Corporate Citizenship

Corporate citizenship is a concept also known as corporate social responsibility. It states that businesses have a responsibility to society in general and to the community in which they operate.  There are several areas of responsibility of corporate citizenship, such as legal, economic, philanthropic, ethical and environmental areas.

This means doing business not only to meet the needs of owners and stockholders, but to incorporate the interests of all stakeholders in business operations like the employees, customers, the community and the environment. A business that operates in an ethical manner and supports the concerns and interests of the community is a responsible corporate citizen.

Stockholders and stakeholders are two key interest groups in many businesses. Stockholders own a piece of the business and have a financial investment in the business. Stakeholders may or may not own a piece of the business. A stakeholder is any person or group who has an interest in the business such as employees and managers, customers, residents in the area, regulatory agencies, suppliers, distributors and community groups. A good corporate citizen has responsibility to both.

A good corporate citizenship is the result of generating profits for owners and stakeholders in the free market model of business.  As much as possible, the business produces at the lowest cost possible. In this model, improved health, social development, effective resource management, education, and other community and social issues are driven by business. When the business is successful it is a good corporate citizen because when the business is successful the community is successful as well.

Businesses choose to be good corporate citizens because it increases profits. This is sometimes called enlightened self-interest. The founder of The Body Shop believes that “being good is good for business.” The Body Shop displaying Save the Whales posters in its store windows created interest in the community and bolstered the company’s reputation. Good corporate citizens have a good reputation in the community because they meet the various needs and work to balance and meet the needs of various stakeholder groups. They also have lower employee turnover, reduced risk and liability, along with improved efficiency because they improve their processes and reduce waste.

The third business model of corporate citizenship has environmental, social and profit goals, all of which are equal. Profit does not take precedence over the other two.  These types of businesses are privately owned by entrepreneurs, philanthropists or environmentalists. Social responsibility and corporate citizenship drive the company’s operations, including marketing and sales. One business donates most of its after-taxes profit to charitable and educational causes. The business was made not only to provide a product or service but to improve and support the community.