Top

Journal of Business Ethics

Published in:

01-06-2014

Convergence of Corporate Social Responsibility and Corporate Governance in Weak Economies: The case of Bangladesh

Authors: Mia Mahmudur Rahim, Shawkat Alam

Published in: Journal of Business Ethics | Issue 4/2014

Activate our intelligent search to find suitable subject content or patents.

search-config

AI-assisted search

Off

Abstract

The convergence of corporate social responsibility (CSR) and corporate governance (CG) has changed the corporate accountability mechanism. This has developed a socially responsible ‘corporate self-regulation’, a synthesis of governance and responsibility in the companies of strong economies. However, unlike in the strong economies, this convergence has not been visible in the companies of weak economies, where the civil society groups are unorganised, regulatory agencies are either ineffective or corrupt and the media and non-governmental organisations do not mirror the corporate conscience. Using the case of Bangladesh, this article investigates the convergence between CSR and CG in the self-regulation of companies in a less vigilant environment.

previous article The Morality of Unequal Autonomy: Reviving Kant’s Concept of Status for Stakeholders

next article A Conceptual Framework for Understanding the Effects of Corporate Social Marketing on Consumer Behavior

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

It is the largest public pension fund in USA with assets totalling more than US$250 billion. For details, see Welcome to CalPERS On-Line. Global Principles of Accountable Corporate Governance, available at www.calpers-governance.org/docs-sof/principles/2010-5-2-global-principles-of-accountable-corp-gov.pdf.

For details on compliance management, financial regulation and administration at the corporate enterprise level, see Lobel (2004).

Section 104 of Schedule 1 of the Company Act, 1994.

According to Section 143(1) of the Companies Act, 1994, an ‘untrue statement’ includes statements misleading in the form and context in which it is included and any omission from a prospectus which is calculated to mislead.

Details of this news are available at http://www.aims-bangladesh.com/2000/75WeeklyJuly-10-2000.pdfcan; Rahman (2000) in Solaiman (2005, p. 524).

Rwegasira provided a detailed account of this hybrid corporate governance. For details, see Rwegasira (2000); regarding corporate governance in South Africa, see West (2006), for India, see Reed (2002).

The capital market of this country is still in primitive stage; in 2006, this market accumulated only 7.5 % of this country’s GDP. Hence, the banking sector supplies most of the business capital; excessive liquidity and competition drive this sector to pass credit leniently. For details, visit Bangladesh Bank at http://www.bangladesh-bank.org/ and Securities and Exchange Commission of Bangladesh at http://www.secbd.org/ 5 February 2011.

Bangladesh has two stock exchanges, Dhaka and Chittagong Stock Exchanges. These Stock Exchanges, though established in 1954 and 1995, have not flourished in comparison with its neighbouring exchanges. In 2006, whilst the average listed companies in four Indian stock exchanges were 1,175 and 237 in Sri Lanka, the average for the same for these two exchanges as of 5 February 2011 is 347. For details, see http://www.secbd.org/ and http://www.secbd.org/ 5 February 2011.

This scenario is prevalent in Asian CG structure. For instance, 68 %, 72 %, 67 %, 62 %, 56 % and 48 % of listed companies in Hong Kong, Indonesia, Malaysia, Thailand, Singapore and South Korea, respectively, are controlled by family. For details, Welford (2007, pp. 43, 48), Farooque et al. (2007, p. 1455).

Section 86 of the Companies Act, 1994.

This code is the sole comprehensive set of guidelines for CG and resembles the Cadbury Code or the Combined Code in the UK. The Cadbury Code has been adopted by the London Exchange Commission.

For this case study, we have made a qualitative analysis of the evidence. We have also analysed some facts and findings taken from authentic media sources, mainly national newspapers for this study.

Dr. Mohiuddin Farooque v. Bangladesh and others, Writ Petition No. 891/1994 (Industrial Pollution Case).

Bangladesh Environmental Lawyers Association (BELA) v. Bangladesh and others, Writ Petition No. 1430 of 2003.

Non-state actors would be divided into two major spheres: the economic sphere and the civil sphere. The economic sphere includes, for instance, markets and a broad range of profit-motivated organisations and activities embracing finance, industry, etc. The civil sphere includes non-governmental organisations, charities, trusts, foundations, advocacy groups, groups of professionals, etc. For this article, non-state actors generally meant the non-state actors of the civil sphere. For details of non-state actors, see Hutter and O’Mahony (2004).

