Does the Board of Directors have responsibility to encourage socially responsible behavior? Why or why not?
Response Paper
Q: Does the Board of Directors have responsibility to encourage socially responsible behavior? Why or why not?
I do think that, for modern corporations, the Board of Directors have responsibilities to encourage socially responsible behavior.
As we learned from the class lectures and Julia’s talk on last class, the Board of Directors is primarily loyal to shareholders and has the fiduciary duties of taking care of shareholder wealth. So the rising question now is: “Is Corporation Social Responsibility (CSR) conflicted with the bottom line?” It’s not a easy question to answer, because CSR should mostly contribute to a corporation’s intangible asset and long-term profit, both of which are hared to measure. However, some past cases have illustrated that market does value CSR and such appreciation can transit to be values for shareholders. One best example here is the Johnson & Johnson’s Tylenol case, in which some drugs on sale were positioned by individuals, and the corporation decided to remove all Tylenol drugs on market with public announcement of warnings to consumers; the declined market share was quickly recovered with climbing stock price once Johnson & Johnson re-launched its products due to its earned public reputation of being safe and responsible. Moreover, even though we can’t be sure of CSR’s positive impacts, there’s significant certainty that public reveal of non-socially-responsible behaviors of corporations would definite hurt shareholder benefits, and there were so many examples to tell revealed in the financial crisis. In addition, it’s a trend of more socially responsible consumptions and I think the trend is speeding up with rising living standards and greater awareness of environmental and social problems worldwide.
The first stage of CSR could be that corporations just manage to reduce or prevent the adverse social and environmental impacts resulted from its operation, and it’s just compliance to legal requirements or common
Q: Does the Board of Directors have responsibility to encourage socially responsible behavior? Why or why not?
I do think that, for modern corporations, the Board of Directors have responsibilities to encourage socially responsible behavior.
As we learned from the class lectures and Julia’s talk on last class, the Board of Directors is primarily loyal to shareholders and has the fiduciary duties of taking care of shareholder wealth. So the rising question now is: “Is Corporation Social Responsibility (CSR) conflicted with the bottom line?” It’s not a easy question to answer, because CSR should mostly contribute to a corporation’s intangible asset and long-term profit, both of which are hared to measure. However, some past cases have illustrated that market does value CSR and such appreciation can transit to be values for shareholders. One best example here is the Johnson & Johnson’s Tylenol case, in which some drugs on sale were positioned by individuals, and the corporation decided to remove all Tylenol drugs on market with public announcement of warnings to consumers; the declined market share was quickly recovered with climbing stock price once Johnson & Johnson re-launched its products due to its earned public reputation of being safe and responsible. Moreover, even though we can’t be sure of CSR’s positive impacts, there’s significant certainty that public reveal of non-socially-responsible behaviors of corporations would definite hurt shareholder benefits, and there were so many examples to tell revealed in the financial crisis. In addition, it’s a trend of more socially responsible consumptions and I think the trend is speeding up with rising living standards and greater awareness of environmental and social problems worldwide.
The first stage of CSR could be that corporations just manage to reduce or prevent the adverse social and environmental impacts resulted from its operation, and it’s just compliance to legal requirements or common