The Influence of CSR Disclosure On Corporate Governance and Company Performance
SMC Working Paper
20 Pages Posted: 18 Nov 2008 Last revised: 23 Nov 2009
Date Written: November 21, 2008
It is argued that corporate social responsibility (CSR) can be a potent source of innovation and competitive advantage. Those firms typically investing in socially responsible practices, both in ways that solve pressing social issues and improve the firms' competitive edge using the same frameworks that guide their core business choices, are discovering that CSR can be much more than a cost, a constraint or a charitable deed; they are discovering that it can be an enabler for competitive advantage.
This paper explores how the application of CSR starts with vision, innovation and an organizational design to tackle CSR at the core of a firm's business strategy. Firms are grappling on strategic, tactical and operational levels to identify ways to meet society's demands, this in combination with achieving company performance targets in an economic climate under pressure. It may take firms and stakeholders time to work through the issues of how to disclose and monitor the CSR practices of the firm in a standardized way, in a currency that crosses global and organizational boundaries; yet being part of the solution, rather than part of the problem is essential to creating value in this domain.
Various forms of self-regulatory practices which are applied on a discretionary basis are explored in this paper, arguing that while incomplete contracts and imperfect knowledge debar form resorting to reputation effects in order to support discretional self-regulation, on the contrary an explicit standard for CSR strategic management, both publicly shared by stakeholders and firms through social dialogue - make it possible to put again at work the reputation mechanism inducing endogenous incentives of compliance with a voluntary standard; the result being that stakeholders are encouraged to 'trust' in the firm's practices and commitment to CSR.
Keywords: CSR, corporate governance, outsourcing
JEL Classification: M14,M00, F20, L51
Suggested Citation: Suggested Citation