1.

Issues concerning Sustainability

a. What are the 4 factors of sustainability?

The Four Factors of Sustainability are:

 Human sustainability. Human sustainability aims to maintain and improve the human

capital in society. Investments in the health and education systems, access to services, nutrition,

knowledge and skills are all programs under the umbrella of human sustainability. Natural

resources and spaces available are limited and there is a need to balance continual growth with

improvements to health and achieving economic wellbeing for everyone. In the context of

business, an organisation will view itself as a member of society and promote business values that

respect human capital. Human sustainability focuses on the importance of anyone directly or

indirectly involved in the making of products, or provision of services or broader stakeholders.

Human sustainability encompasses the development of skills and human capacity to support the

functions and sustainability of the organisation and to promote the wellbeing of communities and

society.

 Social sustainability. Social sustainability aims to preserve social capital by investing and

creating services that constitute the framework of our society. The concept accommodates a larger

view of the world in relation to communities, cultures, and globalization. It means to preserve

future generations and to acknowledge that whatever we do can have an impact on others and on

the world. Social sustainability focuses on maintaining and improving social quality with concepts

such as cohesion, reciprocity and honesty, and the importance of relationships amongst people.

The principle of sustainable development addresses social and economic improvement that

protects the environment and supports equality, and therefore the economy and society and the

ecological system are mutually dependent.

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  Economic sustainability. Economic sustainability aims to maintain the capital intact. If

social sustainability focuses on improving social equality, economic sustainability aims to improve

the standard of living. In the context of business, it refers to the efficient use of assets to maintain

company profitability over time. Maintaining high and stable levels of economic growth is one of

the key objectives of sustainable development. Abandoning economic growth is not an option, but

sustainable development is more than just economic growth. The quality of growth matters as well

as the quantity.

 Environmental sustainability. Environmental sustainability aims to improve human

welfare through the protection of natural capital (e.g. land, air, water, minerals etc.). Initiatives and

programs are defined environmentally sustainable when they ensure that the needs of the

population are met without the risk of compromising the needs of future generations.

Environmental sustainability places emphasis on how business can achieve positive economic

outcomes without doing any harm, in the short- or long-term, to the environment. An

environmentally sustainable business seeks to integrate all four sustainability pillars, and to reach

this aim each one needs to be treated equally.

b. What are the factors of distributable sustainability?

The term distributable sustainability refers to the true sustainability which depends not just

upon how actions affect choices in the future but also upon how the effects of those actions - both

positive and negative – which are distributed among the stakeholders involved. A central tenet of

this argument is that for a corporate activity to be sustainable, it must not simply utilize resources

to give benefit to owners but must recognize all effects upon all stakeholders and distribute these

in a manner which is acceptable to all of these - both in the present and in the future.

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 Sustainability must involve greater efficiency in the use of resources and greater equity in

the distribution of the effects of corporate activity. To be operationalized then, of course, the effects

must be measurable and the combination must of course be manageable.

This acts as a form of balanced scorecard to provide a form of evaluation for the operation

of sustainability within an organization. It concentrates upon the 4 key aspects, namely:

 Strategy – It must be manageable.

 Finance – It must be measurable.

 Distribution – It must be equitable.

 Technological development – It must be efficient.

c. What is Brundtland and why is it important?

Brundtland Commission was formally known as the World Commission on Environment

and Development (WCED). Its mission is to unite countries to pursue sustainable development

together. At the time the UN General Assembly realized that there was a heavy deterioration of

the human environment and natural resources, it decided to establish the Brundtland Commission

to rally countries to work and pursue sustainable development together.

The Brundtland Report was primarily concerned with securing a global equity,

redistributing resources towards poorer nations whilst encouraging their economic growth. The

report also suggested that equity, growth and environmental maintenance are simultaneously

possible and that each country is capable of achieving its full economic potential whilst at the same

time enhancing its resource base. The report also recognized that achieving this equity and

sustainable growth would require technological and social change.

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 The report highlighted three fundamental components to sustainable development:

environmental protection, economic growth and social equity. The environment should be

conserved and our resource base enhanced, by gradually changing the ways in which we develop

and use technologies. Developing nations must be allowed to meet their basic needs of

employment, food, energy, water and sanitation. If this is to be done in a sustainable manner, then

there is a definite need for a sustainable level of population. Economic growth should be revived

and developing nations should be allowed a growth of equal quality to the developed nations.

Most agree that the central idea of the Brundtland Commission's definition of "sustainable

development" is that of intergenerational equity. In sum, the "needs" are basic and essential,

economic growth will facilitate their fulfillment, and equity is encouraged by citizen participation.

Therefore, another characteristic that really sets this definition apart from others is the element of

humanity that the Brundtland Commission integrates.

2. Ethics, Corporate Governance and Corporate Behavior

a. What are the responsibilities of business in their corporate decisions?

Responsibility to Employees. An organization’s first responsibility is to provide a job to

employees. Keeping people employed and letting them have time to enjoy the fruits of their labor

is the finest thing business can do for society. Beyond this fundamental responsibility, employers

must provide a clean, safe working environment that is free from all forms of discrimination.

Companies should also strive to provide job security whenever possible. Enlightened firms are

also empowering employees to make decisions on their own and suggest solutions to company

problems. Empowerment contributes to an employee’s self-worth, which, in turn, increases

productivity and reduces absenteeism.

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 Responsibility to Customers. To be successful in today’s business environment, a

company must satisfy its customers. A firm must deliver what it promises, as well as be honest

and forthright in everyday interactions with customers, suppliers, and others. Recent research

suggests that many consumers, particularly millennials, prefer to do business with companies and

brands that communicate socially responsible messages, utilize sustainable manufacturing

processes, and practice ethical business standards.

Responsibility to Society. A business must also be responsible to society. A business

provides a community with jobs, goods, and services. It also pays taxes which the government

uses to support schools, hospitals, and better roads.

Responsibility to Environment. Business is also responsible for protecting and improving

the world’s fragile environment. The world’s forests are being destroyed fast. Every second, an

area the size of a football field is laid bare. Plant and animal species are becoming extinct, a

continent-size hole is opening up in the earth’s protective ozone shield, and we throw out tons of

non-biodegradable materials every day.

Responsibility to Philanthropy. Companies also display their social responsibility

through corporate philanthropy. Corporate philanthropy includes cash contributions, donations of

equipment and products, and support for the volunteer efforts of company employees.

Responsibility to Investors. Companies’ relationships with investors also entail social

responsibility. Although a company’s economic responsibility to make a profit might seem to be

its main obligation to its shareholders, some investors increasingly are putting more emphasis on

other aspects of social responsibility.

