR: economic, legal, ethical and discretionary. Archie B. Carroll, A Three-Dimensional Conceptual Model of Corporate Performance, 4 Acad. Mgmt. Rev. 497 (1979). Later, he developed his ideas on CSR categories. Archie B. Carroll, The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders, Bus. Horizons, July–August 1991, at 39. Carroll’s approach has been cited as a leading model of CSR categories. See, e.g., Kevin T. Jackson, Global Corporate Governance: Soft Law And Reputational Accountability, 35 Brook. J. Int’l L. 41, 53 (2010); Raúl Etcheverry, Corporate Social Responsibility, 23 Penn St. Int’l L. Rev. 493, 501–02 (2005); Nancy Knauer, The Paradox of Corporate Giving: Tax Expenditures, The Nature of The Corporation, And The Social Construction of Charity, 44 Depaul L. Rev. 1, 31 (1994).
151.
See Carroll, A Three-Dimensional Conceptual Model of Corporate Performance, supra note 173, at 500.
152.
See id.
153.
See Carroll, The Pyramid of Corporate Social Responsibility, supra note 173, at 40–41.
154.
See Geoffrey Lantos, The Boundaries of Strategic Corporate Social Responsibility, 18 J. Consumer Marketing 595, 598 (2001). Professor Lantos basically agrees with Professor Carroll’s categories of CSR, and develops his own view focused on strategic CSR. See id.
155.
See Carroll, The Pyramid of Corporate Social Responsibility, supra note 173, at 40–41 fig. 1.
156.
Kennedy School of Government, CSR Initiative, supra note 160.
157.
Id.
158.
Carroll, The Pyramid of Corporate Social Responsibility, supra note 173, at 40–41.
159.
Id.
160.
Id.
161.
Id.
162.
Id. at 41.
163.
Id.
164.
Id.
165.
Id. at 42.
166.
Id.
167.
Id. at 41.
168.
For information about the ISO, See www.iso.org/iso/about.htm (last visited November 20, 2014) (“The International Organization for Standardization (ISO) is a network of the national standards institutes of 163 countries, one member per country, with a Central Secretariat in Geneva, Switzerland, that coordinates the system. ISO is a non-governmental organization that forms a bridge between the public and private sectors. On the one hand, many of its member institutes are part of the governmental structure of their countries, or are mandated by their government. On the other hand, other members have their roots uniquely in the private sector, having been set up by national partnerships of industry associations. Therefore, ISO enables a consensus to be reached on solutions that meet both the requirements of business and the broader needs of society.”).
169.
For information about ISO 26000, See International Organization for Standardization, ISO 26000, Guidance on social responsibility (2010) (“ISO 26000 is the designation of the future International Standard giving guidance on social responsibility (SR). It is intended for use by organizations of all types, in both public and private sectors, in developed and developing countries. It will assist them in their efforts to operate in the socially responsible manner that society increasingly demands.”).
170.
ISO 26000 defines CSR as a “responsibility of an organization for the impacts of its decisions and activities on society and the environment, through transparent and ethical behaviour that—contributes to sustainable development, including health and the welfare of society;—takes into account the expectations of stakeholders;—is in compliance with applicable law and consistent with international norms of behaviour; and—is integrated throughout the organization and practised in its relationships.” Id. 2.18.
171.
The World Business Council for Sustainable Development (WBCSD) is a CEO-led, global association of some 200 companies “united by a shared commitment to sustainable development via the three pillars of economic growth, ecological balance, and social progress. WBCSD members are drawn from more than 30 countries and 20 major industrial sectors. The Business Council also benefits from a Global Network of 35 national and regional business councils and partner organizations involving some 1000 business leaders globally.” Toward A Sustainable Cement Industry: Summary Report, The World Business Council for Sustainable Development ii (2002).
172.
WBCSD defines CSR as a “continuing commitment … to contribute to economic development while improving the quality of life of the workforce and their families as well as of the community and society at large.” Corporate Social Responsibility: Meeting Changing Expectations, World Business Council for Sustainable Development 3 (1999).
173.
The Innovation Briefs series provides insights into the most recent policy-relevant research on emerging challenges to sustainable development, with particular attention to their relevance to developing countries. http://sustainabledevelopment.un.org/index.php?menu=1841 (last visited Nov. 20, 2014).
