Enhancing Organizational Performance and Social Responsibility with Self-Regulation
13 Pages Posted: 6 Jun 2006
Date Written: June 6, 2006
This paper identifies how replaceable rules in corporate constitutions could enhance their operations and social accountability on a self-enforcing basis. The introduction of self-enforcing provisions in organizations creates a strategy for reducing the role and cost of government by exempting complying corporations from the laws made redundant. Self-enforcement is achieved by corporate constitutions sharing powers with those citizens and communities that the government makes laws to protect. To achieve this objective each stakeholder constituency needs to establish separate advisory councils. Each council would advise directors on concerns of their constituencies as well as advice on the strengths, weaknesses, opportunities and threats of management and the business. Only concerns not resolved privately would be publicly reported to reduce the disclosure burden of companies and their directors. While the scope of public disclosure would increase, its volume would be reduced to a need to know basis to those parties that have the ability to take corrective action. To empower dispersed shareholders to protect themselves against dominant management and/or other shareholders, their advisory council would be elected by one vote per investor instead of one vote per share a basis that would also enrich democracy.
Keywords: Audit committees, Co-regulation, Corporate Governance, Corporate Responsibility, CSR Reporting, Democracy, Self-enforcing regulation, Stakeholder Councils, Watchdog board
JEL Classification: G38, H11, K22, L20, L50, M14
Suggested Citation: Suggested Citation