The Hub Why corporate governance and social responsibility matter

Why corporate governance and social responsibility matter

Violence. Deforestation. Pollution. Financial crisis. Human rights violations.

Look no further than the Enron scandal in 2001, the BP oil spill in the Gulf of Mexico, or the recent Facebook whistleblower’s claims that they put profit over protection for their employees and users to see how a corporation’s lack of socially and environmentally responsible practices directly affects its long-term profitability and even its viability.

Short-term gains but at what cost?

Not considering the full effects of socio-environmental factors within corporate governance can have disastrous results not just for the for-profit corporations, but for our world. BP had to pay billions of dollars after the Horizon oil spill, some of Enron’s executives went to jail, and quite a few of us might be wondering if that Facebook account is worth it. All board and executives’ decisions (or lack of) have an impact on the bottom line of these companies, as well as their reputation and long-term survival.

Research and teaching

It is at this intersection that Athabasca University business professor Dr. Eduardo Ordonez-Ponce conducts his research, and it’s covered in one of his upcoming graduate courses, ECGR 688 – Corporate Governance and Social Responsibility. While some of us won’t be the board chair for a major corporation, some of us may be an executive working with a board, and many more may volunteer on local boards. Some folks simply want to understand how it is possible for these corporations to get so off-track.

"Good" corporate governance?

“At the core, the main issue is this: Is having ‘good’ corporate governance sufficient for an organization not only to be successful but also to contribute to society?” he said. “Here too, one can define ‘success’ in relative terms, and these might apply differently when one is trying to maximize profit for shareholders while contributing to the sustainability of society and the environment.”

Why good corporate governance matters

How decisions are made and whose interests are taken into account are why social responsibility is so important for corporate governance, for companies as well as society. The examples above show the terrible consequences when the social and environmental impacts aren’t built into corporate governance.

It isn’t just about a few one-off bad actors, but a way to make decisions that considers business impacts on all stakeholders, not just short-term profit gains for shareholders. The idea is that if boards are governed better and consider social and environmental factors, the corporation should perform better in the long run.

Learning more about corporate governance

In Ordonez-Ponce’s course, students will learn about the relevance of social responsibility for corporate governance, their codes, components, models, and how to build more effective boards. Learners will get the chance to evaluate the evolving best practices for corporate governance models and for building more effective boards. While not all of us may sit on the board of a multinational corporation, we all can gain from learning more about why socio-environmental responsibility is so important for corporate governance in imagining a more sustainable future for everyone.

Bigger picture

Ultimately, exploring social and environmental considerations should factor into good corporate governance and is important for addressing long-term sustainability for investors and business leaders. A better understanding of the principles and practice of good governance, what to define as success, and broader impacts on society, are all important.

  • November 29, 2021