174.
The United Nations’ Innovation Briefs define CSR as “the overall contribution of business to sustainable development” and categorize CSR by incorporating practical views on what constitutes CSR, based on two factors. The first factor is “the extent to which importance is placed on the centrality of the ‘financial business case’ for responsible business behavior in defining the scope of CSR practices.” The second is “the extent to which government is Seen to have a role in framing the agenda—and how.” Sustainable Development Innovation Briefs, The United Nations, Issue 1, at 1 (2007), See http://sustainabledevelopment.un.org/documents.html# (last visited November 20, 2014).
175.
Id.
176.
See, e.g., Cynthia A. Williams, Corporate Social Responsibility in an Era of Economic Globalization, 35 U.C. Davis L. Rev. 705 (2002).
177.
For information on the UN Global Compact, See www.unglobalcompact.org (last visited November 20, 2014) (“The UN Global Compact is a strategic policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labor, environment and anticorruption… The Global Compact is not a code of conduct. Rather, it offers a policy framework for organizing and developing corporate sustainability strategies while offering a platform—based on universal principles—to encourage innovative initiatives and partnerships with civil society, governments, and other stakeholders. The Global Compact is a purely voluntary initiative. It does not police or enforce the behavior or actions of companies. Rather, it is designed to stimulate change and to promote good corporate citizenship and encourage innovative solutions and partnerships.”); What is the Global Compact?, The United Nations preamble, id. (“The United Nations Global Compact is a strategic policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labor, environment and anti-corruption.”); see also Global Compact Critics, How “sphere of influence” was introduced into the Global Compact, May 8, 2010, http://globalcompactcritics.blogspot.com/2010/05/global-compacts-principle-one-subject.html (last visited Nov. 20, 2014) (“A close look at the UN Global Compact reveals that the concept of sphere of influence was originally part of the first principle. When the Compact was launched on January 31, 1999, UN Secretary-General Kofi Annan asked world business to ‘support and respect the protection of international human rights within their sphere of influence.’ This phrase became the text of the first principle of the Global Compact. In 2006, the phrase was reintroduced in the first principle. A year later, apparently it was dropped for good. The concept sphere of influence was moved to the preamble, which currently reads: ‘The Global Compact asks companies to embrace, support, and enact, within their sphere of influence, a set of core values in the areas of human rights, labor standards, the environment, and anti-corruption.’”).
178.
This principle arises out of the Universal Declaration of Human Rights (UDHR) adopted by the UN General Assembly in 1948. The United Nations Global Compact, The Ten Principles (last updated July 26, 2013), www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/index.html. The United Nations Global Compact defines corporations as organs of society and applies its principles to corporations. Corporations are subject to the Declaration, since the Office of the UN High Commissioner for Human Rights defines corporations as “organs of society” under the UDHR. See Interfaith Center on Corporate Responsibility—Promoting Human Rights Working Group, Office of the High Commissioner for Human Rights, September 24, 2004, http://www2.ohchr.org/english/issues/globalization/business/docs/interfaith.doc; The Universal Declaration of Human Rights is available at www.un.org/en/documents/udhr/ (last visited November 20, 2014).
179.
Aron Cramer & Sebastian van der Vegt, Raising the Bar: Creating Value with the UN Global Compact 21 (2004); see also The Universal Declaration of Human Rights (“On December 10, 1948 the General Assembly of the United Nations adopted and proclaimed the Universal Declaration of Human Rights. Following this historic act the Assembly called upon all Member countries to publicize the text of the Declaration and ‘to cause it to be disseminated, displayed, read and expounded principally in schools and other educational institutions, without distinction based on the political status of countries or territories.’”).
180.
