Integrating Corporate Social Responsibility in Corporate Governance Codes in the EU

Abstract

While having different starting points, corporate social responsibility (CSR) and corporate governance have developed along similar paths and today they are linked in many different ways. As a consequence of this development, CSR is becoming an integral part of corporate governance codes in the EU, and the aim of this article is to analyse the extent of this integration. It is concluded that stakeholder-related issues in particular are now part of most codes in the EU, whereas corporate governance recommendations refer less frequently to specific CSR issues. However, specific CSR recommendations are still common, so it seems that in most codes it is recognised that there is a strong link between CSR and corporate governance. Even though this link may be widely recognised, it is also clear that the existing codes show a great variety of solutions to the integration of CSR and corporate governance codes. It is shown that for CSR the codes mostly contain specific recommendations related to transparency and that other recommendations are less specific. The vagueness of the recommendations on CSR issues seems to be common to all the codes examined. This general vagueness makes CSR recommendations 'soft' and frequently open to interpretation. It is also shown that the countries whose codes are most dominant in the field of corporate governance do not seem to be at the forefront of integration of CSR in their corporate governance codes. Furthermore, an analysis of two examples of the reporting on CSR recommendations under the comply-or-explain principle shows that the adoption of this principle for CSR disclosure may not work without measures to overcome some of the shortcomings seen hitherto in the application of the comply-or-explain principle.