Corporate Governance, Wealth Creation and Social Responsibility Accounting

Abstract

The spate of social unrest resulting in corporate disruption and production shortages have assumed alarming dimension. Companies’ activities most often impact negatively on the environment within which the company is doing business. Howbeit the environment is adversely affected, the company increasingly exploits it to increase profits and provide attractive returns on investment. In recent times, most companies have come to terms with the fact that their continuous existence and increasing expansion of shareholders’ wealth depend on the conduciveness and acceptability of the company in the environment. With this realization, companies strife to identify with the needs and problems of the environment where they operate by contributing part of the profit generated to the social welfare of the environment. This concern by companies for the environment where they operate has given rise to the widely embraced concept of corporate social responsibility. Companies become socially responsible as they are alive to the demands of the society. The society embraces such companies thus enhancing the image and status of the company. The image and status of the company directly impact on shareholders’ wealth thus reflecting the strength of corporate governance. Corporate governance encourages best practices by protecting the interest of shareholders and creating atmosphere for increased returns on investment for the shareholders. This paper has demonstrated the undisputable correlation between social responsibility accounting and shareholders wealth manifested in good corporate governance. The paper has shown that changes in profit attributable to shareholders result from changes in corporate social contributions. Companies investing in societal activities rapidly create wealth, image and good social status for the shareholders. It becomes necessary therefore for companies focusing on growth and survival indices to equally watch its corporate governance rating and corporate social responsibility outlook.

Key words: Corporate governance; Shareholders’ wealth; Corporate image; Corporate social responsibility; Social responsibility accounting