OBLIGATORY CSR VIA SOCIAL ENTERPRISE CORPORATE BUSINESS ENTITIES

Shahril Nizam M.,

doi:10.17762/pae.v58i2.2313

Abstract

Corporate Social Responsibility (CSR) is primarily a philanthropic concept. The underlying principle that CSR is merely a business voluntary endeavor has become the main problem in the implementation of CSR. One of the developments of CSR enforcement is through the Corporate Code of Conduct (CoC) which is a standard procedure in a company conducting its business activities on the basis of economic, legal and ethical factors. Recently, there are a new business entities known as Low Profit Limited Liability Company (L3C), Benefit Corporation (B Corps), and Community Interest Company (CIC) introduced in the UK as a new vehicle to promote social well-being through business activities, which is believed to be more effective than corporate social responsibility, whereby these new business entities enforce CSR as an obligatory obligation rather than a voluntary act. Main purpose of this article is to examine legal jurisprudence behind establishment of these business entities. This research adopted the doctrinal legal research which focus on review of the regulation and policy contained in primary sources such as, case law, and statutory provisions. Reference will also be made to secondary sources such as textbook, journal articles, report, seminar papers, as well as data from official website.

Highlights

Traditionally, the concept of corporate law only focuses on the rights and interest of shareholders that need to be protected
This is because, from corporate law’s perspective, corporations exist resulting from the contractual relationship between shareholders thereby the main objective of corporate law is to provide a legal framework to maximize shareholders’ profit
Though there is a finding from the research shows that there is a significant relationship between business performance with Corporate Social Responsibility (CSR) programs conducted by the corporation, (Selnes, 1993) most of the companies choose to reserve their obligations in voluntarily basis, as to protect their shareholders’ rights

Summary

Introduction

The concept of corporate law only focuses on the rights and interest of shareholders that need to be protected. Though there is a finding from the research shows that there is a significant relationship between business performance with CSR programs conducted by the corporation, (Selnes, 1993) most of the companies choose to reserve their obligations in voluntarily basis, as to protect their shareholders’ rights Realizing this problem, an effort has been taken by some jurisdictions such as in United Kingdom and Malaysia to introduce Corporate Code of Conduct as to overcome the issue. Similar to L3C, Benefit Corporation is created by a state, whereby the director is on duty to ensure that the whole operation of the company will consider the other stakeholders’ interest Another example of social enterprise entity is Community Interest Company. Based on this theory, the state has a right to confer rights and liabilities for any artificial persons as it wishes to meet the purpose of their establishment (Hassan et al, 2012)

Conclusion

Jurisprudential Theories on Corporate