Bangladesh Rural Advancement Committee (BRAC) is the largest NGO in the world with over 7 million microfinance group members, 37,500 non-formal primary schools and more than 70,000 health volunteers. It has over 120,000 staff members and it reaches to over 110 million people in Asia and Africa. Grameen Bank was awarded the Nobel Peace Prize in 2006. For details, visit www.grameen-info.org/index.php?option=com_contentandtask=viewandid=21andItemid=139.

ADB. (2010). Bangladesh quarterly economic update. Dhaka: Asian Development Bank.

AIMS. (2000). AIMS ditches modern food. Weekly Market Review 2. Dhaka: Assets and Investment Management Services Ltd. of Bangladesh-AIMS.

Ararat, M., & Ugur, M. (2003). Corporate governance in Turkey: An overview and some policy recommendations. Corporate Governance, 3(1), 58–75.CrossRef

Baden, D., Harwood, I., & Woodward, D. (2009). The effect of buyer pressure on suppliers in SMEs to demonstrate CSR practices: An added incentive or counter productive? European Management Journal, 27(6), 429–441.CrossRef

Bagić, A., Škrabalo, M., & Narančić, L. (2004). An overview of corporate social responsibility in Croatia. Zagreb: AED.

Bangladesh Bureau of Statistics. (2008). Statistical Pocketbook of Bangladesh. Dhaka.

Barako, D. G., Hancock, P., & Izan, H. Y. (2006). Factors influencing voluntary corporate disclosure by Kenyan companies. Corporate Governance: An International Review, 14(2), 107–125.CrossRef

Bebchuk, L., Cohen, A., & Ferrell, A. (2009). What matters in corporate governance? Review of Financial Studies, 22(2), 783.CrossRef

Becht, M., Bolton, P., & Röell, A. (2003). Corporate governance and control. Handbook of the Economics of Finance, 1, 1–109.CrossRef

Belal, A. R. (2001). A study of corporate social disclosures in Bangladesh. Managerial Auditing Journal, 16(5), 274–289.CrossRef

Belal, A. R. (2008). Corporate social responsibility reporting in developing countries: The case of Bangladesh. Aldershot: Ashgate Pub Co.

Berghe, L., & Louche, C. (2005). The link between corporate governance and corporate social responsibility in insurance. The Geneva Papers on Risk and Insurance-Issues and Practice, 30(3), 425–442.CrossRef

BGMEA. (2011). Comparative statement on export of RMG and total export of Bangladesh. Dhaka: Bangladesh Garment Manufacturer and Exporters Association.

Bhimani, A., & Soonawalla, K. (2005). From conformance to performance: The corporate responsibilities continuum. Journal of Accounting and Public Policy, 24(3), 165–174.CrossRef

Blair, M. (1995). Ownership and control: Rethinking corporate governance for the twenty-first century. Washington, DC: Brookings Institution Press.

Blowfield, M., & Frynas, J. G. (2005). Editorial Setting new agendas: Critical perspectives on Corporate Social Responsibility in the developing world. International Affairs, 81(3), 499–513.CrossRef

Braithwaite, J. (2006). Responsive regulation and developing economies. World Development, 34(5), 884–898.CrossRef

Bruyn, S. T. (1999). The moral economy. Review of Social Economy, 57(1), 25–46.

Daily, C., Dalton, D., & Cannella, A., Jr. (2003). Corporate governance: Decades of dialogue and data. The Academy of Management Review, 28(3), 371–382.

Doh, J., & Guay, T. (2006). Corporate social responsibility, public policy, and NGO activism in Europe and the United States: An institutional–stakeholder perspective. Journal of Management Studies, 43(1), 47–73.CrossRef

Duarte, F. P., & Rahman, S. (2010). Perceptions of corporate social responsibility by Bangladeshi managers: An exploratory study. International Review of Business Research Papers, 6(5), 119–136.

Dunlop, A. (1998). Corporate governance and control. Cima.

Eisenberg, M. (1982). The modernization of corporate law: An essay for Bill Cary. University of Miami Law Review, 37, 187.

EPB. (2011). Product-wise and region-wise export. Dhaka: Export Promotion Bureau.

Farooque, O. A., Zijl, T. V., Dunstan, K., & Karim, A. W. (2007). Corporate governance in Bangladesh link between ownership and financial performance. Corporate Governance: An International Review, 15(6), 1453–1468.CrossRef

Frank, W. (2004). Successful partnership for CSR activities in Thailand: The Nike village development project. Corporate Social Responsibility in the Promotion of Social Development, 1–20.