“The Global Reporting Initiative (GRI) is a leading organization in the sustainability field. GRI promotes the use of sustainability reporting as a way for organizations to become more sustainable and contribute to sustainable development. GRI has pioneered and developed a comprehensive Sustainability Reporting Framework that is widely used around the world. A sustainability report is a report published by a company or organization about the economic, environmental and social impacts caused by its everyday activities. A sustainability report also presents the organization’s values and governance model, and demonstrates the link between its strategy and its commitment to a sustainable global economy… In May 2013, GRI released the fourth generation of its Guidelines–G4.” www.globalreporting.org/information/about-gri/what-is-GRI/Pages/default.aspx (last visited November 20, 2014); See also Global Reporting Initiative, G4 Sustainability Reporting Guidelines: Reporting Principles And Standard Disclosures (2013) (hereinafter G4 Guidelines), and Global Reporting Initiative, G4 Sustainability Reporting Guidelines: Implementation Manual (2013) www.globalreporting.org/reporting/g4/Pages/default.aspx (last visited Nov. 20, 2014).
181.
See G4 Guidelines , supra note 203.
182.
Id. at 48. (“The economic dimension of sustainability concerns the organization’s impacts on the economic conditions of its stakeholders, and on economic systems at local, national, and global levels. The Economic Category illustrates the flow of capital among different stakeholders, and the main economic impacts of the organization throughout society.”). For an example of a study adopting the economic dimension of CSR, See Robert Ashford, The Socio-Economic Foundation of Corporate Law and Corporate Social Responsibility, 76 Tul. L. Rev. 1187 (2002).
183.
G4 Guidelines, supra note 203, at 52 (“The environmental dimension of sustainability concerns the organization’s impact on living and nonliving natural systems, including land, air, water, and ecosystems. The Environmental Category covers impacts related to inputs (such as energy and water) and outputs (such as emissions, effluents, and waste). In addition, it covers biodiversity, transport, and product and service-related impacts, as well as environmental compliance and expenditures.”).
184.
Id. at 64.
185.
Communication from the Commission, Concerning Corporate Social Responsibility: A Business Contribution to Sustainable Development 5, at 7 (COM(2002) 347 final, Brussels, 2 July 2002).
186.
Kennedy School of Government, CSR Initiative, supra note 160.
187.
See Radu Mares, The Dynamics Of Corporate Social Responsibilities 9–13 (2008).
188.
This categorization is made for purposes of the literature only. Each group may have a descriptive empirical segment, a business practice case, or a legal analysis. See id. at 9–10.
189.
See id. at 10. For CSR literature focusing on human rights, See David Kinley, The Politics of Corporate Social Responsibility: Reflections on the United Nations Human Rights Norms for Corporations, 25 C&SLJ 30 (2007); Addo, M.K., Human Rights Standards and the Responsibility of Transnational Corporations (1999); Andrew Clapham, Whither the State of Human Rights Protection? New Ways to Hold Non-State Actors Accountable, Draft Paper, The International Council on Human Rights Policy (1998); Craig Forcese, Commerce with Conscience?, Human Rights and Corporate Codes of Conduct, International Center for Human Rights and Democratic Development (1997).
190.
See Mares, supra note 210, at 10–11. For a discussion of financial performance related to CSR, See Margarita Tsoutsoura, Corporate Social Responsibility and Financial Performance, Working Paper Series, Center for Responsible Business, UC Berkeley (2004). http://escholarship.org/uc/item/111799p2.
191.
See Mares, supra note 210, at 10–11.
192.
For information on ISO 26000, See supra notes 192, and 193.
193.
For information on the Global Reporting Initiative, See supra note 203.
194.
See Mares, supra note 210, at 12 (“The normative stream of CSR tackles business structural issues head on.”).
195.
See Adolf. A. Berle, Jr., For Whom Corporate Managers Are Trustees: A Note, 45 Harv. L. Rev. 1365 (1932); Adolf. A. Berle, Jr., Corporate Powers as Powers in Trust, 44 Harv. L. Rev. 1049 (1931); Dodd, supra note 162.
196.
Merrick Dodd and Adolf Berle debated the question in the 1930s, See Berle, supra note 218; Dodd, For Whom Are Corporate Managers Trustees?, supra note 162. For an example of the first court decisions on corporate purpose and role in society, See Dodge v. Ford, 170 N.W. 668 (Mich. 1919); A.P. Smith Mfg. Co. v. Barlow, 98 A.2d 581 (N.J. 1953).
197.
