Corporate Social Responsibility: The Role of Law and Markets and the Case of Developing Countries

In order for the corporation to engage in responsible practices, many obstacles must be overcome. One such obstacle is the belief of many managers that the corporation would be violating its fiduciary responsibility if it engaged in activities that go beyond what is required by the law. Another obstacle is that many of those practices have a real cost but are perceived not to have a corresponding tangible benefit. The article discusses and dismisses these perceived obstacles and argues that it is both through law and the workings of the market that responsible behavior can enhance society\u27s welfare. It is precisely the market that can induce the corporation to go beyond the minimum requirements of the law, thereby avoiding the need for constraining laws and regulation that would stifle creativity and innovation. In the case of developing countries, the situation is more critical; those same two obstacles are at work, but laws and regulations are deficient and poorly enforced and markets are even more imperfect. There is a strong need to develop institutions and markets and to educate managers on the long-term benefits of responsible behavior for society and, consequently, for the corporation itself through its contribution to economic development