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Corporate responsibility is a term which has come to characterize a family of professional disciplines intended to help a corporation stay competitive by maintaining accountability to its four main stakeholder groups: customers, employees, shareholders, and communities.
The professional disciplines included in the corporate responsibility field include legal and financial compliance, business ethics, corporate social responsibility, public and community affairs, investor relations, stakeholder communications, brand management, environmental affairs, sustainability, socially responsible investment, and corporate philanthropy.
Major membership organizations and media in the Corporate Responsibility industry include Business in the Community (bitc.org.uk), WBCSD.org, CERES, National Investor Relations Institute, and Compliance Week .
Business Ethics Magazine (acquired in August, 2006 by The CRO, or Corporate Responsibility Officer) has helped to define the field with its 100 Best Corporate Citizens list, published since 1998. The Corporate Responsibility industry, which includes all professional services purchased by for-profit and not-for-profit companies to maintain their levels of corporate responsibility, was valued by the CRO Magazine at $20 billion in 2005.
In the USA, the failings of corporate responsibility have been closely associated with the corporate scandals (Enron, Tyco, Citigroup) of the 2000-2004 period and the Sarbanes–Oxley Act of 2002 which was passed in response to these accounting scandals. [1] Section 302 of the Sarbanes–Oxley Act specifically refers to the corporate responsibilities of the "signing officers" responsible for signing-off financial reports and accounts. [2] [3]
In the UK and Europe, the term is more generally associated with the local and Europe-wide regulations holding companies accountable to their stakeholders.
Business ethics is a form of applied ethics or professional ethics, that examines ethical principles and moral or ethical problems that can arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and entire organizations. These ethics originate from individuals, organizational statements or the legal system. These norms, values, ethical, and unethical practices are the principles that guide a business.
The Sarbanes–Oxley Act of 2002 is a United States federal law that mandates certain practices in financial record keeping and reporting for corporations. The act,, also known as the "Public Company Accounting Reform and Investor Protection Act" and "Corporate and Auditing Accountability, Responsibility, and Transparency Act" and more commonly called Sarbanes–Oxley, SOX or Sarbox, contains eleven sections that place requirements on all U.S. public company boards of directors and management and public accounting firms. A number of provisions of the Act also apply to privately held companies, such as the willful destruction of evidence to impede a federal investigation.
Corporate governance are mechanisms, processes and relations by which corporations are controlled and operated ("governed").
Corporate accountability is the acknowledgement and assumption of responsibility for the consequences of a company's actions. It can be defined in narrowly financial terms, e.g. for a business to meet certain standards or address the regulatory requirements of its business activities. Corporate accountability may also be applied more broadly, such as expectations for a publicly-traded company to be accountable to its employees and local community rather than focusing exclusively on earning profits in the short-term for the benefit of its shareholders.
Corporate social responsibility (CSR) or corporate social impact is a form of international private business self-regulation which aims to contribute to societal goals of a philanthropic, activist, or charitable nature by engaging in, with, or supporting professional service volunteering through pro bono programs, community development, administering monetary grants to non-profit organizations for the public benefit, or to conduct ethically oriented business and investment practices. While once it was possible to describe CSR as an internal organizational policy or a corporate ethic strategy similar to what is now known today as Environmental, Social, Governance (ESG); that time has passed as various companies have pledged to go beyond that or have been mandated or incentivized by governments to have a better impact on the surrounding community. In addition, national and international standards, laws, and business models have been developed to facilitate and incentivize this phenomenon. Various organizations have used their authority to push it beyond individual or industry-wide initiatives. In contrast, it has been considered a form of corporate self-regulation for some time, over the last decade or so it has moved considerably from voluntary decisions at the level of individual organizations to mandatory schemes at regional, national, and international levels. Moreover, scholars and firms are using the term "creating shared value", an extension of corporate social responsibility, to explain ways of doing business in a socially responsible way while making profits.
Investor relations (IR) is a "strategic management responsibility that is capable of integrating finance, communication, marketing and securities law compliance to enable the most effective two-way communication between a company, the financial community, and other constituencies, which ultimately contributes to a company's securities achieving fair valuation." as defined by National Investor Relations Institute (NIRI). IR is also function to assess the impact of a company actions on the company's position in the capital markets.
An audit committee is a committee of an organisation's board of directors which is responsible for oversight of the financial reporting process, selection of the independent auditor, and receipt of audit results both internal and external.
In general, compliance means conforming to a rule, such as a specification, policy, standard or law. Compliance has traditionally been explained by reference to the deterrence theory, according to which punishing a behavior will decrease the violations both by the wrongdoer and by others. This view has been supported by economic theory, which has framed punishment in terms of costs and has explained compliance in terms of a cost-benefit equilibrium. However, psychological research on motivation provides an alternative view: granting rewards or imposing fines for a certain behavior is a form of extrinsic motivation that weakens intrinsic motivation and ultimately undermines compliance.