For examples of scholarship by CSR proponents, See Tara J. Radin, Stakeholder and Sustainability: An Argument for Responsible Corporate Decisionmaking, 31 Wm. & Mary Envtl. L. & Pol’y Rev. 363 (2007); Einer L. Elhauge, Sacrificing Corporate Profits in the Public Interest, 80 N.Y.U. L. Rev. 733 (2005); Ian B. Lee, Corporate Law, Profit Maximization, and the “Responsible” Shareholder, 10 Stan. J.L. Bus. & Fin. 31, 34–36 (2005); Thomas W. Joo, Race, Corporate Law, and Shareholder Value, 54 J. Legal Educ. 351, 361 (2004); Stephen M. Bainbridge, Corporation Law and Economics § 9.2–3 (2002); Alan J. Meese, The Team Production Theory of Corporate Law: A Critical Assessment, 43 Wm. & Mary L. Rev. 1629 (2002); Lawrence E. Mitchell & Theresa A. Gabaldon, If I Only Had a Heart: Or, How We Can Identify a Corporate Morality, 76 Tul. L. Rev. 1645 (2002); Margaret M. Blair & Lynn A. Stout, A Team Production Theory of Corporate Law, 85 Va. L. Rev. 247 (1999); D. Gordon Smith, The Shareholder Primacy Norm, 23 J. Corp. L. 277 (1998).
198.
This question arises from the debates over whether corporate fiduciaries owe their duties to the corporation’s shareholders or to the corporation as an entity. Generally, modern corporate law takes the approach that managers owe their duties to the corporation as an entity. See, e.g., Paramount Comms., Inc. v. Time Inc., 571 A.2d 1140 (Del. 1990); Blair & Stout, supra note 220, at 287–319.
199.
C. A. Harwell Wells, The Cycles of Corporate Social Responsibility: An Historical Retrospective for the Twenty-First Century, 51 U. Kan. L. Rev. 77, 78 (2002).
200.
Id. at 79.
201.
Larry Cata Backer, Multinational Corporations, Transnational Law: The United Nations’ Norms on the Responsibilities of Transnational Corporations as a Harbinger of Corporate Social Responsibility in International Law, 37 Colum. Hum. Rts. L. Rev. 287 (2006).
202.
See Reuven S. Avi-Yonah, The Cyclical Transformations of the Corporate Form: A Historical Perspective on Corporate Social Responsibility, 30 Del. J. Corp. L. 767 (2005); Berle, Corporate Powers as Powers in Trust, supra note 218; Berle, For Whom Corporate Managers Are Trustees, supra note 218; Dodd, supra note 162. For an analysis of the Berle and Dodd debate, See Wells, supra note 222, at 87–100.
203.
Berle assumed that corporate law “becomes in substance a branch of the law of trusts” in terms of the relation between shareholders and managers as fiduciaries of shareholders. Berle, Corporate Powers as Powers in Trust, supra note 218, at 1074.
204.
See id.
205.
See, Restrictions on the Power of a Director to Contract with His Corporation, A Note, 29 Colum. L. Rev. 338, 345 (1929).
206.
Theodore Levitt, The Dangers of Social Responsibility, 36–5 Harv. Bus. Rev. 41, 42 (September–October 1958).
207.
See Joel Seligman, The Transformation Of Wall Street: A History Of The Securities And Exchange Commission And Modern Corporate Finance 43 (2nd ed. 1995).
208.
See Berle, Corporate Powers as Powers in Trust, supra note 218.
209.
See id. Berle demonstrated that corporations need to be controlled by equity for shareholders as follows: “[t]he power to issue stock is at all times subject to the equitable limitation that such issue must be so accomplished as to protect the ratable interest of existing and prospective shareholders…. The power to declare or withhold dividends must be so used as to tend to the benefit not only of the corporation as a whole but also of all of its shareholders to the extent that this is possible…. The power to acquire stock in other corporations must be so used as to tend to the benefit of the corporation as a whole and may not be used to forward the enterprises of the managers as individuals or to subserve special interests within or without the corporation…. The reserved power of the corporation to amend its charter must be so exercised that the result will tend to benefit the corporation as a whole, and to distribute equitably the benefit or the sacrifice, as the case may be, between all groups in the corporation as their interests may appear…. The power to transfer the corporate enterprise to another enterprise by merger, exchange of stock, sale of assets or otherwise, may be exercised only in such a manner that the respective interests of the shareholders of all classes are respectively recognized and substantially protected.” Id. at 1050, 1060, 1063, 1066, 1069.