Franklin, D. (2008). Just good business: A special report on corporate social responsibility. Economist Newspaper.

Freeman, R. E. (2010). Strategic management: A stakeholder approach. Cambridge University Press.

Gill, A. (2008). Corporate governance as social responsibility: A research agenda. Berkeley Journal of International Law, 26(452), 462.

Grosser, K., & Moon, J. (2005). Gender mainstreaming and corporate social responsibility: Reporting workplace issues. Journal of Business Ethics, 62(4), 327–340.

Gunningham, N. (1995). Environment, self-regulation, and the chemical industry: Assessing responsible care. Law and Policy, 17(1), 57–109.CrossRef

Gunningham, N., & Rees, J. (1997). Industry self-regulation: An institutional perspective. Law and Policy, 19(4), 363–414.CrossRef

Gutiérrez, R., & Jones, A. (2007). Corporate social responsibility in Latin America: An overview of its characteristics and effects on local communities. Available at SSRN 1018674.

Haque, A. K. E. (1997). Human health and human welfare costs of environmental pollution from the tanning industry in Dhaka—an EIA study. Dhaka: Department of Economics, North South University.

Hart, O. (1995). Corporate governance: Some theory and implications. The Economic Journal, 105(430), 678–689.CrossRef

Hopkins, M. (2004). Corporate social responsibility: An issue paper. Geneva: Policy Integration Department, World Commission on Social Dimension of Globalisation.

Horrigan, B. (2007). 21st century corporate social responsibility trends—an emerging comparative body of law and regulation on corporate responsibility, governance, and sustainability. Macquarie Journal of Business Law, 4(1), 85–122.

Huse, M. (2005). Accountability and creating accountability: A framework for exploring behavioural perspectives of corporate governance. British Journal of Management, 16(1), 65–79.CrossRef

Hussain, M. G. (2007). Compliance in RMG Industry of Bangladesh. In Social compliance and decent work: The Bangladesh perspective papers and proceedings of the National Tripartite Meeting on social compliance in the RMG sector (pp. 1–49). Dhaka: International Labour Organization.

Hutter, B. M. (2006). The role of non-state actors in regulation. Centre for Analysis of Risk and Regulation, London School of Economics and Political Science.

Hutter, B. M., & O’Mahony, J. (2004). Business regulation: Reviewing the regulatory potential of civil society organisations. CARR Discussion Paper Series. London: Centre for Analysis of Risk and Regulation, London School of Economics and Political Science.

Imam, O., & Malik, M. (2007). Firm performance and corporate governance through ownership structure: Evidence from Bangladesh Stock Market. International Review of Business Research Papers, 3(4), 88–110.

Institute, B. E. (2003). A comparative analysis of corporate governance in South Asia charting a roadmap for Bangladesh. Dhaka: Bangladesh Enterprise Institute.

Islam, M. A., & Deegan, C. (2008). Motivations for an organisation within a developing country to report social responsibility information: Evidence from Bangladesh. Accounting, Auditing and Accountability Journal, 21(6), 850–874.CrossRef

Jabed, M., & Rahman, K. M. (2003). Corporate responsibility in Bangladesh: Where do we stand. Dhaka: The Centre for Policy Dialogue.

Jamali, D., & Mirshak, R. (2007). Corporate social responsibility (CSR): Theory and practice in a developing country context. Journal of Business Ethics, 72(3), 243–262.CrossRef

Jamali, D., Safieddine, A., & Rabbath, M. (2008). Corporate governance and corporate social responsibility synergies and interrelationship. Corporate Governance, 16(5), 443–459.CrossRef

Jones, P., Comfort, D., & Hillier, D. (2005). Corporate social responsibility and the UK's top ten retailers. International Journal of Retail & Distribution Management, 33(12), 882–892.

Kakabadse, N. K., Rozuel, C., & Lee-Davies, L. (2005). Corporate social responsibility and stakeholder approach: A conceptual review. International Journal of Business Governance and Ethics, 1(4), 277–302.CrossRef

Keasey, K., Thompson, S., & Wright, M. (1997). Corporate governance: Economic and financial issues. Oxford University Press on Demand.

Kendall, N. (1999). Good corporate governance. Institute of Chartered Accountants in England and Wales.

King, A., & Lenox, M. (2000). Industry self-regulation without sanctions: The chemical industry responsible care program. Academy of Management Journal, 43(4), 698–716.CrossRef

Lerach, W. (2002). Plundering America: How American investors got taken for trillions by corporate insiders—the rise of the new corporate kleptocracy. Stanley Journal of Law, Business and finance, 8, 69–128.

