2.11 Conclusion

CSR and corporate governance are international developments attracting considerable attention while sharing common features. Both developments concern the behaviour and internal management of large, mostly international, companies. The international business community has been urged to incorporate ethical awareness and integrity practices into its everyday business. Codes of conduct are instrumental in achieving this. With a view to stimulating good corporate conduct and citizenship, the accountability of companies and directors has been increased. In addition, compliance with corporate governance standards demands that companies give reasons for derogating from corporate governance codes. Corporate transparency should be increased in order to provide adequate information to interested parties, allowing them to judge whether or not a company behaves ethically and in accordance with corporate governance standards. If interested parties have doubts about this, the information provided may serve as a starting point for taking up the issue with the company in question. Communication between companies and interested parties is becoming ever more important. If communication cannot solve the matter, interested parties may initiate legal proceedings to enforce their view of good conduct or claim damages.

CSR and corporate governance have not as yet evolved into strict legal norms and it will therefore be difficult for interested parties to successfully enforce their view of good corporate behaviour before a court. When interpreting open legal norms, a judge can take into account codes of conduct and developments in society. It is likely that a code of conduct that is entrenched in law and subscribed to by a company in its annual report, will be awarded more import by a judge than a code of conduct that is established or adopted by a company on a voluntary basis. Thus, standards for corporate conduct will be developed further, which will benefit CSR and good corporate governance.

The issues involved in the development of CSR and good corporate governance are of a very different nature. CSR concerns ethical issues that go beyond everyday corporate practice. The development of CSR is aimed at adjusting corporate behaviour for the purpose of (i) preventing depletion of the Earth's natural resources; (ii) promoting human rights protection, (iii) promoting a fair and social corporate policy for all employees in all countries where the company carries out business operations and (iv) combating bribery. Corporate governance is about rules for corporate organisation and their implementation. The development of corporate governance seeks to restore the balance between corporate bodies with an aim to raising shareholder confidence in company directors and the capital market. To this end, companies enjoy a large degree of discretion with respect to corporate governance. CSR requires a different approach: it is neither the company nor its shareholders that determine the minimum standards of corporate business strategy, but society. Therefore, a wider audience of individuals has an interest in CSR than in corporate governance. Those who benefit from good corporate governance are mainly the company's shareholders. To enforce their view of good corporate governance they may exercise their shareholders' rights, by legal and other means. The broad spectrum of interested parties with regard to CSR does not make it any easier to enforce ethical corporate conduct. Interested parties may effectively be barred from seeking legal redress. Stakeholders, for instance, must first establish a substantial interest in the case before they are allowed to fight corporate unethical behaviour in court. Alsoit may sometimes be too dangerous for an interested party to openly challenge a company, for example in case of human rights violations. In other cases, lack of legal personality and locus standi prove problematic: who will stand up for polar bears, or in other words biodiversity preservation, against business activities that damage their habitat? Seeking publicity seems to be the only option to attract attention to unethical corporate behaviour in such cases. These kinds of actions may cause loss of reputation. Many companies want to avoid this, especially the ones active in the consumer market.

Financial institutions, for example, try their best to protect their reputation in this respect. To this end, they tend to be stricter with the companies they do business with: only companies that embrace CSR will obtain funds or be included in investment funds. This strategy also involves specific guarantees on environmental and social matters and against commercial bribery in investment contracts and other investment documents. Financial markets play a key role in this development, particularly since ethical investing is on the increase. Some stock exchange indices now only consist of sustainable funds.

Both in the fields of CSR and corporate governance measures have been taken at an international, European and national level, while more measures are under way. All of these measures aim to improve transparency in corporate behaviour and corporate strategy. Moreover, initiatives have been taken to draw up new codes of conduct that companies can adopt to realise good corporate governance and CSR. Obviously, new legislation, the Tabaksblat Code and codes of conduct on CSR will not prevent future bankruptcies and accounting scandals from happening. Nor will they be a safeguard against environmental disasters or human rights violations. What all these initiatives do seek to obtain, however, are a transparent and sound corporate risk assessment with minimum risks. The measures intend to make companies accept responsibility by embedding CSR principles in their organisations and by applying corporate governance principles, thus limiting the risk of scandals and other misfortune. Both CSR and corporate governance focus on best practices and the exchange of experience. They started off as voluntary initiatives, but have become stricter over time. Companies are obliged to include CSR and corporate governance information in their annual reports. There have been regular complaints from companies that these developments preclude them from doing real business and taking risks. Most likely, the developments in the fields of CSR and corporate governance are just a matter of habit, like all new things. It is expected that practising CSR on a global scale and implementing good corporate governance will have become fully accepted in ten years time. Finally, it should be remembered that corporate ethical conduct has a positive side to it: risk management may have a purifying effect on the entire company, it may save money through the efficient use of raw materials and it may stimulate innovation, leading some companies to stand out from the others by displaying ethical behaviour.