Corporate Social Responsibility and Law in Africa

Theories, Issues and Practices

Nojeem A. Amodu

• Publisher: Routledge
• Year: 2020
• ISBN:
  9781000052961
• Edition: 1
• Topic: Law
• Subtopic: Corporate Law
• Index: Law

This book examines the conception of corporate social responsibility (CSR) in Africa, expanding it's frontiers beyond corporate reporting, voluntary corporate charity and community development projects.

Taking a corporate law perspective on CSR, the author combines theory and practice to explain how CSR interacts with of sustainable development and sets an agenda for effective operationalization in Africa. The book not only devises an enforcement mechanism towards embedding effective CSR and sustainable development in Africa but also addresses CSR greenwash on the continent. The author critically examines CSR practices, legal and regulatory techniques in Nigeria and South Africa in the context of contexts of international regulatory dialogues and shows how corporate socially responsible behaviour can be effectively embedded within business communities in Africa.

Increasing our understanding of the theoretical, legal and regulatory frameworks supporting corporate responsibility, this book will be of interest to scholars, policy makers and practitioners in the fields of Africa law, corporate law, corporate social responsibility and African business.

Part I
Background, theories and global outlook

1
Introduction

1 Background

Corporate social responsibility (CSR) is a corporate governance and business management model used as a catalyst for economic prosperity for businesses and sustainable growth in the society. Although CSR may be shrouded in mystery coupled with a number of issues and debates, many scholars in the field, however, agree that situating CSR within a proper conceptual and implementation framework offers great prospects for achieving sustainable development for both business communities and the society.

Despite varying definitions, debates and approaches on the CSR subject as shall be later demonstrated in this chapter, the subject has nonetheless received general recognition in many jurisdictions around the globe. Many businesses are now desirous of been tagged as good corporate citizen, socially responsible, environmentally conscious, enlightened business and economically sustainable. CSR has become very popular around the world including in Africa. While it is commonly known as ‘corporate social responsibility’ (CSR) in Nigeria and ‘corporate citizenship’ in South Africa, it is called ‘corporate responsibility’ (CR) in the United Kingdom and ‘corporate citizenship’ (CC) in the United States of America, ‘ maatschapelijk verantwoord ondernemen ’ (MVO) in The Netherlands, ‘ responsabilite social des enterprises’ (RSE) in France, ‘ responsabilidad social empresarial’ (RSE) in Spain, ‘responsabilita socialedelle impresse’ (RSI) in Italy, ‘unternehmerische gesellschaftsverantwortung’ (UG) in Germany, amongst other nomenclatures in other countries.

Notwithstanding the different CSR nomenclatures across different jurisdictions as highlighted earlier, this chapter highlights the emergence of the CSR subject in corporate governance discourse of both the United States of America and the United Kingdom. It also shows differences in CSR conceptions and definitions together with their respective associated problems and underscores the interconnectedness between CSR and corporate governance. Following its CSR conceptual analyses and clarifications and summaries of all subsequent chapters in the book, the chapter concludes by setting an agenda for investigating the philosophical underpinnings of corporate actions and CSR with a view to situating effective CSR practices within an acceptable theoretical, regulatory and enforcement framework within African business communities.

1.1 Emergence of CSR

Although capitalism provided efficient means of optimal distribution of resources, it also engendered market failures together with economic recession, and accordingly public trust in businesses continues to dwindle. The fundamental assumptions of the free market shareholder primacy theory continues to gather queries about the efficacy of the most developed ‘invisible hand’ of the free market in sustainably distributing resources in the society. Therefore, a few ideological and policy questions have become inevitable in the manner in which the world’s largest economies are run. There are questions, for instance, surrounding the role of state institutions and governments in economies; such questions pertain to identifying whose responsibility it must be to provide public goods and social services in the society. The present economic structure has been incapable to counterbalance the recurrent negative ethical, social and environmental developments in terms of poverty reduction, decreasing unemployment and inequality. This has reinforced arguments for systemic economic reforms and better corporate governance mechanisms. These systemic reforms have taken different shapes including agitations for social inclusion and the gradual shift from using the traditional (transaction-oriented) economic parameters of gross domestic product (GDP) to gauge the health of any economy to more some progressive and people-oriented parameters such as the gross national happiness (GNH)¹ amongst others.

Corporate social responsibility emerged as one of the systemic reform responses to the previously mentioned economic imbalances, corporate irresponsibility and sustainability challenges attributable to capitalism. CSR enjoins corporations not just to ‘do well’ economically in the course of their operations but also to do good; corporate success is nowadays measured in terms of the success of all relevant stakeholders of companies, not just the success of the business owners. However, in view of the manner in which CSR was introduced into corporate governance discourse, coupled with issues, debates and policy questions inherent in the CSR concept itself, the relevant ultimate question is: (at least as CSR is presently conceived in many jurisdictions around the world including in Africa) is CSR really capable of addressing the fundamental queries and inadequacies of corporate capitalism and of the dominant shareholder primacy model² in the business community? To put it differently, to what extent can the responsibilities and obligations of businesses and companies be broadened in reaction to societal pressure for effective CSR practices and sustainable development?

