CHAPTER a response to “the risks that corporate wrongdoing

CHAPTER 1. LEGAL THEORY OF CORPORATE
SOCIAL RESPONSIBILITY

The notion of
“corporate social responsibility” (CSR) has become a widely accepted concept in
the business world. Despite differences and difficulties in definition, “it is
clear that most authors mean corporate social responsibility to include
behavior and actions beyond mere profit, making that serve to improve the
conditions of society and individuals within that society.”1
Supporters of the field state that the concept developed as a response to “the
risks that corporate wrongdoing poses to society.”2
After various corporate scandals and financial crises, the United States and
European countries started strengthening their CSR policies, obliging
corporations to take into account the interests of various constituencies.
Prominent authors argue, “heightened interest in CSR in recent years has
stemmed from the advent of globalization and international trade, which have
reflected in increased business complexity and new demands for enhanced
transparency and corporate citizenship.”3

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CSR rests on the
idea that corporations should play an important role in society.4
It is argued by scholars that the idea of “corporate social responsibility”
emerged from the writings of Andrew Carnegie, who argued that the two
principles of charity and stewardship are necessary in order to make capitalism
work.5
According to him and supporters of his ideas, the “more fortunate members of
society are obliged to assist its less fortunate members”6
under the charity principle. As regards to the stewardship principle, in his
view the rich were stewards of their property holding wealth “in trust” for the
benefit of the rest of society.7
Since “corporate social responsibility” is aimed at serving the welfare of
society, it should be noted that the notion “does not negate earning a profit.”8
Instead, it requires corporations to balance the costs and benefits of CSR
policies. The notion of “corporate social responsibility” reconciles the ideas of
making profit with welfare of society.9
It is argued that the stated field brings together profit making, law and
economics as a “pyramid of corporate social responsibility”10.
It should be noted that the concept includes ethical points of CSR policies.
The idea that the corporations bear some responsibilities towards the society gained
wide acceptance and helped that corporations add social concerns to their
primary economic purposes.

Supporters of
“corporate social responsibility” argue that multinational corporations must be
socially responsible since sometimes it is extremely hard to provide legal
remedies for corporate wrongdoings of multinational corporations in certain
jurisdictions and therefore, CSR policies can have a gap filling function in
this regard.11
Multinational corporations are also required to “serve a social, political, and
cultural role as well as an economic role.”12
Therefore, binding CSR codes exist at international level as well, including
the 2011 United Nations Guiding Principles on Business and Human Rights13
and the 2011 OECD Guidelines for Multinational Enterprises.14
The notion of “corporate social responsibility” represents the voluntary way of
implementation of social role of corporations. Hence, for some scholars it is a
voluntary way of enhancing public image and reputation; satisfy obligations
that are beyond legal requirements.15
The European Union Commission while defining a concept of “corporate social
responsibility” undertakes the same approach and states that CSR is “a concept
whereby companies integrate social and environmental concerns in their business
operations and in their interaction with their stakeholders on voluntary
basis.”16
Therefore, the concept includes various polies that can be undertaken on
voluntary basis and will serve the society.

Despite the fact
the modern national and multinational corporation bear economic, legal, ethical
and philanthropic responsibilities, it should be noted that the idea behind the
notion of “corporate social responsibility” was economic notwithstanding the abovementioned
ethical considerations. It is widely argued that CSR policies affect the
profitability of business entities and that is why scholars sometimes use “triple-bottom
line” as a synonym of “corporate social responsibility”.17
According to the narrow definition of “triple-bottom line”, the term should be
used for “measuring and reporting corporate performance against economic,
social and environmental parameters”,18
It should be noted that CSR policies have three dimensions: economic,
environmental and social. “Companies should have three different bottom lines, first
bottom line should include traditional concept of the profit and loss account,
second one should be company’s “people account” and third as a measure of
“planet account””.19
Corporate performance is sometimes called “sustainable corporate performance
that includes financial, social and environmental performance measures.
Therefore, inclusion of two additional aspects of measurement and evaluation of
corporate performance can be deduced from the preposition that the
“responsibility of the company is not only to generate economic welfare (i.e., profit), but also to care for the
society (e.g., people) and the environment (i.e.,
the planet).”20
The following approach aims to make business sustainable and durable. Triple
bottom line approach suggests viewing benefits to the stakeholders inside and
outside corporation and environmental issues (such as water and air) equally
important alongside with profit maximization. It is considered to be overall
more successful than achieving the same goals on governmental level.