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 b. Why does a company have to be ethical?

Ethics concern an individual’s moral judgements about right and wrong. Decisions taken

within an organization may be made by individuals or groups, but whoever makes them will be

influenced by the culture of the company. The decision to behave ethically is a moral one;

employees must decide what they think is the right course of action. This may involve rejecting

the route that would lead to the biggest short-term profit.

Ethical behaviour and corporate social responsibility can bring significant benefits to a

business. For example, they may:

 Attract customers to the firm’s products, which means boosting sales and profits

 Make employees want to stay with the business, reduce labour turnover and therefore

increase productivity

 Attract more employees wanting to work for the business, reduce recruitment costs and

enable the company to get the most talented employees

 Attract investors and keep the company’s share price high, thereby protecting the business

from takeover.

Knowing that the company they deal with has stated their morals and made a promise to

work in an ethical and responsible manner allows investors’ peace of mind that their money is

being used in a way that arranges with their own moral standing. When working for a company

with strong business ethics, employees are comfortable in the knowledge that they are not by their

own action allowing unethical practices to continue. Customers are at ease buying products or

services from a company they know to source their materials and labour in an ethical and

responsible way.

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 For example, a coffee company which states all their raw beans are picked from sustainable

plants where no deforestation has occurred, by people paid a good living wage, in an area where

investments have been made to ensure that producing the coffee for a foreign market has not

damaged the local way of life, will find that all these elements of their buying strategy becomes a

selling point for their final product.

A company which sets out to work within its own ethical guidelines is also less at risk of

being fined for poor behaviour, and less likely to find themselves in breach of one of a large

number of laws concerning required behaviour for corporate entities.

Reputation is one of a company’s most important assets, and one of the most difficult to

rebuild should it be lost. Maintaining the promises it has made is crucial to maintaining that

reputation.

c. What is the relationship between CSR and corporate behaviour?

Corporate behaviour is important for company success both financially and concerning the

relationship between corporate and business interests of stakeholders. We cannot define corporate

behaviour without an ethical and CSR base in order to refer to that behavioral aspect. Corporate

behaviour involves legal rules, ethical codes of conduct and social responsibility principles. In

other words corporate behaviour is based on all of these components and involves law, ethics and

CSR. It is important to recognize also that this behaviour must not only be ethical but must also be

seen to be ethical - perceptions are very important.

Corporate behaviour has effects not only on stakeholders and shareholders but also on the

entire economy. When a corporation acts ethically and responsibly in its business decisions and

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strategic planning then that corporation will be more sustainable. Socially responsible corporate

behaviour is increasingly seen as essential to the long term survival of companies.

Corporate behavior and CSR are much interconnected. CSR is the social responsibility of

business which encompasses the economic, legal, ethical, and discretionary expectations that

society has of organizations at a given point in time. It can also be defined as societal expectations

of corporate behavior; a behavior that is alleged by a stakeholder to be expected by society or

morally required and is therefore justifiably demanded of a business

Corporate behaviour toward the stakeholders is becoming a much more important concept

in practice and a central part of corporate governance. To be a socially responsible corporation, a

company must be more than a legal and ethical entity. Corporate bahavior, in other words, provides

the platform upon which social responsibility is built.

d. Is corporate governance a legal necessity? Why?

Due to the widely-known corporate scandals (ex. WorldCom and Enron) which rocked the

entire world in the recent history, corporate governance has gained an increasing interest from

different arrays of stakeholders. Several regulatory laws have been passed both in the international

trading market and in the local economy to counter the possibility of great corporate mishaps. The

Sarbañes-Oxley Act is only one of the most popular laws which imposes a legal necessity for

corporations to maintain good corporate governance. Aside from the fact that it is the legal law

which grants a judicial personality to a corporation, its deviance from statutes and laws on

corporate governance will implicate many legal consequences which may involve a fine and/or

imprisonment.

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 e. Why is corruption a problem for corporations?

When corruption is rife in a business, the general business climate is affected because the

public trust has been jeopardized. Corruption may wear many faces, from extortion, to

embezzlement, to bribery. The existence of this robs many businesses of not only their profits but

also of their credibility in the eyes of their customers. There are numerous adverse effects of

corruption

Lost Business Resources. A significant effect that corruption has on a business is

economic losses. When a corrupt professional within a company has stolen a considerable amount

of money and wants to cover up his sins, the business may boost its employee ranks in order to

achieve higher sales volume. Of course, the increase in employee ranks will have adverse financial

impact on the company’s performance. Moreover, the embezzled money is a financial loss which

could have been used for the company’s operations. The burden for such losses will ultimately be

passed to the consumers through inflated prices or reduced product quality.

Weakened Business Development. Misappropriation of assets deprives the company of

opportunities to enhance its corporate performance. The resources which falls to the deep pockets

of self-serving individuals within the company could have been used to further improve product

offerings, manufacturing design, customer service, and other relevant aspects of operation.

Decrease in Productivity. When businesses engage in corruption, it works as a trickle-

down effect which increases negativity in the workplace. The presence of corruption creates an

atmosphere of hatred, envy, and discontent which leads the employees to be unmotivated, thereby

reducing the overall productivity of the company.

Discouraged Shareholders. Even the smallest hint of corruption can ruin the image of a

company in the eyes of its shareholders. Knowing that the shareholders are very protective of their

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invested capital, a smell of corruption may spoil their future plans of reinvestments. Prospective

shareholders who are well-aware that corrupt practices exist in a certain business will absolutely

keep their resources away from it.

Damage to the Business’s Brand. When a firm is exposed to corruption, it is bound to

receive massive damage to its corporate image. If the corrupt activity makes it to ears of the public,

it will cause an unfavorable shift in stakeholders’ opinion which might actually be irreversible.

Rebuilding the brand of the business is never easy or swift, and it may well take many years and a

massive PR campaign to achieve, which the business may not be able to afford. Consequently, the

business may never be able to achieve the once-lofty levels of trust it had occupied in the hearts

of its customers.

3. Risk Management and Corporate Governance

a. What is the relationship between a beta value and the level of risk?

Beta is a measure of a stock's volatility in relation to the market. By definition, the market

has a beta of 1.0, and individual stocks are ranked according to how much they deviate from the

market. A stock that swings more than the market over time has a beta above 1.0. If a stock moves

less than the market, the stock's beta is less than 1.0. High-beta stocks are supposed to be riskier

but provide a potential for higher returns; low-beta stocks pose less risk but also lower returns.

