CORPORATE SOCIAL ACCOUNTABILITY.

• Author: Zhao, Jingchen

1. INTRODUCTION 64 II. DEFINING CSR AND BOARD ACCOUNTABILITY: PREPARING FOR A FEASIBLE INTEGRATION 70 A. CSR: Current Understanding and the Trajectory for Advancement 70 B. Building a Route from Responsibility to Accountability 74 C. Board Accountability and Its Contribution to Enforcing the Legal Dimension of CSR 78 III. THE CONCEPTION OF CSA AS A MORE SUITABLE NOTION FOR CORPORATE LAW 82 A. The Necessity of a New Notion to Replace CSR in Company Law through the Lens of Board Accountability 83 B. Linking CSR with Board Accountability 88 C. Responses to Potential Limits of CSA 91 D. Developing an Appropriate Mechanism for Corporate Law: CSA 93 IV.THE ENFORCEMENT STAGES OF CSA 99 A. Mandatory Information Disclosure and Stakeholder Communication 100 B. Stakeholder Participation and CSR Committees 101 C. Imposition of Directors' Liabilities for Socially Irresponsible Behaviors 102 D. CSA and Constitutional Documents 105 E. Legislative Objects, Harmonization, Compliance Costs, and Synthesis 108 V. CONCLUSION 109 I. INTRODUCTION

   The COVID-19 pandemic is the biggest crisis humanity has faced in decades. It is an unprecedented challenge for governments, individual citizens, businesses, as well as businesses' suppliers, employees, customers, financiers, and local communities. All businesses, including small and medium enterprises (SMEs) and big multinational enterprises (MNEs), are facing heightened uncertainties as a result of the COVID-19 outbreak. These companies are seeing unprecedented drops in sales, severe cash and capital shortages, mass lay-offs, an overwhelming rise in cross-border logistics costs, and belated resumption of work at suppliers.

   Corporate social responsibility (CSR) seems paradoxical in the context of the pandemic. It is perfectly reasonable to argue that times are tough and companies, especially SMEs, need to focus on their core operating business for short-term survival. By this argument, CSR costs may be classified as resources allocated to noncore business activities, which may be difficult to justify. While companies are facing a host of unforeseen difficulties, directors arc also confronted by extremely difficult decisions in relation to their companies' futures, together with the prospect of personal liability for the decisions they make if they fail to maintain a healthy cash reserve and minimize pandemic-related losses.' CSR strategies may thus be dropped, because they are too costly and complex to be synthesized in a single figure.

   In light of the global pandemic, the attention of governments, the public, and the media is focused on public health policy and scientific research on vaccine and drug therapies. But an area that carries equal weight for people's welfare has seemingly been overlooked: the refinement of corporate objectives via government interventions in corporate decisions to tackle the social problems caused by the crisis. One of the lessons we have learned from this pandemic is that "CSR compliance is not enough . . . [fjar from it." (2) For companies and directors who genuinely believe that their company has a purpose beyond short-termism, and for governments that include CSR as part of their legislative reform agendas, the pandemic has created a significant opportunity to pursue new values. For example, certain companies, known as B-Corps, (3) have demonstrated how resilient and prepared they are to manage risks in order to adapt to the "new normal." We have been given a long-term window to reassess the corporate objective debate and propose future legislative reforms. CSR practices would likely generate a win-win scenario for companies with an existing CSR commitment, who want to respond to government calls to support COVID-19 relief work and meet statutory requirements at the same time. Tough times can simultaneously bring opportunities for companies. Embedding and developing CSR will be a major contemporary means for companies to realize their societal functions and serve public interest goals in order to demonstrate their inventiveness, liberality, and courage to communicate and serve both corporate and societal interests.

