Home' Trinidad and Tobago Guardian : June 1st 2017 Contents BG20 | COMMENTARY
BUSINESS GUARDIAN guardian.co.tt JUNE 1 • 2017
What really is social re-
sponsibility in a cor-
much money for the
shareholders once it
is within the boundaries of the law?
Certainly we live in times of rapid change,
where business is sometimes a high-stakes
game with a zero-sum outcome.
Making as much money as possible within
the confines of the law does not mean that in
the future society will view such an operation
favourably. Jobless growth has added to the
We are all familiar with Amoco and the neg-
ative opinions formed about them in Mayaro
and the subsequent attempt by bpTT to change
this view. At the moment it was lucrative busi-
ness, but in hindsight the strategy was flawed.
Corporate governance refers to the manner
in which a corporation is directed and the laws
and customs affecting that direction. It in-
cludes the laws governing the formation of
firms, the bylaws established by the firm itself
and the structure of the firm.
The corporate governance structure specifies
the relations, and the distribution of rights and
responsibilities, among primarily three groups
of participants. The board of directors, the
managers and the shareholders.
This system spells out the rules and proce-
dures for making decisions on corporate affairs.
It also provides the structure through which
the company objectives are set, as well as the
means of attaining and monitoring the per-
formance of those objectives.
The fundamental concern of corporate gov-
ernance is to ensure the conditions whereby
a firm's directors and managers act in the in-
terests of the firm and its shareholders and to
ensure the means by which managers are held
accountable to capital providers for the use of
assets. Issues of fiduciary duty and accounta-
bility are often discussed within the framework
of corporate governance.
It would have been nice if the equation was
as simple as operating the business efficiently,
then paying a fixed amount to shareholders and
giving fixed amounts to social causes.
Our society has matured beyond that, and
now labels such activity "tokenism." This is
particularly so in the case of our banking sector.
Our credit unions do a much better job and
they go unacknowledged.
Whether the corporations share this view or
not is another story, but they should be par-
ticularly concerned about their social image
in the long term and not just for the moment.
Levels of responsibility
There are certainly different levels of cor-
porate social responsibility.
At the most basic level there are the obliga-
tions to shareholders, customers, employees,
government and the like.
The next level may be the result of the oper-
ations of the company and the effects on the
environment where just observing minimum
or non-existent standards is just not good
enough: illegal quarrying is a case in point.
The next level is the most difficult to ascer-
tain. The board must look to broader societal
issues and, according to English Corporate
Governance expert Sir Adrian Cadbury, de-
termine the extent to which business should
consider society's priorities as well as its own
commercial priorities. This is certainly a dif-
ficult question as societies' views change with
time and business must be in sync with the
Why the concern about social responsibility?
In our globalising economy, economic
growth as an unqualified aim is being increas-
We have seen the effects of greed in the eco-
nomic boom of the seventies and the price paid
for it in the eighties.
We are now on the information superhigh-
way and are better informed than ever before.
There is an abundance of information on the
effects of one-sided economic growth. This
means the widening social gap between the
rich and the poor is fueling a crime wave.
Corporations today are extremely power-
ful. In fact, some multinationals operate on a
budget that is larger than that of many small
island states like ours. The result of these
resources is that they have the power to in-
Corporations today by their actions have the
ability to shape the society of the future. There
is also a greater degree of inter-dependence
between corporations and governments as we
have seen in our energy sector.
Having observed all of this, societies now
beginning to change the manner in which
corporations are perceived. What does this
mean? Giving money to charity is not enough.
Society now demands that corporations help
in national development in a tangible and
Could multinationals not demand greater
transparency in the government as a pre-con-
dition to further investment? It is not about
interfering in the government's affairs but
being a participant in the development of
the countries in which they gain their profits.
One of the problems during periods of rapid
economic growth is that the laws pertaining to
corporate governance become obsolete when
compared to what society expects and the pa-
rameters within which the board functions.
The government has the responsibility to
ensure that the laws are up to date to meet
the current realities. Corporations, however,
should also make recommendations to govern-
ment and be an active participant in the process
as many times the government is not as well
informed, and its good intentions sometimes
get lost in the bureaucratic process.
According to Sir Cadbury, however, "The
law consolidates changes in business conduct
that have already occurred, and represents
enforceable standards rather than best prac-
tice." Hence, the moral obligation lies with the
Companies should not expect that their
higher social responsibility be legislated for
them, neither should they think that giving
to worthy causes puts them above the rest.
They should be sensitive to the signals that
society is sending, and find meaningful ways
to contribute to national development. Just
paying the necessary taxes is not enough.
Openness in the operations of companies
is certainly a start that would force others to
follow, especially with respect to competitive
bidding. State companies are not exempt in
this regard. In fact, they are at the bottom of
the list when it comes to social responsibility.
State boards should not wait for legislation,
but must become proactive. We certainly can't
have Vision 2020 with the State companies
operating in the medieval ages.
In conclusion, companies must conduct a
great level of introspection to determine what
their social responsibilities beyond the mere
minimum are. Society is expecting more from
the corporate world.
While important, earnings per share alone
is not the end of the game, but only a part of
the equation. It should be noted that investors
also place real value on reputation, and once
lost, it is very difficult to regain.
Corporate governance and corporate social
responsibility should not just be buzz words
for the moment, but an integral part of con-
Bhushan Singh is a lecturer, consultant and
team lead of the sustainable and renewable
energy project incubator of the Arthur Lok Jack
Graduate School of Business. He has worked
in both the public and private sectors and has
served as a consultant in both a technical and
professional capacity locally and abroad. www.
Incorporating good governance
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