1.1.1 Historical perspectives from the United States of America

Many writers and commentators have traced CSR to different origins. Historical accounts of early developments of corporate responsibility include the following:

• (i) In ancient Mesopotamia around 1700 BC, King Hammurabi was reported to have introduced a code in which builders, inn keepers and farmers were put to death if their negligence caused the deaths of others or major inconvenience to citizens;
• (ii) In ancient Rome, senators reportedly grumbled about the failure of business to contribute sufficient taxes to fund their military campaigns;
• (iii) In 1622, disgruntled shareholders in the Dutch East India Company were said to have also issued pamphlets complaining about management secrecy and self-enrichment;³
• (iv) CSR history also finds a place in the philanthropic work of wealthy business owners such as John D. Rockefeller, Andrew Carnegie and Henry Ford who gave away millions of dollars for social uses and causes. Rockefeller and Carnegie believed that they were stewards of a social contract between business and society and as such were required by way of philanthropy and good management to hold society’s resources in trust in order to increase total social welfare;⁴
• (v) CSR origins also has a place in the United States’ 19th-century boycotts of foodstuff produced with slave labour.⁵

However, the history of the modern conception of CSR as discussed in this book dates back to the corporate governance debates, largely captured in the published works of Professors Adolf Berle and Merrick Dodd in the Harvard Law Review⁶ and calls for reforms in the early 1930s.⁷ Many scholars have concluded that the majority of issues and problems which characterized discussions in corporate governance and CSR among academics are traceable to Adolf Berle and Gardiner Means’ postulations on the theory of separation of ownership from control in their 1932 work, The Modern Corporation and Private Property.⁸ For instance, Douglas Branson contended that the ideas of the Columbia Professors Berle and Means:

have proven more durable still. The separation of ownership from control, problems it poses, whether indeed it poses any problems at all, and proposals to ‘reform’ corporate governance by filling the void the separation of ownership from control creates, continue to monopolize corporate governance theorists’ discussion to the present day.⁹

Corporate governance reform in its earliest form centred around finding an effective check on the raw exercise of corporate power, and these checks began in respect of the social and environmental concern about businesses. Consequently, the advent of government intervention in terms of prescriptive legislations to check corporate powers appears widely accepted as characterizing the beginning of the CSR movement. Therefore, when in the United States of America, a large number of large corporations consolidated to the detriment of the public in 1890, there was government intervention by way of regulation of utilities together with the anti-trust movements. Also in 1914, the government passed further anti-trust laws in order to prevent the formation of monopolies. Further strict government regulations were made even in the 1960s up to 1970s to curb raw exercise of corporate powers. It is important to note that one of the early writers espousing on this check on corporate powers was the Harvard economist, John Kenneth Galbraith, who theorized on the incidence of government’s exercise of a ‘countervailing power’, which should serve as a check on the raw exercise of corporate powers by way of farm legislations, labour and minimum wages legislation et cetera.¹⁰ While there were other notable early contributions on the CSR subject by writers such as Keith Davis, William C. Frederick and Joseph W. McGuire amongst others,¹¹ it was not until 1954 that the expression ‘corporate social responsibility’ was first introduced into corporate America by Howard R. Bowen in his book, Social Responsibilities of the Business.¹² Howard Bowen defined CSR as:

the obligation of businessmen to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society.¹³

Bowen also contended that corporate executives must perform the ethical duty and ensure that the broader social impacts of their decisions are considered and that all corporations failing to give due regard to the social impacts of their activities ought not to be seen as legitimate. However, in spite of the important contribution of Howard Bowen, the crucial moment in the emergence of modern CSR movement did not come until the 1970s from the wave of legal academics who suggested methods of governmental intrusion in response to the problems posed by the separation of ownership from control. The thesis of the movement was that, in order to solve the ills of society thought in large part to be the product of corporate behaviour (in turn thought to be the result of the separation of ownership from control), some sort of government intervention must remain essential to make large corporations and their managers alike accountable, if not to the owners of such corporations, then to the society as a whole. Essentially, justifications for CSR activism were based on the fact that large corporations were no longer merely aggregations of private property. It was further argued that corporations had become so large – and their behaviour affected so many in the society – that the law should regard them as public, or quasi-public, institutions and regulate them as such. Lawrence Mitchell summarized the influence of these corporations on the society as follows:

No institution other than the state so dominates our public discourse and our private lives…. Corporations make most everything we consume. Their advertising and products fill almost every waking moment of our lives. They give us jobs, and sometimes a sense of identity. They define communities and enhance both our popular and serious culture. They present the investment opportunities that send our children to college, and provide for our old age. They fund our research.

… They pollute our environments. They impoverish our spirits with the never-ending messages of the virtues of consumerism. They provide a living, but often not a meaning. And sometimes they destroy us; our retirement expectations are unfunded, our investment hopes are dashed, our communities are left impoverished. The very power that corporations have over our lives means that, intentionally or not, they profoundly affect our lives.¹⁴

At the...