Beta is a key component for the capital asset pricing model (CAPM), which is used to

calculate the cost of equity. The cost of capital represents the discount rate used to arrive at the

present value of a company's future cash flows. All things being equal, the higher a company's

beta is, the higher its cost of the capital discount rate. The higher the discount rate, the lower the

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present value placed on the company's future cash flows. In short, beta can impact a company's

share valuation.

b. Discuss the different risk management strategies.

Risk management is the identification, assessment, and prioritization of risks or

uncertainties followed up by minimizing, monitoring and controlling the impact of risk realities or

enhancing the opportunity potential by applying coordinated and economical resources.

Risk management is essential in any business. It lays foresight for returns on investments

and projects, and all potential backlash a company could face by starting a new (or even routine)

endeavour. Below are the steps in risk management:

 Identify the risk. Risks include any events that cause problems or benefits. Risk

identification begins with the sources of internal problems and benefits or those of

competitors. Risks can be internal or external, so software can be used to identify

the wide range of risk possibilities.

 Analyze the risk. Once you have identified risks, you can thoroughly analyze the

potential effects that each will have on consumer behavior, your company and other

current endeavors.

 Evaluate the risk. Now you can assign a ranking quality to the likelihood of each

risk’s outcomes. This will help paint a picture around how severely a risk threatens

a project or new product. You can also determine the magnitude that each risk

potentially carries to destroy or support a new tactic. The magnitude is a

combination of the risk likelihood and consequence.

 Treat the risk. Since you have a grip on all possible risks and their severity, you

can begin to treat the worst risks first. You’ll first want to look at the ways you can

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 reduce the probability of a negative risk and then how to increase the probability of

a positive opportunity. At this stage of risk assessment, preventative and

contingency should be prepared so that there are no surprises as your move forward

with action plans.

 Monitor the risk. By now, you know your risks, their likelihood, what will happen

if they occur and how to go about defusing any disaster that arises. What next?

Monitor the risks by tracking involved variables and proposed possible threats to

chain reactions. As your tracking system identifies changes, calmly treat the rising

problem to avoid widespread ripple effects and the triggering of a big risk.

The next important wave of risk management is treating the risk. There are several ways

to treat risk, and they all depend on what type of risks are being treated and how serious those

risk’s repercussions or opportunities are.

Best strategies for treating the risk:

 Avoidance. Best case scenario, you can avoid risk repercussion altogether. But in forfeiting

all activity that carries risk, you also forfeit all associated potential return and opportunity.

It is up to you what type of risk activity you want to play with.

 Reduction. Risk reduction implements small changes to reduce the weight of both risk and

reward post-event. The reduction will require some process and plan manipulation, but it

will save your company from a severe loss in the case of a high-risk manifestation.

 Sharing. Risk sharing or transferring redistributes the burden of loss or gain over multiple

parties. This could include company members, an outsourced entity or an insurance policy.

 Retention. Risk retention involves assuming the loss or gain, entirely. This option is best

for small risks where the losses can be easily absorbed and made up.

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 c. Describe the different attitudes to risk.

Different people have different attitudes toward the risk-return trade-off.

 People are risk averse when they shy away from risks and prefer to have as much

security and certainty as is reasonably affordable in order to lower their discomfort

level. They would be willing to pay extra to have the security of knowing that

unpleasant risks would be removed from their lives. Economists and risk

management professionals consider most people to be risk averse.

 A risk seeker, on the other hand, is not simply the person who hopes to maximize

the value of retirement investments by investing the stock market. Much like a

gambler, a risk seeker is someone who will enter into an endeavor (such as

blackjack card games or slot machine gambling) as long as a positive long run

return on the money is possible, however unlikely.

 Finally, an entity is said to be risk neutral when its risk preference lies in between

these two extremes. Risk neutral individuals will not pay extra to have the risk

transferred to someone else, nor will they pay to engage in a risky endeavor. To

them, money is money. They don’t pay for insurance, nor will they gamble.

Economists consider most widely held or publicly traded corporations as making

decisions in a risk-neutral manner since their shareholders have the ability

to diversify away risk—to take actions that seemingly are not related or have

opposite effects, or to invest in many possible unrelated products or entities such

that the impact of any one event decreases the overall risk. Risks that the

corporation might choose to transfer remain for diversification.

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 d. How does Corporate Governance affect the cost of capital?

A firm’s cost of capital reflects investors’ required return based on the firm’s systematic

risk. A number of possible risks arise when corporate governance is weak. As external monitoring

becomes more difficult, insiders may not pursue value maximizing strategies, instead opting for

strategies that entrench their positions. For example, excessive borrowings and empire building

expansions are typical self-serving activities that also increase a firm’s exposure to market-wide

risk and ultimately, increase the cost of capital. Furthermore, weak governance often results in a

lack of corporate transparency, which translates into higher issuance and transaction costs. This

increases a firm’s cost of capital even further.

e. List the different types of risk to which a corporation is exposed.

1. Market risk. The risk of investments declining in value because of economic

developments or other events that affect the entire market. The main types of market

risk are equity risk, interest rate risk and currency risk.

a. Equity risk - applies to an investment in shares. The market price of shares varies

all the time depending on demand and supply. Equity risk is the risk of loss because

of a drop in the market price of shares.

b. Interest rate risk - applies to debt investments such as bonds. It is the risk of losing

money because of a change in the interest rate.

c. Currency risk – applies when you own foreign investments. It is the risk of losing

money because of a movement in the exchange rate.

2. Liquidity risk. The risk of being unable to sell your investment at a fair price and get your

money out when you want to. To sell the investment, you may need to accept a lower price.

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 In some cases, such as exempt market investments, it may not be possible to sell the

investment at all.

3. Concentration risk. The risk of loss because your money is concentrated in one

investment or type of investment. When you diversify your investments, you spread the

risk over different types of investments, industries and geographic locations.

4. Credit risk. The risk that the government entity or company that issued the bond will run

into financial difficulties and won’t be able to pay the interest or repay the principal at

maturity. Credit risk applies to debt investments such as bonds. You can evaluate credit

risk by looking at the credit rating of the bond.

5. Reinvestment risk. The risk of loss from reinvesting principal or income at a lower interest

rate. Suppose you buy a bond paying 5%. Reinvestment risk will affect you if interest rates

drop and you have to reinvest the regular interest payments at 4%. Reinvestment risk will

also apply if the bond matures and you have to reinvest the principal at less than 5%.

Reinvestment risk will not apply if you intend to spend the regular interest payments or the

principal at maturity.

