Research Handbook on Corporate Governance and Social Responsibility in Developing Countries

Effective Corporate Governance (CG) practice is recognized as an essential component not only in terms of a nation’s economic growth strategy, which is ultimately catered for through entrepreneurial activities of the private sector, but also in terms of investor confidence. Consequently, there is now an increasing call for tighter CG control and reform which recognizes the inclusion of various stakeholder interests. CG is viewed as a strategic tool that helps firms improve performance, drive growth, manage risks, attract and retain investors, reduce the risk of financial crisis, promote disclosure, transparency and accountability - variables which are said to be essential ingredients in promoting the affairs of many developing and emerging nations. CG brings about positive change and overall economic advancement.

There is now recognition of the importance of CG and its interrelationship with other concepts such as Ethics and Corporate Social Responsibility (CSR). In recent times, many countries around the world have witnessed radical change in the relationship between businesses and the society in which they operate. Various corporate scandals such as Enron, WorldCom in the United states and Parmalat in Italy, and the financial crisis in 2009 have brought to the fore international deliberations on the firms responsibilities to their stakeholders and the efficacy of CSR and existing CG standards and practices. Consequently, countries around the globe are adopting tougher stance on businesses in relation to their governance practices and ensuring that they embrace socially and environmentally responsible practices within their strategic framework. The link between CG and CSR is highlighted particularly in relation to the stakeholder perspective of CG. Both CSR and CG champion consideration and commitment to diverse stakeholder interests and interaction within the wider community. CSR is an extension of CG, in that the organization is perceived as owing its fiduciary duty not only to shareholders but also to a wider category of stakeholders and the local communities in which it operates.

The attention given to the twin constructs stems from the need to circumvent future corporate scandals, thus curbing weak governance practices which reverberates negative ramifications for economic growth and social development. In a bid to ensure good CG and bolster socially responsible practices, various countries have devised strategies to ensure transparency and accountability of corporate practices not only as a means of inculcating investor confidence but also as a way of further strengthening their legal systems, democratic governance and ensuring stakeholders and local communities are accounted for. There is general consensus amid academics, researchers and government agencies worldwide that such systems helps to provide a degree of confidence, integrity, stability, investment and sustained economic growth, which is necessary for the proper functioning of a market economy.

In-spite of the growing recognition of the significance of effective governance and socially responsible business practices, much of the scholarly discussions in this area have focused exclusively on MNE's. The concept remains elusive within the African continent generally and the SME sector more specifically. Consequently, there are unanswered questions on CG and CSR within the African milieu and the SME sub-sector. It is argued that the conclusions drawn from studies which have their focus primarily in the ‘Developed World’ and MNE's do not necessarily apply to the situation in developing countries or indeed the SME sub-sector which have peculiarities that distinguish them from the outside world generally and from Western countries where many MNEs and large corporations originate. Therefore, this research handbook takes on a more nuanced approach in focusing on CG and CSR practices of both the SME and MNE sectors in developing countries.