Lim, S., & Phillips, J. (2008). Embedding CSR values: The global footwear industry’s evolving governance structure. Journal of Business Ethics, 81(1), 143–156.CrossRef

Lobel, O. (2004). Setting the agenda for new governance research. Minnesota Law Review, 89, 498.

Lobel, O. (2005). Interlocking regulatory and industrial relations: The governance of workplace safety. Administrative Law Review, 57, 1071.

MacMillan, K., Money, K., Downing, S., & Hillenbrand, C. (2004). Giving your organisation SPIRIT: An overview and call to action for directors on issues of corporate governance, corporate reputation and corporate responsibility. Journal of General Management, 30(2), 15–42.

Marrewijk, M. (2003). Concepts and definitions of CSR and corporate sustainability: Between agency and communion. Journal of Business Ethics, 44(2), 95–105.CrossRef

Matten, D., & Moon, J. (2008). “Implicit” and “explicit” CSR: A conceptual framework for a comparative understanding of corporate social responsibility. Academy of Management Review, 33(2), 404–424.

May, P. J. (2005). Compliance motivations: Perspectives of farmers, homebuilders, and marine facilities. Law and Policy, 27(2), 317–347.CrossRef

McBarnet, D., Voiculescu, A., & Campbell, T. (2007). The new corporate accountability corporate social responsibility and the law. Cambridge, MA: Cambridge University Press.

Mitchell, L. E. (2007). The board as a path toward corporate social responsibility. In D. McBarnet, A. Voiculescu, & T. Campbell (Eds.), The new corporate accountability. Cambridge, MA: Cambridge University Press.

Mitchell, L., & Diamond, M. (2004). Corporations, a contemporary approach. Carolina: Carolina Academic Press.

Moon, J., Crane, A., & Matten, D. (2005). Can corporations be citizens? Corporate citizenship as a metaphor for business participation in society. Business Ethics Quarterly, 15(3), 429.CrossRef

Nagarajan, V. (2008). From command-and-control to open method coordination: Theorising the practice of regulatory agencies. Macquarie LJ, 8, 5.

OECD. (2004). OECD principles of corporate governance. Paris: OECD.

Parker, C. (2002). The open corporation effective self-regulation and democracy. Cambridge, MA: Cambridge University Press.

Parker, C. E. (2007). Meta-regulation: Legal accountability for corporate social responsibility. In D. McBarnet, A. Voiculescu, & T. Campbell (Eds.), The new corporate accountability corporate social responsibility and the law. Cambridge, MA: Cambridge University Press.

Parker, C., & Conolly, O. (2002). Is there a duty to implement a corporate compliance system in Australian Law? Australian Business Law Review, 30(4), 273–293.

PJCCFS. (2006). Corporate responsibility: Managing risk and creating value. Canberra: Commonwealth of Australia.

Radaelli, C. M. (2007, January). Towards better research on better regulation. In Paper delivered to the Advanced Colloquium on Better Regulation, Centre for Regulatory Governance (pp. 25–26). Exeter: University of Exeter.

Rahim, M. M. (2012). Corporate governance as social responsibility: A meta-regulation approach to raise social responsibility of corporate governance in a weak economy. Board Directors and Corporate Social Responsibility, 145–167.

Rahim, M. M., & Wisuttisak, P. (2013). Corporate social responsibility–oriented compliances and SMEs access to global market: Evidence from Bangladesh. Journal of Asia-Pacific Business, 14(1), 58–83.

Rahman, M. S. (2000). AIMS backs down on pledge to underwrite modern food audited accounts differ from prospectus statement. The Daily Star. Dhaka.

Rahman, M. (2010). Grievance against the wage role, agitation in Chittagong—three killed. The Prothom Alo. Dhaka.

Rasul, M. G., Islam, F., & Khan, M. M. K. (2006). Environmental pollution generated from process industries in Bangladesh. International Journal of Environment and Pollution, 28(1), 144–161.CrossRef

Reaz, M., & Arun, T. (2006). Corporate governance in developing economies: Perspective from the banking sector in Bangladesh. Journal of Banking Regulation, 7(1), 94–105.CrossRef

Reed, D. (2002). Corporate governance reforms in developing countries. Journal of Business Ethics, 37(3), 223–247.CrossRef

Rwegasira, K. (2000). CG in emerging capital markets: Whither Africa? Corporate Governance: An International Review of Financial Studies, 8(3), 258–267.CrossRef

Sarkar, S. (2010). When will the waste flow in the Buriganga stop?. Dhaka: The Prothom Alo.

