Corporate Responsibility

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Description of Corporate Responsibility. Explanation.

Definition Corporate Responsibility. Description.

Corporate Responsibility is an expression used to describe what some see as a company’s obligation to be sensitive to the needs of all of its stakeholders or even to society as a whole in its business operations. The term is associated with those people that argue that:

Corporations care little for the welfare of workers, and given the opportunity will move production to sweatshops in less well regulated countries.
Unchecked, companies will squander scarce resources.
Companies do not pay the full costs of their impact. For example the costs of cleaning pollution often fall on society in general. As a result profits of corporations are enhanced at the expense of social or ecological welfare.
Regulation is the best way to ensure that companies remain socially responsible.

Supporters of a more Market-based Approach argue that:

Free markets and capitalism have been at the centre of economic and social development over the past two hundred years and that improvements in health, longevity or infant mortality (for example) have only been possible because economies (driven by free enterprise) have progressed.
In order to attract quality workers, it is necessary for companies to offer better pay and conditions which leads to an overall rise in standards and to wealth creation.
Investment in less developed countries contributes to the welfare of those societies, notwithstanding that these countries have fewer protections in place for workers.
Failure to invest in these countries decreases the opportunity to increase social welfare.
Free markets contribute to the effective management of scarce resources. The prices of many commodities have fallen in recent years. This contradicts the notion of scarcity, and may be attributed to improvements in technology leading to the more efficient use of resources.
There may indeed be occasions when externalities, such as the costs of pollution are not built into normal market prices in a free market. In these circumstances, regulatory intervention is possible to redress the balance, to ensure that costs and benefits are correctly aligned.
Whilst regulation is necessary in certain circumstances, over regulation creates barriers to entry into a market. These barriers increase the opportunities for excess profits, to the delight of the market participants, but do little to serve the interests of society as a whole.

The concept is strongly related to other concepts such as Corporate Sustainability, Corporate Transparency, Corporate Accountability, and Corporate Governance.

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End of description Corporate Responsibility. An explanation.