   Despite wide, multi-disciplinary recognition of the significance of CSR, particularly in light of the pandemic, there remain strong disputes about the definition, nature, and future of CSR. (4) Theoretically, the term CSR is "a form of international private self-regulation focused on the reduction and mitigation of industrial harms and provision of public good." (5) It has been discussed from a multi-disciplinary perspective, including the disciplines of philosophy, business management, law, politics, sociology, and economics, as well as pragmatically by business people and politically by public representatives. In the meantime, the notion has received its share of criticism over the years for being ill-defined and fundamentally flawed. Critics have leveled accusations of green-washing and have pointed out contradictions with corporate purposes, corporate culture, law enforcement, and the subjective nature of business judgments.'' In addition to its dubious definition, the nature, purposes, and applications of CSR constantly change and evolve according to variations in the overall economic climate, the ups and downs of corporate operations, and even the orientation of academic research agendas. Such definitional ambiguity not only makes it difficult for stakeholders seeking to hold companies accountable but also leaves companies open to considerable risks, including criticism from the media and even protests and lawsuits from the public.

   Pragmatically, in response to elevating challenges as well as civil society and public expectations of good corporate citizenship, different jurisdictions have enacted a number of regulatory approaches. Most of these embrace CSR into the corporate law domain as a primary means, as is the case with the Indian Companies Act 2013 (7) or China Company Law 2018. (8) In the meantime, this also makes CSR a further target for analysis and evaluation, as well as for constructive criticism, in the corporate law arena.

   To begin with, the appropriateness of using CSR--currently a vague and sometimes self-contradictory notion--in company law, which requires meticulousness, remains doubtful. Indeed, a critical assessment of the connotation and practice of CSR raises doubts about how its multiple dimensions and various elements may be embraced into the public regulatory realm. Moreover, deficiencies in current legislative experiences in existing CSR regimes also call for a more sophisticated and richer approach for corporate law endorsement. For example, despite their ethical and progressive legislative initiatives, mandatory CSR laws have been criticized for being window dressing and lacking enforcement channels. (9) "Politics and the open-ended notion of CSR significantly weaken the compulsory nature of the CSR laws." (10)

   Additionally, CSR is no longer to be treated merely as an internal management policy of corporations, but rather as part of an international regulatory framework governing and smoothing businesses' operations." CSR is directly and indirectly linked to international law principles and global governance regimes, influenced and regulated by international guidelines and codes of conduct, international trade and investment law regimes, and attempts to exercise extraterritorial jurisdiction. (12) Despite its merits in providing greater flexibility for states to cope with uncertainty, the soft law approach" in the form of international legal principles relating to CSR have been seen as less credible and inadequate considering the urgency of sustainability challenges. (14) In response to the challenges brought about by soft law, in line with the problematic recognition of CSR as a voluntary responsibility, (15) research has suggested the improvement of governance environments towards the direction of "more transparency, accountability, and public ordering at the macro level," as an important precondition for enhancing CSR, particularly raising the level of CSR communications."' Furthermore, the pragmatic grounds for embracing CSR into the regulatory domain are also seemingly set, based on multiple configurations of interaction between CSR and government, which are already embedded in respective national regulatory systems. (17) Proposals to improve the practicality of CSR by way of utilizing the public ordering system have thus far placed limited focus on the considerations of individual stakeholder groups, such as employee interests, (18) customer satisfaction, (19) creditor protection, (20) environmental protection, (21) and most recently reputation and supply chains. (22) Voluntary or self-regulatory approaches to implementing CSR have proven largely inadequate in resolving "deeply rooted social and environmental problems." (23) These theoretical and practical dynamics and ambiguities surrounding CSR suggest that it is necessary to redefine its conceptual boundaries, point out broad but pragmatic routes of implementation in the regulatory domain, and relate these boundaries and routes to real-life corporate decisions and strategies. (24)

   Between extraordinary government intervention and the urgency of addressing vulnerability among stakeholder communities, the pandemic now represents "a unique opportunity to redefine CSR's conceptual boundaries and routes of implementation." (25) Appreciating that limitations stemming from CSR's vague scope and weak enforceability will likely hinder the effectiveness of CSR law, it is envisaged that the most effective path to overcoming the crisis will be through a renewed environmental, economic, and social strategy and an elevated notion of CSR that is not only effectively enforced but also offers managerial guidance for more long-term value and resilience in order to deal with problems such as inconsistent practices and attitudes from different companies. A...