Corporate Governance & CSR have endured as other fads faded away

A good governance system in a company comprises two elements: the governance code that helps set goals and monitor performance; and the internal controls that ensure that these are carried out according to the code. Auditing, external reporting and regulatory compliance complete the picture.

Corporate Social Responsibility (CSR) has several definitions. Some see it as an obligation; while others see it as a commitment made by the company to behave ethically, be accountable to all stakeholders, and above all aim for sustainable development.

In fact, the common thread that binds governance and CSR is this relentless pursuit of sustainable development. This is vividly reflected in the soul of the IMC Ramkrishna Bajaj National Quality Award criteria, for business excellence. As would be expected, the Tata Business Excellence Model is more specific (and prescriptive) for this objective.

However, good governance and CSR has its detractors. Companies, the detractors say, exist to maximize profits and shareholder value at all costs.

Naysayers also claim that good governance only comes with policing from the outside. After all, the fountainhead of ethical behavior, the board of directors, have increasingly displayed feet of clay in recent times.

In spite of a strong case for good governance and CSR, there are some challenges. While they are not insurmountable, they are certainly formidable:

• Lack of a strong regulatory framework that is able to withstand the might of cash-rich corporations
• Lack of corporate will to really adopt these concepts in totality and ensure ethical practices are followed at all levels and in all transactions of the organization
• Lack of measurement to effectively display that companies espousing ethical behavior or investing in community programs stand to gain.

While the challenges are substantial, so are the rewards.

A solution seems to have come from an unlikely quarter – customer and stakeholder pressure groups. More so in recent months. This, if  coupled with a concerted effort by governments and industry bodies to improve awareness levels; as well as to provide facilitation for change would certainly boost the movement.