The Board as a Path Toward Corporate Social Responsibility

Abstract:     
Corporate social responsibility has become an increasingly common topic of academic discourse over the past decade. In this essay, I argue that the typical focus on enhanced disclosure, codes of conduct, statements of principle and the like is misplaced. Indeed history shows that attempts to achieve corporate social responsibility directly are bound to fail. The issue is too important to be left to politics. It should be relocated where it properly lies, in business itself.

The central barriers to achieving corporate social responsibility are the norm of shareholder-valuism and its contemporary manifestation as short-term share price maximization. The most successful way to redress these problems is to employ the tools of corporate governance to achieve the goals of corporate social responsibility by creating incentives for long-term management and diminishing incentives for short-term management. After briefly discussing the history of the rise of shareholder-valuism as a function of 1970s political upheaval leading to the creation of the monitoring board, I make a series of reform suggestions to create long-term managerial incentives and enhance board accountability. These include capital gains tax reform and accounting changes to capitalize certain worker compensation and training expenses. I also propose that each corporate director be required to include with the corporation's annual report a 1,000 word, free-form statement identifying the director's ideas about important corporate issues and her business philosophies as a means of introducing individual director accountability into an environment that traditionally has accepted less-effective group accountability.

Keywords: corporate social responsibility, CSR, corporations, corporate governance, board of directors, shareholder-valuism, short-termism, shareholders, managers

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