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Editor convidado: Valdir de Jesus Lameira, D.Sc. (U. de Coimbra, Portugal)

Vol. 6 No. 2 (2011): Agosto/2011

Contrasting Two Models for Reporting Corporate Social Activities: Encouraging the Responsible and Discouraging the Irresponsible

DOI
https://doi.org/10.7177/sg.2011.V6.N2.A1
Submitted
March 21, 2012
Published
2012-03-21

Abstract

This paper reviews the traditional incentive model of reporting corporate social responsibility (CSR), a complementary disincentive model is introduced, and the two are compared. Both models are grounded in the assumption that reporting increases the supply of information to inform providers of capital and, being informed, providers respond. The traditional model assumes an incentive response, i.e. the capital is provided and the cost of capital is beneficial to the company. By contrast, and the emerging model assumes a disincentive response, information motivates potential debt or equity investors to withhold capital. The emerging disincentive model is seen in the coal mining industry of the U.S. through (a)  derivative lawsuits by shareholders to obtain safety and environmental information about corporate actions, (b) banking policies that restrict credit for mountaintop removal coal mining (MTRM), and (c) regulatory provisions e.g. Dodd-Frank Act requiring financial statement disclosure of  health and safety mining health and safety standards. Also, the disincentive model is advanced through technology (a) in collection, aggregation, and disclosure of information and (b) investment funds that exclude socially irresponsible companies.  The emerging CSR disincentive reporting model (a) addresses core accountability aspects reporting compliance failures with laws and regulations and (b) incorporates beneficial accounting and auditing attributes. Implications for further research are presented.

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