Socially Responsible Finance and Investing: Financial Institutions, Corporations, Investors, and Activists

CHAPTER 16

Corporate Social Responsibility and Corporate Governance

LORENZO SACCONI

Professor of Economics and Unicredit Chair in Economic Ethics and Corporate Social Responsibility, University of Trento

INTRODUCTION

In the last decades, the agency model has gained acceptance among corporate governance (CG) scholars and practitioners. The agency model does not acknowledge any basic responsibility of managers or directors' toward any stakeholder beyond shareholders. It is based on shareholders primacy. Corporate social responsibility (CSR), however, involves at least some corporate responsibility toward stakeholders other than shareholders. Not surprisingly, the agency model of CG does not reserve any major role to CSR within CG, but it does not exclude an instrumental use of CSR as far as it may function as a tool that is practical to shareholder value maximization.

The agency model is by no means the only view of CG. A second prominent view sees the board of directors as a largely autonomous body aimed at providing an impartial balance among the different corporate stakeholders and playing the role of a mediating hierarchy. While some suggest that this model is a faithful interpretation of American corporate law, there are also CG institutions that cannot be interpreted according to the shareholder primacy doctrine in Japan, Germany, and most continental European countries.

The purpose of this chapter is to provide a theory of CSR as an extended model of corporate governance ...