6. Inflation risk. The risk of a loss in your purchasing power because the value of your

investments does not keep up with inflation. Inflation erodes the purchasing power of

money over time – the same amount of money will buy fewer goods and services. Inflation

risk is particularly relevant if you own cash or debt investments like bonds. Shares offer

some protection against inflation because most companies can increase the prices they

charge to their customers. Share prices should therefore rise in line with inflation.

Real estate also offers some protection because landlords can increase rents over time.

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 7. Horizon risk. The risk that your investment horizon may be shortened because of an

unforeseen event, for example, the loss of your job. This may force you to sell investments

that you were expecting to hold for the long term. If you must sell at a time when the

markets are down, you may lose money.

8. Longevity risk. The risk of outliving your savings. This risk is particularly relevant for

people who are retired, or are nearing retirement.

9. Foreign investment risk. The risk of loss when investing in foreign countries. When you

buy foreign investments, for example, the shares of companies in emerging markets, you

face risks that do not exist in Canada, for example, the risk of nationalization.

4. Globalization and Corporate Governance

a. What is the main indication of globalization?

We often hear the word globalization in many contexts and repeated frequently as a concept

to denote more trade, foreign companies, and even the ongoing economic crisis.

Globalization is the free movement of goods, services and people across the world in a

seamless and integrated manner. Globalization can be thought of to be the result of the opening up

of the global economy and the associated increase in trade between nations. In other words, when

countries that were previously closed to trade and foreign investment open up their economies and

go global, the result is an increasing interconnectedness and integration of the economies of the

world. This is a brief introduction to globalization.

Further, globalization can also mean that countries liberalize their import protocols and

welcome foreign investment into sectors that are the mainstays of its economy. What this means

is that countries become magnets for attracting global capital by opening up their economies to

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multinational corporations. Globalization also means that countries liberalize their visa rules and

procedures so as to permit the free flow of people from country to country. Moreover, globalization

results in freeing up the unproductive sectors to investment and the productive sectors to export

related activities resulting in a win-win situation for the economies of the world.

Globalization also means that countries of the world subscribe to the rules and procedures

of the WTO or the World Trade Organization that oversees the terms and conditions of trade

between countries. There are other world bodies like the UN and several arbitration bodies where

countries agree in principle to observe the policies of free trade and non-discriminatory trade

policies when they open up their economies.

b. How does globalization affect corporate governance?

The impact of globalization extends from human and social or ethical perspective to the

strategic or technological perspective. Thus it has a wide scope and its impact Corporate Social

Responsibility of companies across the globe is very significant.

Due to liberalization of economy, several organizations have taken a number of steps to

improve operational efficiency. In response, public pressure has increased for businesses to take

on more social responsibility and operate according to higher levels of ethics. Firms in developed

nations now promote, and are often required by law to observe, non-discriminatory policies for the

hiring, treatment, and pay of all employees

However, on the recruitment front, as globalization evolves from being a mere corporate

buzzword to basic economic reality, more and more organizations are realizing that they need

managers and workers with skills that conform to the international standards.

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 Globalization has necessitated certain structural adjustments (restructuring and

diversifications), which has led to cutting off the jobs and recession in the employment scenario.

Privatization proved a major thrust to promote global trends. Eventually, the trade unions become

concerned about their job loss and potential adverse effects on their group dynamics and their

rights. The right to strike which has been restricted or denied in public services is now made

available to private enterprises.

In developing countries like the Philippines, a business can succeed only if the industries

maintain good relationships with all their stakeholders. These relationships can be strengthened. It

gives the business the right to build or rent facilities, benefit from the tax revenues raised in the

form of local services, infrastructure, etc.

Hence business and society are bound by contracts in which they operate. While business

is expected to create wealth and provide opportunity for employment, society is expected to

provide an environment conducive for business. As business depends on the community in which

it operates, society also expects business to make its contribution to the community.

c. Why is global governance an issue and what form might it take?

Global governance is a purposeful order that emerges from institutions, processes, norms,

formal agreements, and informal mechanisms that regulate action for a common good. Global

governance encompasses activity at the international, transnational, and regional levels, and refers

to activities in the public and private sectors that transcend national boundaries. In this conception

of global governance, cooperative action is based on rights and rules that are enforced through a

combination of financial and moral incentives. The concept of global governance raises two sets

of, as yet, unresolved issues. One has to do with claims of the legitimate exercise of authority, the

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other with democratic values. In contrast to theories of governance at local and national levels,

a social contract between citizens and institutions of global governance has not been developed

sufficiently to constitute a sufficient basis for legitimacy. In its current conception, global

governance implies democratic governance. However, the reliance on scientific and professional

bodies to set standards, rules, and procedures, on bureaucratic agencies of the state to implement

policies, and on voluntary organizations to monitor compliance, none of which are based on

democratic principles of representation or equal participation, raises questions about the

compatibility of democratic values and the concept of global governance.

d. Is the reason for the big corporate scandals irresponsible management?

Why?

Enron, WorldCom, Parmalat, and various other failures of global corporations bring out

some governance issues and have increased attention to the role of business ethics. Managers and

CEOs of these companies must be considered responsible for all of these failures and these are

cases of "corporate irresponsibility". Many people have the opinion that if corporations were to

behave responsibly, most probably corporate scandals would stop.

Corporate governance protects firms against some long term loss. When corporations have

social responsibilities, they calculate their risk and the cost of failure. Firstly, a company has to

have responsibility to shareholders and also all stakeholders which means that it has responsibility

to all society. Corporate failures have an important impact on all society also. In particular, big

scandals such as Enron have sharply affected the market and the economy. Various stakeholders

(e.g. employee, customer, consumer, suppliers etc) as well as shareholders and regulators of the

firm have a responsibility to ensure good performance. Therefore, corporate governance is not

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only related to firms but also related to all society. So changing the role of corporate responsibility

shifts the focus from the real problem that society needs to address.

One of the reasons for this result is increasing competition between the company and the

market. Managers tend to become much more ambitious than before in their behaviour and status

in the globalized world. Thus we have to focus on corporate and managerial behaviour. The

question is how to behave as a socially responsible manager and how to solve this vital problem

in business life and in society. In the business world there are always some rules, principles and

norms as well as regulations and some legal requirements.

However, to be socially responsible one must be more than simply being a law abiding

person who has to be capable of acting and being held accountable for decisions and actions. The

problem is the implication for all of these directions for company and managerial behaviour. On

the other hand, one perspective is that a corporation is a "legal person" and has the rights and duties

that go with that status-including social responsibility. In the case of Enron, managers were aware

of all regulations, even though they have known all irresponsible and unethical problems in the

company management, they did not change their approach and behaviour.

