Difference Between Corporate Governance and Corporate Social Responsibility
Difference Between Corporate Governance and Corporate Social Responsibility
| Aspect | Corporate Governance (CG) | Corporate Social Responsibility (CSR) |
|---|---|---|
| Definition | Corporate Governance refers to the system, principles, and processes by which companies are directed and controlled. It ensures accountability, fairness, and transparency in a company's relationship with stakeholders. | CSR refers to a company’s initiatives and activities aimed at contributing positively to society and the environment beyond its profit motives. It involves ethical responsibilities towards social welfare. |
| Objective | To ensure efficient management, protect shareholders’ interests, maintain accountability and transparency, and promote long-term business sustainability. | To contribute to social, environmental, and economic development, improve community welfare, and demonstrate ethical business practices. |
| Focus Area | Internal framework of policies, procedures, board structure, risk management, compliance, and stakeholder relations. | External impact of business on society including environment, community development, education, health, and philanthropy. |
| Nature | Primarily regulatory and legal compliance-driven, ensuring that the company is managed according to laws and ethical standards. | Voluntary and philanthropic in nature, though in some jurisdictions (like India) CSR is mandated by law to a certain extent. |
| Who is Responsible? | Board of Directors, management, and shareholders who oversee the governance mechanisms. | Entire organization, with CSR committees or designated teams implementing social initiatives. |
| Scope | Covers accountability to shareholders, transparency in financial reporting, internal controls, and ethical corporate behavior. | Covers activities like environmental conservation, community welfare, education programs, healthcare initiatives, and sustainable development. |
| Legal Requirement | Enforced by laws, stock exchange regulations, and governance codes (e.g., Companies Act, SEBI Regulations). | May be voluntary or mandatory (e.g., Section 135 of Companies Act, 2013 in India mandates CSR for certain companies). |
| Examples | Appointment of independent directors, disclosure of financials, prevention of fraud, audit committees. | Donations to NGOs, environmental sustainability programs, education scholarships, rural development projects. |
| Impact | Ensures corporate integrity, reduces risks, boosts investor confidence, and helps avoid corporate scandals. | Enhances corporate reputation, fosters goodwill, supports sustainable development, and benefits society at large. |
Summary
Corporate Governance is about how a company is managed and controlled, ensuring it operates ethically and transparently to protect stakeholder interests.
Corporate Social Responsibility is about what a company does for society beyond profit-making, focusing on its social and environmental duties.
Both concepts are interrelated but serve different purposes: Governance creates a framework for responsible management, while CSR reflects the company’s commitment to societal welfare.
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