Double bottom line seeks to extend the conventional bottom line, which measures fiscal performance—financial profit or loss—by adding a second bottom line to measure a for-profit business's performance in terms of positive social impact. There is controversy about how to measure the double bottom line, especially since the use of the term "bottom line" implies some form of quantification. A 2004 report by the Center for Responsible Business noted that while there are "generally accepted principles of accounting" for financial returns, "A comparable standard for social impact accounting does not yet exist." Social return on investment has been suggested as a way to quantify the second bottom line, though defining and measuring social impact can prove elusive.
Information technology controls are specific activities performed by persons or systems to ensure that computer systems operate in a way that minimises risk. They are a subset of an organisation's internal control. IT control objectives typically relate to assuring the confidentiality, integrity, and availability of data and the overall management of the IT function. IT controls are often described in two categories: IT general controls (ITGC) and IT application controls. ITGC includes controls over the hardware, system software, operational processes, access to programs and data, program development and program changes. IT application controls refer to controls to ensure the integrity of the information processed by the IT environment. Information technology controls have been given increased prominence in corporations listed in the United States by the Sarbanes-Oxley Act. The COBIT Framework is a widely used framework promulgated by the IT Governance Institute, which defines a variety of ITGC and application control objectives and recommended evaluation approaches.
The chief risk officer (CRO), chief risk management officer (CRMO), or chief risk and compliance officer (CRCO) of a firm or corporation is the executive accountable for enabling the efficient and effective governance of significant risks, and related opportunities, to a business and its various segments. Risks are commonly categorized as strategic, reputational, operational, financial, or compliance-related. CROs are accountable to the Executive Committee and The Board for enabling the business to balance risk and reward. In more complex organizations, they are generally responsible for coordinating the organization's Enterprise Risk Management (ERM) approach. The CRO is responsible for assessing and mitigating significant competitive, regulatory, and technological threats to a firm's capital and earnings. The CRO roles and responsibilities vary depending on the size of the organization and industry. The CRO works to ensure that the firm is compliant with government regulations, such as Sarbanes–Oxley, and reviews factors that could negatively affect investments. Typically, the CRO is responsible for the firm's risk management operations, including managing, identifying, evaluating, reporting and overseeing the firm's risks externally and internally to the organization and works diligently with senior management such as chief executive officer and chief financial officer.
The Committee of Sponsoring Organizations of the Treadway Commission (COSO) is an organization that develops guidelines for businesses to evaluate internal controls, risk management, and fraud deterrence. In 1992, COSO published the Internal Control – Integrated Framework, commonly used by businesses in the United States to design, implement, and conduct systems of internal control over financial reporting and assessing their effectiveness.
Enterprise risk management (ERM) in business includes the methods and processes used by organizations to manage risks and seize opportunities related to the achievement of their objectives. ERM provides a framework for risk management, which typically involves identifying particular events or circumstances relevant to the organization's objectives, assessing them in terms of likelihood and magnitude of impact, determining a response strategy, and monitoring process. By identifying and proactively addressing risks and opportunities, business enterprises protect and create value for their stakeholders, including owners, employees, customers, regulators, and society overall.
Internal control, as defined by accounting and auditing, is a process for assuring of an organization's objectives in operational effectiveness and efficiency, reliable financial reporting, and compliance with laws, regulations and policies. A broad concept, internal control involves everything that controls risks to an organization.
Continuous monitoring is the process and technology used to detect compliance and risk issues associated with an organization's financial and operational environment. The financial and operational environment consists of people, processes, and systems working together to support efficient and effective operations. Controls are put in place to address risks within these components. Through continuous monitoring of the operations and controls, weak or poorly designed or implemented controls can be corrected or replaced – thus enhancing the organization's operational risk profile. Investors, governments, the public and other stakeholders continue to increase their demands for more effective corporate governance and business transparency.
Accounting ethics is primarily a field of applied ethics and is part of business ethics and human ethics, the study of moral values and judgments as they apply to accountancy. It is an example of professional ethics. Accounting was introduced by Luca Pacioli, and later expanded by government groups, professional organizations, and independent companies. Ethics are taught in accounting courses at higher education institutions as well as by companies training accountants and auditors.
The following outline is provided as an overview of and topical guide to accounting:
A celebrity board director is an officer with significant influence in the company's governance decision-making process and who possesses one or more celebrity traits including credibility, goodwill, rights, image, influence, liability, and standard of value. A director's leadership and decision-making affects the governance and wealth maximization of shareholders’ wealth.
Social accounting is the process of communicating the social and environmental effects of organizations' economic actions to particular interest groups within society and to society at large. Social Accounting is different from public interest accounting as well as from critical accounting.