The conclusion is that it is not always possible to control behaviour and corporate activity

with regulations, rules and norms. So another question arises in this situation, that if people do not

know their responsibility and socially responsible things to do and if they do not behave socially

responsibly then, who will control this problem in business life and in the market. The concern is

that the social responsibility implication of the company cannot be controlled through legal means.

This is the only social contract between mangers and society and stakeholders of the company and

for responsible and accountable behaviour.

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 e. What is the relationship between crisis and regulation?

Regulation is of critical importance in shaping the welfare of economies and society. Costly

regulation can mitigate the probability of the crisis. Tranquil time, when the crisis would not take

place, reduces the regulation intensity. If the spell of no crisis is long enough, the regulation level

may drop to zero, despite the fact that the socially optimal regulation level remains positive. The

challenges facing the regulator are aggravated by asymmetric information, as is the case when the

public does not observe regulator's effort. Higher regulator effort, while helping avoiding a crisis,

may be confused as a signal that the environment is less risky, reducing the posterior probability

of the crisis, eroding the support for costly future regulation. The other side of the regulation

paradox is that crisis resulting with unanticipated high costs may induce over-regulation and

stagnation, as the parties that would bear the cost of the over regulation are underrepresented in

the decision making process. While, a regulatory structure that mitigates the above concerns,

including information disclosure; increasing the independence of the regulatory agency from the

political process; centralizing the regulatory process and increasing its transparency; and adopting

global standards of minimum prudential regulations and information disclosure, are commonly

being preferred by domestic regulators.

5. Discuss the benefits of adopting good corporate governance principles to:

a. Charities

In the charitable sector, stakeholders expect a high level of corporate governance. It is no

longer enough for a charity to merely meet its objectives; it also needs to demonstrate good

corporate governance through ethical behaviour and rigorous corporate practices. Also, recent

media reports on transgressions by certain charities have raised queries as to how charitable

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funding is obtained. The result is that the issue of corporate governance has become more relevant

than ever.

The impact of unsound corporate governance practices can have an adverse effect on many

areas of critical concern for charities:

Charitable Status. In the Philippines, charities may be able to avail of certain tax

exemptions. These exemptions are reviewed and monitored by BIR on a continuous basis. These

tax exemptions may be lost where charitable organisations fail to adhere to the highest standards

of corporate governance across all aspects of their organisation, both internal and external. This

will not only affect future revenues as income from previous years may also become taxable.

Charitable Donations. Charities are primarily dependent on the good will of the public in

terms of once off financial contributions and ongoing subscriptions. Such donations ensure that

the objects of the charity are achieved on an ongoing basis. When questions arise as to how these

funds are being expended, the knock on effect on the amount of donations is detrimental.

Publicity. There is a slogan that “there is no such thing as bad publicity”. However, this

does not apply to charities. Given the moral and ethical standing surrounding the causes which

charities support, publicity which raises concern or questions in terms of how a charity is managed

or controlled or as to how funds are being disbursed, creates undesirable attention in the public

eye.

Associated Persons. It is often the case that charities benefit from the support of a celebrity

whether it is a sporting, entertainment or other well-known person or group. The value of such

relationships can be by way of monetary support, increased publicity and other factors. To ensure

the ongoing backing of such individuals, charities must ensure that their corporate governance

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record is unblemished and that there is no question as to whether these relationships are of benefit

to all parties.

It is important that corporate governance is an integral aspect of leadership rather than a

matter which only receives consideration when deemed absolutely necessary. As it is the people

who run the organisation who are responsible, a good board of directors should always aim to be

proactive, ethical, fair and diligent in matters surrounding corporate governance.

b. Social Enterprises

Governance is formally defined as systems and processes that ensure the overall direction,

effectiveness, supervision and accountability of an organization. Governance mechanisms can

include governing boards, monitoring systems and signalling mechanisms like reporting or codes

of conduct. Creating and managing boards, while acknowledging that the governance of social

enterprises covers a broader field than governing boards is a vital function of good governance.

Social enterprises address the most pressing problems societies face through employing scalable,

self-sustainable and innovative business models. They must balance financial responsibilities and

social impact and must coordinate among multiple stakeholder groups, including investors,

employees, regulators, clients and beneficiaries. As a result, social enterprise leaders manage

complex trade-offs. A carefully selected, well-designed and well-managed board will help the

social enterprise reach its goals. Yet many social enterprise leaders are reluctant to set up a board.

They express concern that a board will limit their management team’s effectiveness. While this is

a valid concern, it demonstrates the lack of understanding of how boards can facilitate an

enterprise’s success and make the management team’s work easier. Furthermore, of those social

enterprises that have a board, many fail to engage their board actively in the strategic guidance and

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oversight of their organization. This represents a lost opportunity. Most countries have developed

guidelines around governance and boards for the corporate and often also for the non-profit sector.

c. Small Companies

Corporate governance is often associated with public companies, but small businesses can

also benefit from this practice. Corporate governance consists of rules that direct the roles and

actions of key people rather than processes. Unlike simple policies and procedures, such as a dress

code or expense reimbursement procedure, corporate governance rules focus on creating better

management and fewer ethical or legal problems.

Examples of corporate governance include setting rules for using business funds for

personal use; serving on a board of directors; hiring family members; conflicts of interest;

notifying owners, investors and partners of key meetings and decisions; and disbursing profits.

Small companies may benefit from good governance through the following:

Improves the Company's Reputation. A corporate governance program can boost your

company's reputation. If you publicize your corporate governance policies and detail how they

work, more stakeholders will be willing to work with you. This can include lenders who see you

have strong fiscal policies and internal controls, charities you might partner with to promote your

business, government agencies, employees, the media, vendors and suppliers. The practice of

sharing internal information with key stakeholders is known as transparency, which allows people

to feel more confident you have little or nothing to hide.

Fewer Fines, Penalties, Lawsuits. Corporate governance includes instituting policies that

require the company to take specific steps to stay compliant with local and national rules,

regulations and laws. For example, as part of corporate governance, an executive management

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team or board of directors might conduct a review of the company’s hiring practices if it falls under

the guidelines of the DOLE. You might require that your accounting department undergo an

external audit by an independent auditor every quarter or year.

Decreased Conflicts and Fraud. Corporate governance limits the potential for bad

behavior of employees by instituting rules to reduce potential fraud and conflict of interest. For

example, the company might draft a conflict of interest statement that top executives must sign,

requiring them to disclose and avoid potential conflicts, such as awarding contracts to family

members or contracts in which an executive has an ownership interest. The company might forbid

loans to officers and family members or the hiring of family members. External audits or requiring

checks over a certain amount to be approved and signed by two people help reduce errors and

fraud.