210.
See Dodd, supra note 162.
211.
See id. at 1163 (“If we recognize that the attitude of law and public opinion toward business is changing, we may then properly modify our ideas as to the nature of such a business institution as the corporation and hence as to the considerations which may properly influence the conduct of those who direct its activities.”).
212.
See id. at 1145.
213.
See id. at 1147–48 (“The present writer is thoroughly in sympathy with Mr. Berle’s efforts to establish a legal control which will more effectually prevent corporate managers from diverting profit into their own pockets from those of stockholders, and agrees with many of the specific rules which the latter deduces from his trusteeship principle. He nevertheless believes that it is undesirable, even with the laudable purpose of giving stockholders much-needed protection against self-See king managers, to give increased emphasis at the present time to the view that business corporations exist for the sole purpose of making profits for their stockholders. He believes that public opinion, which ultimately makes law, has made and is today making substantial strides in the direction of a view of the business corporation as an economic institution which has a social service as well as a profit-making function, that this view has already had some effect upon legal theory, and that it is likely to have a greatly increased effect upon the latter in the near future.”).
214.
See id. at 1154. Dodd thought managers were no longer attorneys for stockholders; they were becoming trustees of a corporation. See id. at 1147.
215.
See id. at 1157.
216.
See Wells, supra note 222, at 92.
217.
See id.
218.
See Dodd, supra note 162 (“There is a widespread and growing feeling that industry owes to its employees not merely the negative duties of refraining from overworking or injuring them, but the affirmative duty of providing them so far as possible with economic security.”).
219.
See id. at 1149 (citing Hamilton, Affectation With Public Interest, 39 Yale L. J. 1089, 1095 (1930); Brandeis, J., in New State Ice Co. v. Liebmann, 52 Sup. Ct. 371, 383 (1932)).
220.
Dodd, supra note 162, at 1161–62.
221.
Id. at 1155–56.
222.
Berle, For Whom Corporate Managers are Trustees, supra note 218.
223.
See id. at 1367–68.
224.
Id. at 1365.
225.
Id. at 1372.
226.
Id. at 1367.
227.
Id.
228.
Id. at 1372.
229.
Id.
230.
Adolf A. Berle, Jr., The 20th Century Capitalist Revolution 169 (1954).
231.
See Wells, supra note 222, at 102–07. “The corporation, they believed, was not merely an economic assemblage but a social institution serving employees, shareholders, customers, and communities…. Berle and Drucker [would have] the corporation treat shareholders as merely one constituency among many, and trust the managers to act for the ‘public good.’” Id, at 78.
232.
See id. at 103.
233.
The debate over corporate social responsibility is often conducted between advocates of “shareholder primacy” and those who believe the interests of other constituencies should be weighed alongside the demands of shareholders. Id. at 80.
234.
“[In] the corporate responsibility debate…. Each iteration adopts a new terminology, focuses on a slightly different facet of the problem, and develops some new ideas. But all-in-all, we have been here before.” Stephen M. Bainbridge, Community and Statism: A Conservative Contractarian Critique of Progressive Corporate Law Scholarship, 82 Cornell L. Rev. 857, 902–03 (1997); See also Wells, supra note 222, at 78–79.
235.
See Wells, supra note 222, at 79 (“They all were premised on the idea that the American economy was dominated by a relatively small number of enormous, powerful, and stable business corporations that were qualitatively different from their smaller competitors, and the debates all assumed that the solution to pressing social ills was neither to eliminate corporations nor let them alone, but rather to implement legal mechanisms that would lead corporate managers and directors to take into account the needs not only of shareholders but of workers, consumers, and communities when making business decisions.”).
236.
See Judd F. Sneirson, Doing Well By Doing Good: Leveraging Due Care For Better, More Socially Responsible Corporate Decisionmaking, 3 Corp. Gov. L. Rev. 438, 440 (2007).

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You, J. (2015). What Is Corporate Social Responsibility (CSR)? . In: Legal Perspectives on Corporate Social Responsibility. Springer, New Delhi. https://doi.org/10.1007/978-81-322-2386-3_2

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