Literature Review As already detailed in the summary in the UK, the new Companies Act (2006) provides a legal foundation for CSR governance at board level. The recent briefing paper from the Institute of Business Ethics (2007) cites this legal requirement as one of several drivers for the development of board-level CSR committees in the UK. Other drivers cited include: risk and reputation management; embedding of ethical values throughout an organisation and raising board awareness of ethical values and issues, whilst indicating to staff that values and ethics are taken seriously at the top.6 Parallel developments in the US, reviewed by Cramer and Hirschland in the Harvard Business Review (2006), show that legislative changes to board composition, roles and authority as well as increased attention to non-financial risks and opportunities are leading to the expansion of boards’ ‘fiduciary duties’ to include social, environmental and human rights issues. It is reported in this review that US boards are recognising that a proactive approach to these issues impacts on business performance and enhances their own legitimacy. “Active board engagement around what it means to be a responsible and responsive enterprise has the potential to buttress the true power of the board as an instrument for strategic, long-term value creation. Boards are stepping in to help guide company strategy by defining the meaning of “responsibility” in an era when the views of stakeholders have joined shareholders as critical measures of company success.”7
This is further reflected in the US where it is becoming increasingly common for companies to address CSR issues at board level with an estimated 20 percent of the Standard & Poor’s 500 having established board CSR committees8 and eight out of Fortune’s top ten ‘Most Admired Companies for Social Responsibility’ in 2004 having board CSR committees. This literature reports that the reasons cited for boards taking a proactive stand on CSR issues include: positioning companies for future success; reducing conflict with environmental campaigners and communities; responding to stakeholder demands; reputation building and attracting mainstream investors. Notably, Porter and Kramer (2006) pointed out that in 2005 alone there were 360 shareholder resolutions relating to CSR issues such as labour conditions and global warming.9 Although the literature does not demonstrate a standard approach to integrating oversight of CSR issues into the structures of US boards, Cramer and Hirschland (2006) identified four emerging trends: • Expanding the charter of an existing board committee; • Considering the full board as a CSR committee; • Establishing an executive committee or external advisory committee that reports to the board; and • Establishing a CSR-specialised board committee.
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