6. CSR and Corporate Governance

a. What are the principles of CSR?

Consumers today expect a lot out of companies. According to a study by Cone

Communications, 9 out of 10 consumers expect companies to operate responsibly and address

social and environmental issues rather than simply make a profit. In addition, 84 percent of

consumers seek out responsible products.

To please consumers, many companies now practice corporate social

responsibility. Corporate social responsibility (CSR), also known as corporate citizenship, is a

business concept in which social and environmental concerns are integrated into a company’s

operations. Some refer to CSR as conscious capitalism, in which businesses “serve the interests of

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all major stakeholders—customers, employees, investors, communities, suppliers, and the

environment.”

Although there are multiple versions of CSR, the general main categories of CSR include

environmental efforts, philanthropy, ethical labor practices, and volunteerism.

Environmental Efforts. The primary focus of many companies in their commitment to

CSR is through environmental efforts. For example, companies can have a large carbon footprint

on the environment, which is the amount of greenhouse gases, especially carbon dioxide, emitted

by an individual, organization, process, event, structure, or product. Any action taken to reduce a

carbon footprint is considered beneficial for the environment. These efforts have included

minimizing the amount of land occupied or used, constructing/occupying energy-efficient

buildings, planting trees in the rainforest, and using locally sourced products.

Philanthropy. Many companies practice CSR by donating to various charities, starting

charitable programs, and offering scholarships to underprivileged students wanting to attend

college. Gawad Kalinga, SM Foundation, Ayala Foundation, Gokongwei Brothers Foundation,

MVP Sports Foundation, and Bantay Bata 163 are but few examples of philanthropic arms of big

companies in the Philippines.

Ethical Labor Practices. Labor practices are often controversial from an ethical

perspective. For example, Apple’s iPhones contain parts from companies in other countries.

Specifically, the tin, which is used for a part, comes from mines in Indonesia. With labor laws that

vary from one country to another, the company exercised due diligence in ensuring that its sourcing

companies follow all applicable labor laws in their country of operation. But it was revealed to

consumers in the United States that the tin was mined from companies in Indonesia that use child

labor. Moreover, during the mining process, laborers as young as 12 years old were subject to the

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hazards of unstable soil. US consumers were appalled. To address the issue, Apple instituted more

robust labor practices, which were communicated to consumers. In a statement, Apple said, “the

simplest course of action would be for Apple to unilaterally refuse any tin from Indonesian mines.

That would be easy for us to do and would certainly shield us from criticism. But that would also

be the lazy and cowardly path, since it would do nothing to improve the situation. We have chosen

to stay engaged and attempt to drive changes on the ground.” For improved transparency, Apple

has released annual reports that include details of its work with suppliers and their labor practices.

Recent investigations have shown some improvements to the working conditions of the employees

of Apple’s suppliers.

Volunteerism. Many companies are encouraging volunteerism by incorporating it into

their policies and establishing employee volunteer programs. For example, some companies make

a donation to the charities their employees volunteer at, in the amount equivalent to the employees’

regular pay for the same number of hours volunteered. Other companies offer gift cards to

employees who volunteer. Companies are finding creative ways to encourage and reward the

volunteerism of employees not only to help society and the environment but also so that consumers

and stakeholders will perceive them as socially responsible.

b. Should CSR be a voluntary activity?

The debate of CSR has been ongoing for decades; this has brought about confusions on

what exactly companies should perform. The questions of what categorizes the components of

CSR has still been left an answered. Now CSR is taking a new turn in which it will be considered

statutory, this has gained wide concerns and arguments. CSR has been understood in four main

approaches through its responsibilities which are; economic responsibility, legal responsibility,

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ethical responsibility and philanthropic responsibility. Now that CSR has become a quotient of

great importance we can see it reflected globally in its requirements from country to country. Some

countries have made it mandatory through constitutional obligations while others have made it

voluntary. This has raised more concerns amongst shareholders and company owners. These

arguments have been broadly supported with the following points; triple taxation, kills competitive

spirit, multiplier effect of CSR, company as legal citizen, deviation from the basic principles of

CSR, shifting of government responsibilities to companies, corporation is not a charity, and

donations. On the other hand, the altercation of mandatory CSR has been very well articulated

in the following points: prevention of corporate conflict, fulfil long term interest, establish better

image, reputation and goodwill, prevention of costly regulation and control, prevent misuse

of national resource and economic power and it support the role of government to the society.

For me, the duty of corporations to contribute to overall improvement of the society’s well-being

should prevail over its duty to fill the pockets of its shareholders.

c. What is the relationship between CSR and profit?

It is a genuine concern for corporations to consider whether CSR (Corporate Social

Responsibility) should be given more priority than making profits. There are two kinds of opinions

on this issue; one is the ''burden'' opinion, which means the practice of CSR is a burden on

corporations and should be abandoned, and the other one is the ''proliferation'' opinion, which

means corporations can make handsome profits by good performance of CSR. In fact, corporations'

attitudes toward CSR mainly depend on the fitness of CSR with profits. Corporations will usually

hold a positive attitude if their practice of CSR contributes to the increase of profits. Otherwise,

they will hold a negative attitude towards CSR.

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 d. What is the relationship between CSR and Corporate Governance?

The conceptualization of CSR was, initially, purely in terms of philanthropy or charity.

However, the post- liberalization phase has seen a fundamental shift from this philanthropy-based

model of CSR to a stakeholder-participation based model. Furthermore, CSR is gradually getting

fused into companies’ Corporate Governance practices. Both Corporate Governance and CSR

focus on the ethical practices in the business and the responsiveness of an organization to its

stakeholders and the environment in which it operates. Corporate Governance and CSR results

into better image of an organization and directly affects the performance of an organization. It is

pertinent to mention here that transparency, disclosure, sustainability and ethical behaviour is

central theme in both CSR and Corporate Governance. Further, it is worthwhile to mention that

CSR is based on the concept of self-governance which is related to external legal and regulatory

mechanism, whereas Corporate Governance is a widest control mechanism within which a

company takes it management decisions. Furthermore, the objectives and benefits of CSR and

Corporate Governance are similar in nature, some of them are stated herein below:

 Rebuilding of public trust and confidence by increased transparency in its financial as well

as non-financial reporting and thereby increasing the shareholder value.

 Establishing strong brand reputation of the company.

 Making substantial improvement in its relationship with various stakeholders.

 Contributing to the development of the region and the society around its area of operation

 Addressing the concerns of its various stakeholders in a balanced way so as to maintaining

a strong market position.

