Corporate Responsibility has its foundation in the understanding that corporations function as responsible entities all over the world and as members of communities, at all levels, in every country around the world.
From Companies to Corporations - Some History: What we today describe as corporations had their historical start as companies operating in communities. The company, usually local, was an integral part of the community where the company operated. The owners of the company were members of the larger community. That local interaction provided a means, although informal, of holding the company accountable. The owners of the company made profit when things were going well but also paid the price of any dysfunction of the company.
There are major differences between companies and corporations. The major difference is the function of responsibility. Under the law, the corporation functions as a “person” that is held accountable for actions both positive and/or negative. The Board of Directors, although legally charged with oversight and responsibility for the actions of the company, cannot be held personally responsible and therefore their personal assets are protected. This also creates a distance between those running the corporation and those most affected by what the corporation does.
As companies transformed themselves from local entities to state, nation and then international entities, the question of what rules and what laws govern what they do became more complex. If a company functions in two states and the state laws are different, which laws govern the company’s operations? Even the question of which in state a company files its incorporation papers affects its taxes, laws of responsibility to which it is held, etc. This becomes even more complex when it expands to become an international entity and then, a multi-national entity.
In addition to the laws that exist on local, state, national and international levels, there are other systems that serve to hold companies/corporations accountable for their actions and non-actions depending on the issues involved. The world of corporate responsibility is part of that system of accountability.
The “Actors” in the Globalized Economy
Although some people refer to globalization as if it is an unchangeable power or force that acts of its own volition, globalization is the result of policies, programs and practices that have moved the functioning and sphere of influence of any economy from a specific local geographic area to almost any place in the world. Any and all people and communities are actors within the globalized economy. However, some are more prominent that others. That does not mean they are more important that the others who are less prominent. Part of our challenge is to move beyond the visibility that prominence brings…and to pay attention to all who are part of this ever more entwined economic system.
Role of governments – Governments are charged with establishing the rule of law and then enforcing that law. Governments are also charged with providing law that governs and protects the country as a whole and the people of the country both as a whole and as individuals. In the US, the laws that govern corporations are established on the state and national levels with laws on the same issues often being different on these levels.
Role of Corporations – Companies produce products and/or services that are bought or used by others. Some corporations are those brands that we readily recognize in the store. Others are less visible, yet still important because they are part of the system that brings the products and/or services to the consumers.
Investors or shareholder – Shareholders are those who have purchased shares of stock in the corporation. Shareholders can be individuals, organizations, other companies, governments, etc. Depending on the country that is “home” to the corporations, shareholders may be able to bring issues of concern to the attention of other shareholders and affect corporate policies. Most shareholders invest in the companies for profit. Shareholders invest as a means of gaining additional funds for programs, for retirement, or for whatever are the financial needs of the investor.
The Stock Markets - These are sites around the world where shares of stock in publicly traded corporations are bought and sold. This activity is currently moving out of physical locations to electronic exchanges. The people who own the shares do not necessarily have to have any direct interaction with the company. That distance allows passive ownership, where the only important thing is profit. Profit is realized when the stock is sold at a higher price that the purchase price, or when a company announces dividends, a certain amount paid to the shareholder for each share of stock.
Brokers, Analysts, Rating Groups – These are groups that study what the corporations are doing and issue reports on what they perceive is the value of the stock in a company and the likelihood of value increase or decrease. Decisions about buying or selling stock often rely on these groups, and indeed the value of the stock is also influenced by what they say about the company. The perception of the value of the stock of corporations causes their value to rise or fall. This perception can be affected by research that is done, public announcements by companies, signing of contracts, discoveries that a company makes, by the environment , war, conflict, etc.
Investment Managers – These are persons or groups who are hired by investors to manage their investment portfolio. While investment managers are charged to manage the money under their care for the greatest good of investors, some investment managers specialize in managing money according to additional principles, often termed screens, on behalf of specific investors. These are called SRI (Socially Responsible Investment) managers
Investors – Those who purchase stocks, bonds and other investment tools in order to increase the value of their investment portfolio.
SRI Investors – Those who choose to apply specific social, environment and other screens to their portfolio in addition to financial screens to determine in what companies/corporations they are willing to invest.
Employers – Those who hire others to perform a task or work. This work may be of any type including physical or mental. The employer pays the employee in exchange for work performed.
Workers – Those who provide labor of any type for someone else in return for payment
Employees – Those who work for someone else for a period of time
Consumers – Those who purchase a product or service. Consumers can
demonstrate support for or dislike of a particular action by a company thru choosing where and how they purchase. There are actions which unite consumers by calling for a specific action on a given day with a specific company.
NGOs – Non-governmental organizations
are groups formed to focus on specific issues or problems in order to bring about positive change.