Corporate Social Responsibility: A Company Law Perspective

• Jurisdiction: South Africa
• Author: Irene-Marie Esser
• Published date: 25 May 2019
• Date: 25 May 2019
• Pages: 317-335

Articles

Corporate Social Responsibility: A Company

Law Perspective*

IRENE-MARIE ESSER**

University of South Africa

1 Introduction, Definitions, and Background

1.1 Introduction

‘The corporation’s legally def‌ined mandate is to pursue relentlessly and without exception its

own economic self-interest, regardless of the harmful consequences it might cause to

others....Today, corporations govern our lives. They determine what we eat, what we watch,

what we wear, where we work and what we do....’

1

According to Bakan, ‘the corporation is a pathological institution, a

dangerous possessor of the great power it wields over people and societies’.

2

Its sole purpose is, according to him, to make prof‌its, no matter what.

By contrast, the editors of the Economist have stated that the company is

‘the most important organisation in the world’, ‘the basis for the prosperity of

the West and the best hope for the future of the rest of the world’.

3

Companies can accordingly be good and evil, responsible and irrespon-

sible. Whatever one’s perspective of the character of a company, its activities

will be scrutinized. It has to act in a socially responsible manner. Corporate

social responsibility (CSR) is based upon the concept ‘good citizenship’. A

company has a duty to society beyond that of an ordinary citizen as a result of

its power and size, and the benef‌its associated with its status as a separate

legal entity. Bad corporate citizenship and actions based on pure (especially

short-term) prof‌it maximisation have a negative effect on a company’s

long-term prof‌its.

4

These examples clearly show this: During the 1990’s Nike’s products were

boycotted because they were using child labour under sweatshop like

* This article is based on my inaugural lecture 15March 2011 at the University of South Africa. I

wish to thank Professors Michele Havenga and Piet Delport for their interesting and useful suggestions.

** LLB (Stell) LLM (Aberdeen) LLD (Unisa). Professor of Corporate Law in the Department of

Mercantile Law, University of SouthAfrica, Pretoria. e-Mail: esseri@unisa.ac.za.

1

Joel Bakan The Corporation: The Pathological Pursuit of Profit and Power (2005) 1.

2

Idem at 2.

3

John Mickelthwait & Adrian WoolridgeThe Company (2005) xv.

4

Güler Aras, David Crowther & Stella Vettori Corporate Social Responsibility in SME’s (2009) 1

and 2.

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(2011) 23 SA Merc LJ 317

© Juta and Company (Pty) Ltd

conditions in their factories. Nike now has a code of conduct covering labour

standards and working conditions in their contract factories.

5

BP has various CSR initiatives in place. These include programmes in the

area of education, climate change, energy management, and the community,

generally. However, on 20 April 2010, BP’s Deepwater Horizon drilling rig

exploded. The explosion killed eleven people and triggered a massive oil spill

in the Gulf of Mexico. This has been marked, by the media, as the biggest

CSR disaster in years. BP’s stock price has lost about f‌ifteen per cent since the

start of the oil spill. BP is continuing to embark on efforts to restore the Gulf

Coast.

6

The merits of these companies’ actions are not considered here. But

situations like these raise pertinent questions regarding CSR, good gover-

nance, and its regulation.

7

This article provides a journey through CSR in the context of South African

company law. The focus is on CSR as dealt with in legislation, especially the

Companies Act 71 of 2008,

8

the King III Report on Corporate Governance,

9

case law,

10

and the JSE Listing Requirements.

11

I attempt to answer the

question whether or not company law is the correct vehicle to deal with CSR.

I argue that CSR is clearly part of our company law. Whether companies

should merely act with prof‌it maximization as their goal or whether they

should also consider the interests of stakeholders are no longer the primary

issue. The focus now is rather to what length directors must go for their

actions to be considered socially responsible, and the consequences when they

5

See Ramani Naidoo Corporate Governance: An Essential Guide for South African Companies 2ed

(2010) 242. For Nike’s initiatives regarding the working conditions for their factory workers, see

http://www.nikebiz.com/responsibility/workers_and_factories.html (visited on 11March 2011).

6

See http://www.suite101.com/content/bp-goes-from-beyond-petroleum-to-big-polluter-in-csr-set-

back-a235924 (visited on 20 October 2010). See also a special report on the oil spill in the October

2010 edition of the National Geographic.

7

See Bryan Horrigan Corporate Social Responsibility in the 21 st Century Debates, Models and

Practices Across Government, Law and Business (2010) at 8 where he refers to Adv N Frances stating

‘A business able to make all these factors integral components of its operations, rather than add-on

features of its marketing strategy, stands a better chance of satisfying its expectations of its diverse

stakeholders and delivering on its business goals.’ See also Horrigan at 273 where he refers to a study

that examined 25 years of corporate performance since 1970-the 1990’s. In terms of this study there is a

positive correlation between a company’s performance and how it practices CSR. See M Orlitzk; EL

Schmidt & SL Rynes ‘Corporate Social and Financial Performance: A Meta-Analysis’ (2003) 24

Organization Studies (see also http://www.sristudies.org/Orlitzky+et+al+(2003),visited on 17 January

2011).

8

Act 71 of 2008 (hereafter the 2008 Companies Act). This Act came into operation on 1 May 2011

and repealed the Companies Act 61 of 1973, except for Chapter XIV (the winding-up of companies)

(see Item 9 sch 5 of the 2008 Companies Act): R32 in GG 34239 of 26 April 2011.

9

Hereafter referred to as the King III Report. The Code is available for downloading (free of charge)

at: www.iodsa.co.za. Copyright of the Code and the Report rests with the Institute of Directors in

Southern Africa. The Report is also available at www.iodsa.co.za, but only to read and not to download.

For a copy of the Report one has to purchase it from the Institute directly.

10

Only case law post 2002 will be considered. Case law dealing with corporate gifts and donations

fall outside the ambit of this article. Only cases that purely deal with CSR issues and that specif‌ically

refer to principles of good corporate governance like stakeholder protection and corporate citizenship

are discussed.

11

See http://www.jse.co.za/How-To-List-A-Company/Main-Board/Listing-requirements/JSE-listing-

requirements.aspx (visited on 25 October 2010) for the JSE Listing Requirements.

(2011) 23 SA Merc LJ318

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