Corporate Governance In Relation To The Enhancement Of Social Responsibility

Abstract

Paper argues that managers have the obligation to make choices and take actions that will contribute to the welfare and interests of society as well as the organisation. Social responsible behaviour is actually in a company's self interest. Therefore the company must take the social consequences into account when formulating strategies. Still there are those scholars who argue that considerations of social responsibility should not enter into the decision process. However, many institutional investors pay attention to corporate social behaviour and thus influence the market for a company's stock. Our conclusions are based on a longitudinal research method. We made three consecutive research studies on the characteristics of corporate governance in Slovenia in the period 1998 to 2006. We compare the results of our studies made in 1998 and 2002 with the latest results in 2006. The most important long-term strategic objective of Slovenian companies is growth. The share of Slovenian companies not considering equity opportunity costs has decreased significantly in the last six years due to the consolidation of ownership structures. The controlling owners are more active in setting the required rate of return on their equity investments. There is no conflict of interests between internal and external shareholders in most companies. Obviously, Slovenian companies have changed their strategic behaviour to reflect the interests of their stakeholders. We may argue that some stakeholders, like customers and employees, are even more important for Slovenian managers than the owners.