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 e. Is CSR a legal necessity? Why?

Although corporate social responsibility (CSR) seems to have become a buzzword in recent

years, business has always been concerned about society and the environment. Their relationship

is ultimately symbiotic: neither can or will a company thrive in a failing society, nor can a society

prosper without a successful expanding economy.

The increasing globalization of the world economy has led to significant changes in supply

and value chains and in the division of labor. Doing business and manufacturing goods have

become more complex, as enterprises wishing to do international business have to comply with

more and more legal and ethical standards (the Philippines just added data privacy rules that will

affect every organization). As a result, CSR has become a kind of voluntary necessity rather than

an explicit choice. As Gawad Kalinga founder Tony Meloto said before: “Mere charity is not

working.” In order to succeed globally, businesses have to respond to certain expectations and

align their strategies and operations to universal values.

These expectations and values become especially evident when tragic incidents prove weak

standards, like the collapse of the garment factory in Bangladesh or the fire in the plant in

Valenzuela, where many workers lost their lives. Manufacturers came under fire for their supply

chain responsibility. Public pressure prompted companies to improve attention to safety

requirements and labor/human rights issues.

Beyond human rights issues, the public’s attention has also been drawn to questions of

environmental sustainability. The late DENR Sec. Gina Lopez had this high on her agenda.

Thousands of Filipinos, who were inspired by here tenacity in protecting and preserving the

environment, have now raised their voices to call for more environmentally-sustainable measures.

Many local and foreign businesses have responded to these concerns.

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 f. Is globalization an opportunity or threat to CSR?

There is no certain answer for this question and it depends on from where we are observing.

No doubt globalization has varied effects on social responsibility of a company and behavior of

managers. Some of these effects are motivating companies towards socially responsible behavior,

while others are destroying fair business and principles, norms and regulations which are mainly

result of increasing competition.

On one hand, globalization enabled companies to reach to larger consumer base and

provided opportunities for collaboration with other companies but it is also true that it has led

imperfect competition of big companies (in terms of turnover, market capitalization and assets)

with small and medium size companies. Well regulated and controlled markets are not a big

problem and threat, but the lack of regulation and norms is what creates main problem especially

in developing countries as globalization has huge influence in these economies.

The relationship between business and society is still a complicated process and CSR

implementation becomes one of important issues in globalized economies and markets. CSR

provides the required rules for determination of relationship between corporation and society. Thus

CSR is not merely a process but a long term strategic approach by companies that need to adopt

socially responsible behavior with the decision makers enforcing the principle guidelines of CSR

in the company. The long term perspective to CSR helps company earn benefits concerning profits

as well as stakeholder interests in company. Studies and researches have shown relationship

between CSR and corporate financial performance also existence of slack resources resulting from

better financial performance made when companies invest in areas that are related to social actions.

It has also been found that good management practices resulting from engagement in social actions

enhance relationship with stakeholders adding to financial performance.

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 The buying behavior of consumers in globalized world is also influenced by social behavior

of companies and hence CSR provides some opportunities to company to gain visibility in the eyes

of consumers. Consumers want the company, they are associated with, to behave properly with its

suppliers and their suppliers to treat the laborers fairly, even if consumers are in far distant

countries. Any unethical behavior company comes into notice of consumers which adversely

affects the sales of the respective company.

Therefore, from this aspect globalization has a multidimensional effect relating to socially

responsible behavior. Good or bad behavior is easily visible around the world with the

advancement in technology and all stakeholders of a company will be aware. A company will be

affect with this fact both ways, good behavior will affect positively but unethical behavior will

undoubtedly have negative effect. Thus proper socially accepted behavior is the only way

companies can survive. To summarize, a firm has investment in reputation as well and hence

increase in perceived social responsibility improves the image and permits it to exchange costly

explicit claims for less costly implicit charges. Contrary to this, decline in this image results in

increase in costly explicit claims.

g. What is the effect of globalization to CSR?

According to calculations of John Maynard Keynes, the standard of living has increased

100 percent over four thousand years. With passing days there is economic growth all around, and

there is nothing new about economic growth and globalization. Economic growth which is a world

phenomenon brings some consequences for society and one of the important reasons is that we do

not take into account moral, ethical and social aspects of this process. Theorists have indicated the

implications of the rapid changing global economics and have said that economic growth and

economic development might not be without social and moral consequences and implications.

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 Business world is responsible to shareholders for making profit, therefore they take risk for

their profit/benefit. This risk is not opposed to social or moral principles which they formulate for

their company but may be to principles of society and environment. Increasing competition makes

business difficult in globalized world and hence the risk taking tendency increases.

Another major scenario where we can see effect of globalization on CSR in the consumer

domain. According to international norms (practices) and expectation of consumers, companies

have to take into account social, ethical and environmental issues because now, the cost of products

and services is not the only criteria, but proper production process and environment sensitivity are

also considered by consumers.

Shareholders are interested in long term benefits from a sustainable company (company

giving equal consideration to social and environmental performance rather than only to monetary

profits) instead of short term profit. Sustainability includes the requirement that whatever justice

is about- fair distribution of goods, fair procedures, and respect for rights- it is capable of being

sustained into future indefinitely. Globalization has had very sharp effect on company behavior

and the trend shows the acceptance of socially and ethically responsible companies by

stakeholders. The challenge of CSR in a globalizing world is to engage in the political planning

that aims at setting and resetting standards and regulations for global business behavior.

With globalizing world a need for new paradigm for CSR has been identified to address

the global governance deficit and it is suggested by Scherer and Palazzo that this paradigm needs

to recognize the more politically-active role of business in today’s evolving global order. This new

paradigm is `political CSR’, which acknowledges that the old presumptions of strict separation of

the political and economic spheres, no longer applies and involvement of business world in

political deliberation is important.

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 h. What is moral hazard and why is it important?

Moral hazard is the concept of somebody taking advantage of a situation by taking risks

that others will pay for. When that happens, the consequences of risk-taking don't fall on the

party taking action, but they still receive all of the benefits. The situation creates a temptation to

ignore the moral implications of a decision: Instead of doing what is right, you can do what

benefits you most.

Moral hazard originated in the insurance industry. Insurance is a way to transfer risk to

somebody else by paying a premium, but insurance works best when moral hazard is not at work.

Example: If you rent a car and opt for the maximum insurance coverage possible, damaging the

vehicle does not have significant negative consequences. The insurance company will pay for

repairs—or a replacement car—if something happens. In exchange for that coverage, you pay a

price that seems fair, and everybody is satisfied.