Seligman, J. (2002). No one can serve two masters: Corporate and Securities Law after Enron. Washington University Law Quarterly, 80(2), 449–518.

Sharif, M. I., & Mainuddin, K. (2003). Country case study on environmental requirements for leather and footwear export from Bangladesh. Dhaka: Bangladesh Centre for Advanced Studies.

Shleifer, A., & Vishny, R. (1997). A survey of corporate governance. Journal of Finance, 52(2), 737–783.CrossRef

Siddiqui, J. (2010). Development of corporate governance regulations: The case of an emerging economy. Journal of Business Ethics, 91(2), 253–274.CrossRef

Singh, A., & Zammit, A. (2006). Corporate Governance, Crony Capitalism and Economic Crises should the US business model replace the Asian way of “doing business”? Corporate Governance: An International Review, 14(4), 220–233.CrossRef

Solaiman, S. (2005). Investor protection and civil liabilities for defective prospectuses Bangladeshi laws compared with their equivalents in India and Malaysia. Journal of Law and Commerce, 25, 509.

Solaiman, S. M. (2009). Investor protection by securities regulators in the primary share markets in Australia and Bangladesh: A comparison and contrast. Journal of Financial Crime, 16(4), 305–333.CrossRef

Swanson, D. (1999). Toward an integrative theory of business and society: A research strategy for corporate social performance. Academy of Management Review, 24(3), 506–521.

Turnbull, S. (1997). Corporate governance—its scope, concerns and theories. Corporate Governance, 5(4), 180–205.CrossRef

Uddin, S., & Choudhury, J. (2008). Rationality, traditionalism and the state of corporate governance mechanisms: Illustrations from a less-developed country. Accounting, Auditing and Accountability Journal, 21(7), 1026–1051.CrossRef

Uddin, S., & Hopper, T. (2001). A Bangladesh soap opera: Privatisation, accounting, and regimes of control in a less developed country. Accounting, Organizations and Society, 26(7), 643–672.CrossRef

Vogel, D. (2005). The market for virtue: The potential and limits of corporate social responsibility. Washington, DC: Brookings Institution Press.

Ward, H. (2004). Public sector roles in strengthening corporate social responsibility: Taking stock. Washington, DC: The World Bank.

Warhurst, A. (2005). Future roles of business in society: The expanding boundaries of corporate responsibility and a compelling case for partnership. Futures, 37(2–3), 151–168.CrossRef

WB. (2002). The future of research on corporate governance in developing and emerging market. Washington, DC: The World Bank.

WB. (2013). Bangladesh at a glance. World Bank. http://devdata.worldbank.org/AAG/bgd_aag.pdf. Retrieved on 7 May 2013.

Welford, R. (2007). Corporate governance and corporate social responsibility issues for Asia. Corporate Social Responsibility and Environmental Management, 14(1), 42–51.CrossRef

West, A. (2006). Theorising CG in South Africa. Journal of Business Ethics, 68, 233–248.CrossRef

Winston, M. (2002). NGO strategies for promoting corporate social responsibility. Ethics and International Affairs, 16(1), 71–87.CrossRef

Winter, S. C., & May, P. J. (2001). Motivation for compliance with environmental regulations. Journal of Policy Analysis and Management, 20(4), 675–698.CrossRef

Title: Convergence of Corporate Social Responsibility and Corporate Governance in Weak Economies: The case of Bangladesh
Authors: Mia Mahmudur Rahim
Shawkat Alam
Publication date: 01-06-2014
Publisher: Springer Netherlands
Published in: Journal of Business Ethics / Issue 4/2014
Print ISSN: 0167-4544
Electronic ISSN: 1573-0697
DOI: https://doi.org/10.1007/s10551-013-1699-x

Springer Professional

Abstract

Please log in to get access to your license.

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Springer Professional "Wirtschaft"

Other articles of this Issue 4/2014

The Ethics of Meaningful Work: Types and Magnitude of Job-Related Harm and the Ethical Decision-Making Process

You Reap What You Sow: How MBA Programs Undermine Ethics

A Conceptual Framework for Understanding the Effects of Corporate Social Marketing on Consumer Behavior

Do Suppliers Applaud Corporate Social Performance?

Corporate Social Responsibilities: Alternative Perspectives About the Need to Legislate

Which Dimensions of Social Responsibility Concern Financial Investors?

Premium Partner