Definition of corporate responsibility
Corporations have a responsibility to those groups and individuals that they can affect, i.e., its stakeholders, and to society at large. Stakeholders are usually defined as customers, suppliers, employees, communities and shareholders or other financiers.
The responsibility to society at large may well be identical with the responsibility to its various communities. Many have suggested that corporations have a special “social responsibility” over and above its business purpose. In any case corporate responsibility consists of earning a licence to operate by creating value for stakeholders, including shareholders, and society.
Corporate responsibility includes being consistent with ethical principles and conduct such as honesty, integrity and respect for others. By voluntarily accepting responsibility for its actions corporations earn their licence to operate in society.
Companies earn a licence to operate by creating products and services that their customers value, by creating jobs for employees whom they treat fairly and in accordance with the law, and by complying with other applicable laws.
In a case where a company’s products are discovered to be harmful to customers, or where their products or operations are deemed harmful to the general public, a company’s licence to operate can become imperiled. This may result in penalties that enforce existing laws and regulations, or new laws and regulations that in extreme cases put a company out of business.