Information advantage: Insurance works best when neither you nor your insurance

company expects any damage to occur. The insurance company uses statistics to estimate how

likely the vehicle is to suffer damage, and they price their services accordingly. You pay much less

than it costs to repair a car because, in most cases, the insurance company doesn’t have to pay

for any repairs. But there are times when you might have an unfair information advantage over

your insurance company.

Moral hazard example: How might moral hazard enter the picture? You might plan to

drive into the mountains on rough, narrow roads. So, you get the most generous insurance

coverage possible, and you don’t worry about bouncing over rocks or scratching the paint in thick

brush along the side of the road. You might even have a perfectly good car available at home,

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but there’s no way you’re going to drive your vehicle up that road—so you rent a car and buy

insurance.

Again, moral hazard happens when you have an incentive to take risks that somebody

else will pay for: You get to do whatever brings you the greatest potential benefit, and you don’t

suffer the consequences. The more insulated you are from risk, the more temptation you face.

i. Discuss the impact of the internet on corporate governance and CSR on the

following:

i. Cybersquatting

Cybersquatting (also known as domain squatting), according to the United States federal

law known as the Anticybersquatting Consumer Protection Act, is registering, trafficking in, or

using an Internet domain name with bad faith intent to profit from the goodwill of a trademark

belonging to someone else.

The rise in Internet usage in the Philippines has also led to a growth in cybersquatting cases.

With the growth of commercial activity on the internet, a domain name can be said to be used as

a business identifier image. A trademark, a design, a logo or an easily remembered picture is a

studiously crafted personality profile of an individual, institution, corporation, product or service.

Domain name conflicts arise most frequently as a consequence of the practice of cybersquatting.

Cybersquatters deliberately exploit the first-come-first-served nature of the domain name

registration system and then the squatters either offer to sell the domain to the person or company

who owns a trade mark contained within the name at an inflated price. Even before Yahoo!

Philippines launched its own site, the Internet firm bought at least 250 .ph domain names that

included permutations of the Yahoo! brand to ensure that they were protected.

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 Buying a .ph domain name is important for companies reaching out to a local market. For

example, Google already displays country-specific searches that display pages from the

Philippines. To do this, Google’s algorithm checks the IP address of the searcher, the geographical

IP of the server where the Web site is hosted, and the name of the domain. Unfortunately, majority

of the Web sites in the Philippines are hosted in US servers where Web hosting is cheap. By

affixing a .ph on the site, Google can identify the site as Philippine-based even if it is hosted

elsewhere," he said

Cybersquatters have robbed businesses of their fortune. Thus looking at the current

situation prevailing in the world, it can be safely assumed that cybersquatting is a menace which

has no boundaries. Cybersquatting shows the need for greater protection of brand names of

companies, products and famous personalities. There is an urgent need to draft a new legislation

in the Philippines which would expressly deal with domain names.

ii. Fraud

Cyber-crime is on the rise even among Philippine businesses, and it is costing them dearly.

Cyber-crime includes a myriad of devious criminal practices designed to breach a company's

computer security. The purpose of the electronic break and enter can be to steal the financial

information of the business or its customers, to deny service to the company website or to install

a virus that monitors a company's online activity in the future. The most common prey to these

cyber-criminals are banks and financial institutions.

Companies that want to protect themselves from online thieves have to pull out their

wallets to do it. There are costs in identifying risks, building new and safer operating procedures,

and buying protective software and hardware. For businesses with complex or sensitive operations,

this often involves hiring a cyber-security consultant to develop a customized solution.

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 Not only are the upfront costs of protection expensive, but the systems must be tested and

monitored regularly to ensure that they are still effective against emerging cyber-attacks. These

costs are often passed on to the customer through higher prices of goods and services.

Lost Sales. Cyber-crime isn't just for thieves anymore. A new subculture has emerged in

the past few years: the cyber-activist. These are the online equivalents of protesters who chain

themselves to buildings or trees. Their purpose is to shut down a company's online operations to

send a message about the company's business practices. A denial of service attack results in fewer

sales as customers cannot access the company's online store. It can even result in less revenue in

the long-term if some customers decide to no longer do business with a company vulnerable to

attack.

Changing Methods of Doing Business. Cyber-crime can impact businesses in more than

just financial ways. Companies have to rethink how they collect and store information to ensure

that sensitive information isn't vulnerable. Many companies have stopped storing customers'

financial and personal information, such as credit card numbers, social security numbers and birth

dates. Some companies have shut down their online stores out of concern that they cannot

adequately protect against cyber-theft. Customers are also more interested in knowing how the

businesses they deal with handle security issues and they are more likely to patronize businesses

that are upfront and vocal about the protections they have installed.

There is no relief in sight for businesses beleaguered with cyber-crime, or those fighting

against it. Protecting the business against incursion is costly and can impact the relationship

between the company and its customers. As cyber-crime becomes more sophisticated, businesses

will have to stay one step ahead.

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 iii. Taxation

Two of the most common motivations for companies to involve in CSR is the indirect

economic benefits such as tax cuts, and immediate economic benefits, such as grants and loans.

While some companies are merely seeking visibility and recognition through an award, a

conference, or through an adoption of best practices.

As far as the incentives from the state are concerned, providing tax incentives for the

programs of CSR and not just for actions related to culture, would be a very important move. Thus,

the existed disincentives, which concern both legislation and practice of public administration,

central and regional, should be eliminated in the pursuit of CSR policies. At the same time,

governments could play an important role in encouraging and facilitating social and

environmentally responsible business practices. Especially, on a national level, there are more

specific reasons for strengthening CSR and can be used to promote good governance policies.

Although, if the CSR is left without the creation of common and comparable tools, that, could

easily lead to distortions of competition and general market

In particular, a responsible corporate responsibility should be considered as a governance

approach. That implies the creation by the government conditions that allow the CSR be

developed. Governments should create an environment that facilitates and provides incentives,

encourages responsible business activities aimed at building a sustainable and inclusive economy.

iv. Public Interest

The main issues that are of utmost importance regarding the fulfilment of social

responsibility are keeping a balance between the good governance, environmental protection and

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enhancing the standard of living, creating awareness about individual’s responsibility towards

contribution to the society and remaining competent with the ever changing business environment.

In the last few years, the social responsibility and good governance have become crucial aspects

of the countries as they are the backbone for assisting it in effectively flourishing on the global

level. Although the Philippine government and its legal bodies have ensured that they promote the

social responsibility among citizens and corporations but they need to revitalise their political

setting. It has become mandatory for the governance to be implemented properly because social

responsibility can be encouraged only with appropriate rules and regulations.

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