GOOD CORPORATE GOVERNANCE:

MANDATED CORPORATE SOCIAL

RESPONSIBILITY

Submitted by
CLEAH CHARITY A. WASKIN

Submitted to
WILSON C. BARRIGA, CPA, MBA

DECEMBER 2022

Introduction
 The topic is whether businesses should implement CSR as a voluntary company

strategy or whether it should be legally required practice legal requirements. Whether

corporate social responsibility (CSR) is voluntary or mandatory, the government's role in

CSR is not disputable through preferential treatment, permits, monitoring, and other

mechanisms, governments can encourage voluntary CSR ( Dave, 2017). One specific issue

of business conduct and governance that needs to be forcefully addressed and subtly applied

in organizations is corporate social responsibility. CSR is a powerful weapon that, at the same

time, combines the efforts of corporate and nonprofit organizations to advance societal goals

such as sustainable growth and development. Therefore it should be mandatory implemented

in an organization and company.

Counter Argument

On the other hand, the voluntary CSR enthusiasts contend that by raising market

value, lowering financial risks, and assisting in the creation of value for individuals,

voluntary CSR efforts support enhancing economic performance in some way. Legislation, it

has been claimed, cannot address concerns with integrity, social standards, or corruption

owing to several nations may see a question of integrity in various ways or according to

different traditions (Hema Deogharkar & Santosh Datkhile, 2004). According to proponents of

voluntary CSR, there is no need for government involvement in CSR initiatives because the

market provides sufficient incentives for businesses to participate in CSR programs

(González, Cuesta & Martinez, 2004). However, according to Lückerath-Rovers & De Bos

(2011) the proponents of mandated CSR contend that law is intended to assess the

effectiveness of the firms' internal controls and foster stakeholder contact, both of which have

an impact on the formulation of public policy. There is conflicting evidence in the research

on the impact of voluntary CSR engagement on earnings management, but it does show that

firms with higher levels of CSR demonstrate less manipulation, leading some researchers to
draw the conclusion that voluntary CSR participation indicates a firm's emphasis on

corporate ethics, which is reflected in fewer earnings management (Hickman, Lyer, and

Jadiyappa, 2021).

Argument

Further the following claims will prove that mandatory CSR should be implemented.

Firstly, mandatory CSR is in favor of the government's efforts to safeguard the environment

and improve people's quality of life (Japhet, 2022). In my opinion, mandatory CSR focus on

reducing business waste that could damage the environment and make healthier community

while making the business aid sustainability. According to Elmallah, R., Aref, A., and Sherif,

S. (2019), the goal of corporate social responsibility (CSR) is to make sure that businesses

contribute to the prevention of pollution in the environment. CSR entails growing the number

of employees that contribute positively to the environment during the production process as

well as the economic and social activities of businesses that support environmental

protection. Secondly, mandatory CSR could preserve human rights in an organization (Lin,

2020). In my point of view the global community has come a long way in evaluating and

defining the relationships between corporations and human rights and through CSR the rights

of every workers and labors should be equally and legally implemented. Australian Human

Rights Commission (2008) states that businesses must protect the interests of their clients,

employees, shareholders, and the communities in which they operate. Human rights' social

dimensions, such as the right to equality and freedom from discrimination, are crucial. Many

companies have publicly committed to upholding specific human rights standards. Lastly,

mandatory CSR promotes socio-economic development. Participating in CSR initiatives

encourages international investment and provides the nation with vital foreign exchange. This

then triggers socioeconomic development initiatives. According to Sharma, E. and Sathish,

M., (2022) Corporations have an ethical obligation to give back to the community that
supports their success. Companies that participate in CSR initiatives are recognized and

rewarded by national and worldwide business organizations. These investments have a direct

impact on economic growth as well as the wellbeing of the communities they serve.

Conclusion

Thus, mandatory CSR should be implemented in all companies and organizations.

Mandatory CSR can be enforced legally through a company's board of directors, addressing

the needs of shareholders who want to maximize share price and other stakeholders who have

more general concerns. One variant of this structural design would include employee

representatives on the board. Moreover, In order to comply with mandatory CSR due

diligence requirements, businesses must assess the social and environmental risks related to

their operations and develop and implement workable plans to mitigate any potential harm.
References

Dave, A., (2017). Voluntary Vs. Mandatory CSR. Retrieved from

https://www.ijirmf.com/wp-content/uploads/2017/05/201704056.pdf

Hema Deogharkar & Santosh Datkhile (2014). Implication of Corporate Social

Responsibility under Companies Act 2013, Abhinav international monthly referred

journal of Research in Management and Technology , Volume 3, issue 4 (April-2014)

online ISSN-2320-0073.

González, Cuesta & Martinez., (2004). Voluntary vs. Mandatory Sustainability Reporting-

CSR Bulgaria. Retrieved from https://www.globalreporting.org/

Hickman,E., Lyer,S., and Jadiyappa, N., (2021). The effect of voluntary and mandatory

corporate social responsibility on earnings management: Evidence from India and the

2% rule. Retrieved from

https://www.sciencedirect.com/science/article/pii/S1566014120300972

Sharma, E., & Sathish, M. (2022). “CSR leads to economic growth or not”: an evidence-

based study to link corporate social responsibility (CSR) activities of the Indian

banking sector with economic growth of India. Asian Journal of Business

Ethics, 11(1), 67–103. https://doi.org/10.1007/s13520-022-00142-5