Lesson 2: Corporate Social Responsibility and Regulation

Another area in which organizations must demonstrate the concepts of disclosure and transparency is with corporate social responsibility activities. One of the “broadest ways of defining social responsibility is to say that the continued existence of companies is based on an implied agreement between business and society.” Publics expect organizations to be good citizens by providing for the social good. Corporate social responsibility (CSR) activities create long-term value for organizations because these activities often pair philanthropy and financial performance.

This situation mirrors the Page Principle of "managing for tomorrow." Disclosure and transparency play an important role in the long-term value. If companies are not open about where philanthropy dollars and efforts are being given, it can create mistrust and damage stakeholder relationships.

Some critics of CSR see it as only face-saving tactics. This sentiment is echoed in a report from the U.K. charity Christian Aid, which said companies use CSR to only say “‘We can’t be so bad,’ ….. ‘Look at all the nice things we do.’”

To avoid this criticism, transparency and disclosure are necessary. For example, if a company donates a percentage of its profits to a non-profit, both the company and the non-profit organization should fully disclose this relationship.

Members of both organizations’ publics have the right to know this information so they can make an informed decision about supporting the organizations. The company stands to gain an improved reputation, an enhanced image, the ability to attract excellent employees and the ability to keep loyal customers through this CSR program.

The non-profit also gains in that it is receiving revenue so that it can work toward its mission. In addition, this CSR program would be helpful to the company’s cause should it fall into a crisis situation. It seems like a wonderful win-win situation for all involved, right?

Not so fast.

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