Triple bottom
line approach that was firstly examined Elkigston is usually linked to the
notion of “corporate social responsibility” and “sustainability”. Savitz argues
that the stated two notions should be distinguished since “responsibility
emphasizes the benefits to social groups outside the business, whereas
sustainability gives equal importance to the benefits enjoyed by corporation
itself.”21
According to him, “a sustainable corporation is one that creates profit for its
shareholders while protecting the environment and improving the lives of those
with whom it interacts.”22
On the other hand, “corporate social responsibility” is a separate system
including various dimensions that makes the stated notion broad and
comprehensive. Savitz mentions that the notion of “corporate social
responsibility” is a very useful term while discussing triple bottom line
doctrine in the context of sustainability.23
Therefore, it should be noted that triple bottom line doctrine is usually
discussed in the context of “corporate social responsibility” and even if it is
addressed in the context of sustainability, the notion of “corporate social
responsibility” gains huge importance. 

1 John
F. Mahon & Richard A. McGowan, Searching
for the Common Good: A Process Oriented Approach, 34 Bus. Horizons 79, 80 (1991).

2 Jeehye You, Legal Perspectives on Corporate Social Responsibility: Lessons from
the United States and Korea 4 (2015).  

3 Dima
Jamali, Insights into Triple Bottom Line
Integration from a Leading Organization Perspective, 12 BUS. PROCESS MANG.
J., 809, 810 (2006).

4 Id.

5 R.
Edward Freeman & Jeanne Liedtka, Corporate
Social Responsibility: A Critical Approach, 34 Bus. Horizons 92, 92 (1991).

6 Id.

7 Andrew
Carnegie, Wealth, 148 N. Am. Rev. 653 (June 1889).

8 Myrna
Wulfson, The Ethics of Corporate Social
Responsibility and Philanthropic Ventures, 29 J. Bus. Ethics 135, 136 (2001).

9 Id.

10 Archie
B. Carroll, The Pyramid of Corporate
Social Responsibility: Toward the Moral Management of Organizational
Stakeholders, Bus. Horizons,
39-48 (1991).

11 Larry
C. Baker, Multinational Corporations,
Transnational Law: The United Nations’ Norms on the Responsibilities of
Transnational Corporations as a Harbinger of Corporate Social Responsibility in
International Law, Colum. Hum. Rts. L. Rev. 291 (2006).

12 Steven
R. Ratner, Corporations and Human Rights:
A Theory of Legal Responsibility, 111 Y??? L.J. 443, 448-449 (2001).

13 Special
Report of the Secretary-General, Guiding
Principles on Business and Human
Rights: Implementing the United Nations “Protect, Respect and Remedy”
Framework, Human Rights Council, United Nations Doc. A/HRC/17/31 (Mar. 21,
2011).

14 Organization
of Economic Cooperation and Development, OECD
Guidelines for Multinational Enterprises (2011), http://www.oecd.org/corporate/mne/48004323.pdf.

15 Patricia
B. Abels & Joseph T. Martelli, What
is CSR all about?, Global Conference on Business &Finance Proceedings
7(2), 86 (2012).

16
Communication from the European Union Commission, Concerning Corporate Social Responsibility: A Business Contribution to
Sustainable Development 5, at 7 (COM (2002) 347 final, Brussels, 2 July
2002).

17 John
Elkington, Cannibals with Forks: The
Triple Bottom Line of the 21st Century Business, Gabriola Island, BC, N?? S??????
P??. (1998).

18 Jamali,
supra note 3, at 812.

19 J??? E????????,
C???????s ???? F???s: T?? T????? B????? L??? ?? 21s? C?????? B?s???ss. G???????
Is????, BC: New Society Publishers (1998).

20 Fauzi
Hasan, Goran Svensson, Azhar Abdul Rahman, “Triple
bottom line” as “sustainable corporate performance”: a proposition for the
future, 2(5) Sustainability 1345, 1353 (2010).

21 A?????
W. S????? & K??? W????, “T????? ?????? ????: ??? ?????s ??s?-??? ????????s
??? ????????? ????????, s?????, ??? ????????????? s????ss: ??? ??? ??? ??? ???,
????s?? ??? ???????” (2014).

22 Id.

23 Id. 

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